The 3 Dumbest Mistakes Buy & Hold Real Estate Investors Make

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There is no doubt that even the professional long-term real estate investors are prone to the occasional slip up, so don’t feel down if you make some mistakes. After all, it is all a part of the learning process. However, do keep in mind that it is definitely an error if you consistently repeat these mistakes and fail to learn from them.

It may just very well be that you haven’t actually made any mistakes so far (which you should), but nevertheless, in order to give you that extra heads up, here are a few of the stupidest slips you could possibly make as a buy and hold investor.

Related: Want to Lose All Your Money & Cry Yourself to Sleep? Make These 4 Newbie Mistakes!


There is definitely a lot of emphasis whizzing around the world of real estate investing on always having to get the best deals if you are a flipper or a wholesaler—and fair enough. In order to be a successful flipper or wholesaler, you will definitely need to be able to get great deals to earn that quick profit.


However, even if you are a long-term investor, this definitely does not mean that you should pay more than you should — after all, having a sky high mortgage equates to a payment that is far too high, resulting in some serious danger surrounding your cash flow. Hence, as a buy and hold investor, definitely do take the time to learn the best ways to buy low and snag the top deals. By simply trying to imitate the clever tactics of a flipper or wholesaler, you might just find yourself creating some great immediate equity on your investment!

Over-Appreciating Appreciation

One of the biggest mistakes that investors make is purchasing rental properties with very minimal (or even negative) cash flow simply based on their unsubstantiated hopes that these properties will appreciate in value. This, however, is an extremely risky move, as the market can fluctuate rather quickly, and it is impossible to always accurately predict. So it is strongly encouraged that you never purchase a property with your only profit potential being appreciation.

Related: The Top 3 Real Estate Investing Mistakes I’ve Made (& What I Learned)

Pro Tip: In fact, sometimes the best thing to do is to purchase a property below market value or improve a property to add value. In addition to this, it is a good idea to purchase a property that already has a positive cash flow, as this will allow you to bring in income as soon as you rent out the house. So, since you are investing for cash flow, don’t worry about home values; if the home value goes down, it doesn’t really matter because you are making money from the cash flow and not the selling of the property. Remember, real estate investing is a long-term play.


Not Treating Landlording as a Business

This might come as a surprise to many, but landlording is actually a business. In order to keep your assets performing, it is best to maintain property upkeep, tenant relations, and finances. So while the majority think that landlording is an easy-going game of handshake agreements, emotion-based choices and loose regulations, remember that if you want to make it in the long run, you have got to be assertive!

We’re republishing this article to help out our newer readers.

Investors: Surely there are more stupid mistakes out there—which ones do you see made all the time?

Leave your comments below!

About Author

Sterling White

With just under a decade of experience in the real estate industry, Sterling currently manages over $10MM in capital, which is deployed across a $26MM real estate portfolio made up of multifamily apartments and single-family homes. Through the company he co-founded, Holdfolio, he owns just under 400 units. Sterling was featured on the BiggerPockets Podcast and has been contributing content to BiggerPockets since 2014, with over 200 posts on topics ranging from single-family investing and apartment investing to wholesaling and scaling a business.


  1. Russell M.

    Treating Real Estate Investing as “Passive Income”

    Regardless of whether you actively manage your properties, or have a management company, you still need to be involved and aware of what is happening. The old adage that no one cares as much about your money as you do, applies equally to your property. Don’t expect to purchase a property, set it, and forget it.

    Paying attention day in, day out to what is going on, from tenants, to maintenance, to bills being paid, etc. will not only allow you to address issues more quickly when they arise, but also to get a rhythm for property management and working with the different aspects of the business. The less you treat it passively, the more control you have over your profits, and the more experience you will gain as you move down your real estate path.

  2. Andrew Syrios

    Paying too much is a big risk for buy and hold investors, especially since there’s no feedback mechanism. A flipper knows very quickly if they made a mistake, but buy and hold investors can rationalize mistakes because they don’t have to sell (and can always disagree with any appraisal). There is a dangerous tendency to get lazy with buy and hold that such investors need to be very careful about.

    • Marian Smith

      Once you have purchased, it matters less that you overpaid….not much you can do at that point. What matters is being able to rent profitably. If you overpaid to the extent that taking depreciation at tax time does not pop you into the black for the year you may want to consider selling your “alligator.” But at 3% inflation, sometimes just hanging on to a nice property will work out in the long run….and might be more desirable than selling and having to bring a large sum to the table.

  3. Billy Smith

    Yes overpaying is a huge issue on buy and hold ,if I follow my rules: 1 location ,2 buying a house close by ,3 avoiding major foundation work ,checking the sewer. I can deal with most issues after that just matter of the right price for what needs to be done, 4 priced right.

