In your first year as a newbie investing in real estate, you’re bound to make a few mistakes. But you don’t have to make THESE! Instead, learn from me—a real estate investor who did.
In this post, I’ll share several stupid mistakes I made during my first year investing in real estate.
So, it’s been a decade, but I still remember that first year in real estate. I did so many things wrong. Maybe I can help you avoid them.
My first year in real estate, I started with a live-in flip—which was I bought a house, fixed it up, sold it. And then, I took that in and bought a duplex, which I house hacked by living in one unit, renting the other one’s out. Then, I started another flip.
That was my first year—a crazy year full of growth but full of mistakes. So, without further ado, here are my top eight mistakes.
Newbie Investors: Avoid These Missteps
8. I didn’t keep good records.
It was rough. I tried using a spreadsheet but ended up with a box of receipts. And honestly, I don’t even think I kept half the receipts. But it was horrible.
7. I did all the work myself.
Now I’m not opposed to doing your own work—sometimes—but I really should have hired some of that stuff out.
Painting a wall? Sure. Thank God I can do that. Leveling a sloped foundation? Yeah, I should’ve called the experts on that one.
6. I bought a house without running the numbers.
Bad idea. I got lucky with my first couple deals. I didn’t even know how to run the numbers. I just kind of bought stuff because it was cheap.
That’s why today I emphasize so much: You’ve got to learn how to do the math. If you want help with that, I teach an online class for free every week at BiggerPockets.com/webinars, where we do just that. Run the numbers.
5. I spent profit I didn’t yet earn.
I justified spending more money than I was bringing in, putting extra stuff on credit cards because I assumed I’d be able to just pay it off when my property sold. Well, that did work on the first deal. It didn’t on the next deal that I ended up turning into a rental, because the market crashed.
And all of sudden I was stuck with way more credit card debt than I should have. So, don’t spend your profit till it’s actually yours.
4. I didn’t look off-market at the time.
I thought you could only buy properties that were listed on-market, like a property that another real estate agent has put up for sale. I didn’t even know that the best deals were usually found when you use good marketing to attract motivated sellers to you directly. I could have gotten way better deals.
3. I didn’t have a backup exit strategy in that first year.
I wasn’t so optimistic—it just never occured to me that my first plan wouldn’t work out. Today, I always make sure that I have at least two exit plans for any real estate deal I do.
2. I didn’t build a deal funnel.
In the beginning, I didn’t think in terms of deal flow. I just thought of a deal.
In other words, I’d go out and find a property that usually was on the MLS. I’d buy it and then start to work on it.
What I should have been doing is building a business that generates deal flow, right? A deal funnel basically looks like this. You get consistent leads. You analyze those leads to find how much you can pay. You pursue some of those with an offer, and sometimes you get success.
And the cool thing about a funnel is that you just keep working it. You just keep getting deals. It’s not a one-off thing. It’s a business. It just cycles through.
1. I didn’t ask for help.
And the number one mistake that I made that first year, I tried to figure everything out on my own. I didn’t actively seek out other successful real estate investors, whom I could learn from. I just did stuff and made a ton of mistakes
Today, I realize that person can learn from their mistakes, or they can learn from someone else’s mistakes. Today, I try to do the latter more than the former.
The Bottom Line
Now, I don’t want to end this video on a negative. Let’s end it on a positive note.
One thing that I did right that first year: I stuck through it.
You know, I could have given up. It was hard, but I didn’t. I learned and I grew and I kept going.
Look, you’re going to make mistakes. But if you commit to learning from them, 10 years from now, you’ll be able to look back like I do and say with a smile: “It was all worth it.”
If you like the video above, hit that thumbs up button and be sure to subscribe to the BiggerPockets channel.
Have you experienced any of these mishaps? How did you move past them?
Give this video a thumbs up, and leave a comment below!