Biggest Mistake in Real Estate

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Commercial Real Estate Investing
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Biggest Mistake in Real Estate

Ethan Hanes
Real Estate Agent · Westlake Village, CA · Member since 2021 · 64 posts · 41 votes

Hey all, 

I was bored and wanted to ask everyone here what their biggest mistake was in real estate to this day. Something that you will never forget as your biggest screw up.

I haven’t had enough experience to have an answer to this question, but I want to learn from other people’s mistakes so that I don’t make the same ones! 

Appreciate it.

Ethan Hanes

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Jeff CopelandBusiness Member
Real Estate Broker · Tampa Bay/St Petersburg, FL · Member since 2015 · 1k+ posts · 2k+ votes
4y

Honestly, I think the biggest mistake new investors make is analysis paralysis. Time is your best friend in best friend in real estate, so there is a very real cost to doing nothing (aka "waiting"). 

And a corollary to that is thinking everything is going to go exactly to plan, and freaking out or giving up when it doesn't. It never will. Your numbers and projections will never be 100% accurate, and there will always be unexpected issues and problems. 

Real estate (in the sense of owning and holding real estate long term for real equity accumulation and generational wealth) is a get rich slow scheme, so you have to be in it for the long haul, be prepared to roll with the punches, pivot, and have multiple exit strategies, and realize that a single eviction or repair is not the end of the world. One the contrary: it's a normal, expected, everyday part of being a landlord. 

Keep your eye on the prize. 

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  • Angela W.
    Attorney · Houston, TX · Member since 2022 · 60 posts · 93 votes
    4y

    My biggest mistake is hiring cheap labor over quality labor. I wanted to save cost but in the it costs more to fix the damages than to just hire good work in the place. 

    -Angela Walter, Texas Real Estate Attorney at Walter & Truong PLLC

    3Reply
  • Jim WindgassenPro Member
    Rental Property Investor · Stevensville, MD · Member since 2019 · 40 posts · 28 votes
    4y

    I specialize in senior citizen housing rentals.  One of my tenants died and after his death, his son with a bad drug problem was squatting in the house begging the elderly neighbors for food and money.  While he had no money, he couldn't buy drugs and was semi-reasonable to talk to.  As we liked his deceased dad, our late tenant, we tried to look out for his kid and we found a spot for him in a residential drug rehab run by a local ministry.  All was going well until he asked us what he should do with his dad's possessions........

    We foolishly told him to have a garage sale.....which put cash in his pocket which he then used to purchase meth.   We then no longer had a semi rational person to deal with and he refused to go to rehab we found for him and tried to continue squatting in the house and he broke a window to get into the house after he locked himself out.

    My partner's brother who is pretty intimidating paid him a visit and told him to be out by noon.  He left and we never heard from him again.

    We should have told him that we would take care of his dad's stuff for him and gotten him over to rehab.  In hindsight, I can't believe that we didn't think of what would happen as soon as he got a few dollars.

    1Reply
  • Walter Pineda
    Downey, CA · Member since 2022 · 81 posts · 48 votes
    4y

    Hi! I had 100k to invest with in 2021 and knew that higher interest rates and inflation was going to eat up that money if I didn't make a move, so I bought 3 rental properties utilizing a turnkey provider. Bad mistake although the predictions came true two of the tenants are section 8 and apparently it takes 3mos for rent to arrive with section 8, the other property a tree fell onto the property and had to pay $800 for removal of the tree lol 

    0Reply
  • Walter Pineda
    Downey, CA · Member since 2022 · 81 posts · 48 votes
    4y
    Quote from @Travis Timmons:

    Freaking out over an inspection report. I walked away from a property in Nashville in 2011 due to 5-10k in repairs, which I probably could have negotiated to get partially covered by the seller. We were under contract for $108k. That property sold last year for $460k. Hi, my name is Travis. I'm a moron. 

    Thank for posting man. 

    0Reply
  • Cami Gerbmak
    Member since 2022 · 12 posts · 9 votes
    4y
    Quote from @Travis Timmons:

    Freaking out over an inspection report. I walked away from a property in Nashville in 2011 due to 5-10k in repairs, which I probably could have negotiated to get partially covered by the seller. We were under contract for $108k. That property sold last year for $460k. Hi, my name is Travis. I'm a moron. 