    • @Ben- Great question. Its a very personal one. everyones financial situation is unique to themselves. For example- when considering an real state investment. Ask your self this question- How solid is my job?- if self employed- How clear does the near future look.? Could a recession be just around the corner? or could I be getting in on the high of the market? Having been around awhile I have learned a few tips that have saved me a lot of money and frustration. And some were learned the hard way. When property values soar for a few years or so- but the Materials- Land costs- or labor costs have not risen to the same extent- this could mean that the market is heading into a Bubble. We all know what happens next in that case. I applaud your willing to get involved- This tool retired us very nicely, just go into it slow with your eyes ope and bring as much cash with you when you make your first plunge.

  4. Joseph Ziemba

    I have found a duplex that can barely cash flow. The market around me is pretty inflated so this actually seems like a pretty good deal. And I plan on moving into one side which is what makes the deal a winner. Saving 200$ a month on rent is basically another form of cash flow.

    This is also my first buy. I’ve been watching the market for about 8 months now and this is the first one where my conservative numbers don’t come out red.

    Any advice is always appreciated! Thanks for reading

  5. Donald Cooley

    Great article Sterling, thanks for sharing. We just recently purchased our first buy and hold, we’ve since rented it within 3 weeks forcing is to develop some systems. I find so much of the information on here to be helpful. We are making a strong effort to create a professional atmosphere with our tenant especially with using many of the forms available on BP. I appreciate many of the articles that are posted offering great advice in how to proceed to the next step or even next level. Thanks again for the info.

  6. I thought about the same thing yesterday as an investor friend of mine wanted to show me his boat.

    We drove out to a place he has on the gulf here in central Florida. As we got there he told about the house with it’s dock and deep sea gulf access. According to him, he overpaid for it back in 2007 and it wasn’t until now he started seeing a chance of making some money on it.

    He then showed me another very similar house down the street that he had bought 2 years later. For 35 000.. A bargain! His logic was that if he thought the first house was a decent buy for 100 000, he didn’t let the poor market make him belive differently about the second one.

    As a result, he has two houses on the gulf for an average of $67 500. Prices in the neighbourhood today is north of $100 000 making his deals pretty good.

    Not sure why, but the fact that we should focus on how we average in total hit me pretty hard on the drive back. By staying away from over extending ourselves, thus keeping from bankruptcy, averaging good profits through appreciation shouldn’t be that hard. Time is money 🙂

  7. Jessie Niu

    My dilemma is that I am looking for an owner-occupied duplex, but the ones in the area that’s suitable for us to live are just not producing enough cashflows (the mortgage is a lot higher etc). The cheaper ones make so much more sense, but I don’t want to live in those areas. I feel that I am over-paying for owner-occupied duplex, yes I can save on rent, but what happens after I move out? It will probably just break-even with very little cashflow.

      • Jessie Niu

        Thanks for replying Sterling! always enjoyed your articles, very helpful for a newbie like me.
        It’s no negative cashflow, but just very little, I did deal analysis at BP, only less than $100 positive cashflow, the rent definitely doesn’t meet the 2% rule, actually only 0.95%. I can get the same rent with a duplex that’s almost 50~60k less, but the area is not as decent. Should I make compromise due to owner-occupancy?

        • Sterling White

          Jessie I would just keep digging until you find a deal that feels right. From the context you have given me it feels as if you are a little unsure about both the deals you are looking at. You will know when the deal is right!

          Hope that helps

  8. Allen Thomas

    Preach! I know some buy and hold investors who didn’t care in the slightest about the crash (beyond the temporary impact it had on their net worth), because their properties cash flowed the same in 2008 as they did in 2005 and as they do now. They weathered the storm and came out unscathed because the bought right, financed right, and were investing for the long term.

  9. sherwood sohmers

    Good comments from all. I just need to clarify two things. Today appreciation is very low, so counting on it or not does not make a difference in your purchase since this can not be a prime benefit anymore.
    Second point is that real estate investing is long term. That is true, but each buy needs to be evaluated on its own. Therefore, you need to be willing to let go several years after you purchase a property, even at a loss, if it is not performing. Hopefully you will end up with some cash that you can re-invest.

    • Sterling White

      Great question Yatznira. Overleveraged is when a investor’s asset(rental property) is carrying too much debt(loan), and is unable to pay interest payments from loans. Overleveraged investors are unable to pay their expenses because of over excessive costs.”.

      Investor X puts 1M down on apartment worth 4M and has monthly payments of $14,322.45 for the 3M loan. At purchase the apartment brings monthly income of $20,000.45 thus leaving room to pay off the monthly loan. If a economic downturn happens and the rents are cut in half leading to apartment bringing in $10,000 then the loan will not be covered due to debt over-exceeding the income asset is bringing in.

      That was a very simplistic breakdown. Hope that helps.

  10. William Yeh

    Great post!

    On a more nuanced note, not studying the rental market thoroughly enough can also impact long term financial performance. To explain, I’ll share a story.

