Real Estate Investing Basics

The Top 3 Mistakes Real Estate Investors Make

Expertise: Commercial Real Estate, Personal Finance, Real Estate Marketing, Business Management, Landlording & Rental Properties, Real Estate Investing Basics, Personal Development, Real Estate News & Commentary, Mortgages & Creative Financing
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In this post, I’m going to discuss three common mistakes real estate investors make. These are just dumb—for lack of a better word.

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Hopefully, by calling your attention to the missteps of others, you can avoid these errors. Here goes.

3 of the Most Common Mistakes New Investors Make

In the video above, you’ll see my first apartment purchase. It’s 46 units. Some of you may have seen an article breaking down this purchase. If not, here it is: “Case Study: How I Bought My First Apartment Building [With Pictures!]

So, here’s how things are going. I’ve gotten through the complete reposition, put in all the necessary capital to push up rents, and increased the occupancy to just over 96 percent. I could go into tons of lessons learned and successes achieved, and maybe I will in another post. But for now, let’s get into the nitty gritty: common mistakes.

  1. Not treating landlording as a business.

Yes, landlording is a business. Property management can make or break a deal, meaning that good management can turn a subpar deal into a phenomenal deal. You don’t want to get into a bad deal, but it does occasionally happen. And then bad management can turn a good deal into a bad deal.

Related: 3 Ways to Succeed Despite Failure (Video With Tim Ferriss!)

  1. Not trusting the numbers.

The second is trusting numbers. As they say, numbers do not lie. Luckily, I have a partner on my side that is great in terms of underwriting and financial analysis, because that’s not my skillset.

When doing the underwriting, whatever the calculation spits out, that’s exactly what it is. Avoid manipulating and over-appreciating, saying, “OK, I can push up the rents $100 or $200 or more,” in order to make the deal work. That’s when people I’ve seen tend to get in trouble.

  1. Not learning from mistakes.

As simple as that sounds, it does take some reflection to learn from mistakes. For instance, in this 46-unit deal, there were multiple delays on the construction side, which didn’t allow us to get through the upgrades as quickly as we would’ve liked. So, we just took the lessons learned from that construction element and also the pro forma that we provided and applied them to the next deal.

I’m not perfect by any means. I still make mistakes to this day, and I’ve had a lot more failures that I’ve learned from than actual successes. Hopefully by sharing these, I can help you out a little.

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Are there any common mistakes you’d add to this list? Have you experienced any epic failures? What did you learn from them?

Share below in the comment section.

Sterling is an multifamily investor specializing in value-add apartments in Indianapolis and other Midwestern markets. With just under a decade of experience in the real estate industry, Sterling was involved with the management of over $10MM in capital, which is deployed across a $18.9MM real estate portfolio made up of multifamily apartments. Through the company he founded Sonder Investment Group, 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.