    How I feel your pain Travis...at the time it's easy to zero in on the negative, lose perspective, and skew our decisions. You're so not alone! Hi, my name is Cami. I'm a moron too!

    1Reply
  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    4y

    @Ethan Hanes

    One of the biggest mistakes you can make in real estate is trying to do everything yourself and then get into a problem.

    You need to leverage the tasks to professionals and learn from their experiences.

    All the best!

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    2Reply
  • Tina Lee
    Real Estate Agent · Member since 2022 · 37 posts · 24 votes
    4y

    Emotional Attachment.  Investments are business.  Sometimes new investors want to love the house like their own home.  Do not buy the most expensive home on the block.  Make sure you get it under value, and can value add with the inexpensive things.

    2Reply
  • Eric FernwoodBusiness Member
    Realtor · Las Vegas, NV · Member since 2014 · 994 posts · 1k+ votes
    4y

    Hello @Ethan Hanes,

    Good question. There is a reason 90% of the world’s millionaires made their money through real estate. Real estate investing is relatively simple and secure. However, some people still fail. I have witnessed many and listed below a few reasons that had the biggest impact.

    Do Nothing

    Doing nothing is the most common cause of failure. For some, it is the desire to find a “perfect” property. Others spend years looking for the right book or seminar to give them the “secret” to success. Spoiler alert! There are no perfect properties and no “secrets” in real estate investing.

    Buying in a Bad Location

    As long as you buy in a location where prices and rents increase faster than the inflation rate, all but the worst mistakes will be corrected over time through appreciation, inflation, and rent increases. If you buy in a location where rents and prices are not increasing faster than the inflation rate, your inflation-adjusted income will continuously decline. In this case, you can do nothing to turn the situation around other than sell the property.

    Not Working with an Investment Team

    If you needed surgery, you would not start medical school. Also, not just any doctor will do. You want a surgeon specializing in the surgery you need, not a general practitioner. The same is true with real estate investing. You cannot learn what you need to know in 1 or 50 seminars, books, or podcasts. The information all these sources provide is general knowledge. Real estate is local. Only by working with a local experienced real estate Investment Team that already has all the skills and resources will you maximize your investment dollars.

    Selling Winners and Keeping Losers

    I was talking to someone about a 1031 exchange. To my surprise, they wanted to keep their loser properties and exchange their winners. Sadly, this is not uncommon. There is even a name for it, the “Disposition Effect.” Investors will sell winners and marvel at their profits but hold onto losers hoping they will “come back.” Following this approach, you almost guarantee a losing portfolio of properties over time. Everyone makes mistakes. Sell the under-performers and buy winners.

    If you make any of the above mistakes, your success odds are greatly reduced.

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    0Reply
  • John M.
    Investor · Fairfax, VA · Member since 2015 · 1k+ posts · 801 votes
    4y

    Biggest mistake was underestimating the repairs to an old building built in 1910.  It's easy to get emotionally sucked into a prime location, but what good is the location if it cost you too much to build/repair.  I.E. You will never get your money back!

    2nd biggest mistake is being too lenient on rent increases with small merchants.  Even though they struggled during the pandemic, I should have kept increases in the lease as for the first time in 40 years inflation is soaring.  

    Anlaysis Paralysis as some people mentioned would be #3.  There is no perfect deal.  You got learn to live with 70% of your expectations

    2Reply
  • Atanas Petrov
    Investor · Los Angeles · Member since 2021 · 16 posts · 10 votes
    4y

    Some of the big mistakes in real estate as mentioned above are hesitating for too long, not making the decision, and not following through.  The first time I tried to buy a property, I wanted my dream home, in a really good area, obviously way more than I could afford.  I sat down with the lender he was looking over my tax returns, did all the number crunching, and later explained that the maximum I would qualify for is about half of what my dream home was going to cost.  Then instead of finding a property that I can qualify for, I decided that I'm going to wait couple of years until I have a bigger downpayment and higher income to get my dream house.  4 years later I ended up buying an investment property in completely different neighborhood because the prices had risen so high that again this was all I could get.  Moral of the story, don't wait, don't hesitate, make the decision, follow your plan of action, believe in yourself and make it happen.  Do not take advice from people that don't own a home, and are not investors. 