    I help put together a portfolio of a dozen SFR rentals and have several more in my personal portfolio, all in the area I grew up in. In putting these buy and hold investments together, we did all the typical pro forma analysis and purchased those homes that fit our model (in our case it was purchasing homes that performed at a 5.5% net cap or better).

    What we observed over time is that with the bull market of 2013, each property was subject to the micro climates of each neighborhood, both in terms of property appreciation and, more importantly, in terms of rental increases. One of our homes happened to be in the most desirable part of town and in an HOA with a max rental ratio limit and had rents go up from $1795 in 2010 to $2195 today. Then we have homes that have barely budged from their initial rental rates because they were impacted parts of town. Mind you all of our homes had the same starting point in terms of the pro forma.

    Long story short, do more than just your basic pro forma. Having an intimate understanding of ALL of the factors which will affect your investment’s performance can and will pay dividends. Obviously that’s easier to do when the property is under your nose vs. out of state.

    Hope that helps someone and happy investing!

  11. charles johnson

    This was a great post, actually all of the comments are great as well. I really want to thank everyone for being so involved in this community. I am new to investing and I am about to close on my first deal (fingers crossed) a buy and hold. The asking price was 120k and I got an accepted offer at 100k. I couldn’t find comps because it was the only triplex in the area so I went off cashflow to determine if it was a good deal for me or not. How in the future can I get comps if there aren’t any similar structure in the immediate area. Also I know there are people who will fund flips but are there any funders that wont charge a large amount of money for buy and holds?

  12. charles johnson


    charles johnson on April 10, 2016 12:31 pm

    This was a great post, actually all of the comments are great as well. I really want to thank everyone for being so involved in this community. I am new to investing and I am about to close on my first deal (fingers crossed) a buy and hold. The asking price was 120k and I got an accepted offer at 100k. I couldn’t find comps because it was the only triplex in the area so I went off cashflow to determine if it was a good deal for me or not. How in the future can I get comps if there aren’t any similar structure in the immediate area. Also I know there are people who will fund flips but are there any funders that wont charge a large amount of money for buy and holds?

  13. Josh Garner

    So true! At least on the West Coast, there’s a lot of negative cash-flow properties being purchased, in the hopes of appreciation. A dangerous game to play! If you’ve got equity built up on the West Coast, why not plug it in to a positive cash flow environment somewhere safer? If only a book had been written about this:)…David Greene?

  14. Over the long haul, buying in the right location makes a huge difference. If you look at the price differences between a great area and a good area in California 20 years ago, it was maybe $50-100K. Now today that difference is $500K-$1M. So it was penny wise and pound foolish to be narrow minded about cap rates and “overpaying”. Those things lose their significance over a long period.

  15. RodTra Smith

    Very good article Sterling! I strongly believe that over appreciation is just as bad as paying too much….especially if you put too much into the rehab expecting to get it back based in what you think it will rent for. I’m a Realtor and I don’t always trust the comps because there are too many variables behind the scenes when pulling comps…DOM, $/ST Ft., renter motivation…..the list goes on. Comps are a great place to start . You gotta know what works in your purchase area and stop watching HGTV. I blame everything on HGTV!
    -Tracie (from RodTra Smith)

  16. Virginia H Rockwell

    Our mistake was not getting a rock star property manager for our out of state properties. This cost us tens of thousands, multiple court appearances, lawyers and collection agencies, a forclosure, 2 personal loans to cover expenses and many, many sleepless nights.
    Spend the time it takes to find the very best team!
    (Btw, we are still dealing with this financial fiasco but we do have a good property manager and we have sold the non- producing properties.)

  17. Robert Shedden

    Great read! My wife and I are looking at getting into our first rental property. I’m trying to wrap my head around how to raise capital… my concern is that while I will have a positive cash flow (if I purchase the right property) I will still have all the capital tied up in the property. I’ve read a few articles that suggest flipping a house to generate the capital to get into rentals… but I don’t want to be a newbie at two areas of real estate investing to start off!

  18. John Murray

    I have been in this game a really long time. The way I have made the most money is knowing way more than most. I work harder than most. The combination of knowledge and hard work has served me well. The one last gift was luck, I am luckier than most. If you ask most successful people they will tell you how lucky they are. Most will never complain how tough they had it or how easy it was. We correct and drive on and rarely dwell on the past. Freedom is our drive, not money. This is what we understand more than any other concept.

  19. Megan E Boizot


    Thank you for this article! I am a newbie who is doing extensive research to hopefully start my real estate investing in the near future. This article is short and concise but important factors to keep in mind with my real estate journey. I really appreciate any newbie articles.

  20. David Ingle

    I”m a Private Wealth Advisor with over 25yrs experience I real estate. We help our client avoid the common mistakes real estate investors make and create financial and investment plans to help them avoid being over-leveraged and maintain adequate liquid reserves. We provide our clients with some of the best loan programs, rates and terms in the country

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