    2Reply
  • James DainardPro Member
    Real Estate Broker · Bellevue, WA · Member since 2015 · 415 posts · 1k+ votes
    4y
    Quote from @Ethan Hanes:

    Hey all, 

    I was bored and wanted to ask everyone here what their biggest mistake was in real estate to this day. Something that you will never forget as your biggest screw up.

    I haven’t had enough experience to have an answer to this question, but I want to learn from other people’s mistakes so that I don’t make the same ones! 

    Appreciate it.

    Ethan Hanes

    Hey Ethan,

    That's a huge loaded question. There are lots of mistakes you can make. The first thing mistake I made was I didn't buy and keep enough property. From 2008 to 2012, we kept about 50 doors, but we should have kept 150 to 200 doors. The other mistake I made was always biting off more than I could chew on a project where I could lose a lot of money because I didn't know how to implement the right plan. So if you buy a big fixer like this in your brand new, it can be hard to control those costs. After doing thousands of renos, it's a lot easier for us to do it, so don't bite off more than you can chew. Make sure that you have the right plan. You have the right team, and then buy based on what your team can do, not just the amount of money you have.

    Hope that helps!

    Podcast Guest on Show Seeing Greene: Paying Off Rentals, Partnerships Splits, & Using Home Equity
    1Reply
  • Melanie ThomasBusiness Member
    Real Estate Broker · San Antonio · Member since 2022 · 1k+ posts · 489 votes
    4y
    It took me a long time to learn that all business is not good business. Its OK to say no and save your sanity! Have an excellent day!
    [email protected]
    RentWerx Property Management4.73300 Reviews
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    2Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    4y
    Quote from @Atanas Petrov:

    Some of the big mistakes in real estate as mentioned above are hesitating for too long, not making the decision, and not following through.  The first time I tried to buy a property, I wanted my dream home, in a really good area, obviously way more than I could afford.  I sat down with the lender he was looking over my tax returns, did all the number crunching, and later explained that the maximum I would qualify for is about half of what my dream home was going to cost.  Then instead of finding a property that I can qualify for, I decided that I'm going to wait couple of years until I have a bigger downpayment and higher income to get my dream house.  4 years later I ended up buying an investment property in completely different neighborhood because the prices had risen so high that again this was all I could get.  Moral of the story, don't wait, don't hesitate, make the decision, follow your plan of action, believe in yourself and make it happen.  Do not take advice from people that don't own a home, and are not investors. 


     One thing that's lacking here in Biggerpocket, is truly analyzing the market using mathematical-statistical approach. Where appreciation does affect every neighborhood and every city/state has its own appreciation value.

    Here I repeat the mantra :

    It's always best to buy house in C-- neighborhood as long as it's in booming economy city rather than the most expensive house in flat zip code.  Now repeat the mantra again.

    Don't wait especially if the market has low interest rate.

    1Reply
  • Ethan Hanes
    OP
    Real Estate Agent · Westlake Village, CA · Member since 2021 · 64 posts · 41 votes
    4y
    Quote from @Melanie Thomas:
    It took me a long time to learn that all business is not good business. Its OK to say no and save your sanity! Have an excellent day!

     This is a good piece of advice! Thank you Melanie. It's important that we remember that!

    0Reply
  • Corey Martin
    Real Estate Agent · Nashville, TN · Member since 2022 · 54 posts · 36 votes
    4y
    Quote from @Jeff Copeland:

    Honestly, I think the biggest mistake new investors make is analysis paralysis. Time is your best friend in best friend in real estate, so there is a very real cost to doing nothing (aka "waiting"). 

    And a corollary to that is thinking everything is going to go exactly to plan, and freaking out or giving up when it doesn't. It never will. Your numbers and projections will never be 100% accurate, and there will always be unexpected issues and problems. 

    Real estate (in the sense of owning and holding real estate long term for real equity accumulation and generational wealth) is a get rich slow scheme, so you have to be in it for the long haul, be prepared to roll with the punches, pivot, and have multiple exit strategies, and realize that a single eviction or repair is not the end of the world. One the contrary: it's a normal, expected, everyday part of being a landlord. 

    Keep your eye on the prize. 


     Couldnt agree more! My clients tend to do this, just saying "wait and see" as their buying power slowly diminshes.

    0Reply
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