Why Do Most Investors Fail To Buy A single Property?

122 Replies

I was shocked, when I read a statistics about the level of success in the real estate investment industry.

According to the information I read, only 5% of would be investors actually buy something.

Does that mean, 95% of the people out there are still struggling? Are you struggling to buy your first investment property? But don’t worry, you are in good company. Most successful investors also struggled when they first started.

When I first started as an investor, I failed miserably too. I bought courses, and read them. Sometimes halfway. I attempted to make offers, only to allow fear to set in.

I bought Carlton Sheets program twice within a span of five years, thinking the second time will be a charm.

It took me almost 10 years to get my footing. This should not happen to anyone ever again. So I am not surprised when I see others struggling to make it in this business. Real Estate is the easiest hard work there is, once you know what you are doing.

Since I started counting, I have bought and sold over 400 properties. I have been involved in hundreds of other deals where I actually provided the money.

REASONS WHY IT’S HARD TO BUY YOUR FIRST INVESTMENT HOUSE

I will try to address one of the reasons today and do a follow up with another reason in a future post.

1.Information Overload.You bought the 200 page manual, you went to the three day seminar, you attended the coaching program, yet there is something still missing. What is it? There is too much information to digest and you simply do not know where to start. After the three day seminar, you are likely to get confused. I know, because it happened to me. When you have no one holding your hand or staying on your butt, it's easy to fall off the wagon and get discouraged. After buying over 300 houses, I decided I wanted to conquer the commercial real estate business. My first seminar cost $5,000 plus flying, plus hotels. I got so much material, a 500 page manual, CDs, Videos and a workbook. I became so confused and did nothing for three years.

Carlton Sheets program was pretty straight forward, you can't really say the same for most gurus. When I first bought my Carlton Sheets manual and workbook, I went out and made my first offer. I presented the offer to the property owner, he asked me a simple question relating to the contract. I was unable to answer the question. I promised to get back to the owner. I quickly went back to the manual to find the answer. I read the manual from front to back, but I could not find the answer to his question. The contract became my nemesis. My deal died a miserable death. So I put the whole manual under my bed for five years. Has this ever happened to you?

My problem then was, Carlton Sheets was not available for me to call. So if you have a question regarding buying your first property, you should already have a mentor, friend, or coach who can guide you through those questions. If not, you are likely to be paralyzed when the sellers asks you a simple question like... How much earnest money are you putting down? Today, I simply say... Zero, $1, or $10. 15 years ago, I would have been too embarrassed or scared to say something like that.

My question to everyone is, is the statics correct? Are most first time investors having problems doing their first deals?

What is the number one reason why you have not pulled the trigger on a single purchase since you nursed the idea of becoming a real estate investor?

Go ahead, say it loud and let the audience help you with your questions. Let’s find out if your fears are real or imagined.  

Probably pretty accurate.  That is, if you want to call non investors investors.  For me, it was the fear of just not knowing enough. What if I missed something important? What if someone sophisticated took advantage of my ignorance and cost me big time?  I had been taken advantage of in the past because of ignorance. I wasn't going to let that happen again of I could help it.

@Daniel Mohnkern  cracked me up with his "if you want to call non-investors investors" comment.  That's funny, but true.

When you say "real estate investor" I'm reading "wholesaler."  That's in no way derogatory, but the challenges of a flipper are very different than those of a wholesaler, and I want to be sure we're talking about the same group.

For wholesalers - yes - I would say that 95% of people who say "I'm going to wholesale a house" never close their first deal.  With that said, I don't think that information overload is the most common barrier.   In fact, I would say that wholesalers who never do a deal would say that they lack sufficient information.  The catch is that no reasonable number of seminars, camps, talks, guides, workbooks, coaching, etc. will ever get someone feeling that they have enough information to get started.  Though, I would also argue that a lack of information is far more excuse than reason.

I think that the main reasons people stall before their first deal are fear, unrealistic expectations and a lack of grit.  

It really is one of those things where you have to get your hands dirty. You'll meet people on here that have been on here for months/years and never done a deal. They get really good at repeating what they have heard/read. 

Biggest advice I can give is have someone more seasoned than yourself analyze a deal for you then jump on it. 

Medium head icon colorRyan Dossey, Call Porter | http://Callporter.com | IN Agent # RB15001099

Information overload is common. I love BP but you could easily get overwhelmed here :). Pick one niche of investing and get knowledgeable and get going! I focus solely on affordable homes in the $55,000 range, no rentals. Staying focused is very important I think esp for new investors. 

Knowledge is not power, action is power. anyone telling you knowledge is power is selling you a book.

(P.S. Don't hate on me please... it is obvious that some level of knowledge is important... but our field has become a hot bed of information overload.)

There is a local club by me who's slogan is 

"Buy houses not courses!".

Which I wholeheartedly agree with. However interestingly enough they mentor/coach for a fee lol.

Medium head icon colorRyan Dossey, Call Porter | http://Callporter.com | IN Agent # RB15001099

@@Daniel Mohnkern I used to worry about people taking advantage of me too. for a first time investor, making that first deal is crucial to getting off the ground. It eliminates all future fears and gives you the confidence to go and make the next one. 

Because the topic title contains a contradiction, it's quite simple to change that statement:

From:

"Why Do Most Investors Fail To Buy A single Property?"

To:

"Why Do Most Wannabe / Self-proclaimed Investors Fail To Buy A single Property?"

You see the term Investor does have a specific meaning; see

http://www.investopedia.com/terms/i/investor.asp

If the person has committed capital then they are an investor; until that happens, they aren't. 

@Ryan D You are very right, before I make a deal, I sometimes get a second opinion as to value. The best place to get a second opinion is from your hard money lender. I once spent $600,000 buying a group of mobile homes. My goal was to split the lots and put more homes. My hard money lender refused the deal, But I persisted. I did not come out too good on that deal.  The reason your hard money lender is a good second opinion is because his money is riding on the deal. So if he is not willing to risk his money, you  should think twice about risking yours. 

Everyone responding to this Post should read a related discussion which explains "if i'm cash-flowing why does Bigger Pockets make me feel like a failure".  Wholesaler, Investor, or anyone interested in making money in real estate, needs to stop listening to the guru, get rich quick dream sellers.  No one is making so much money that, they need to tell you how they are making it or help you get rich like them.

Buy something below market, sale it or rent it for a profit.  Class over.  It's not rocket science.  I bought Carlton Sheets information too.  Found nothing but, common sense that, I could have learned by working a couple deals with an experienced investor.

Medium real estate logo imadeAlex Hamilton, Hamilton Investment Properties CHDO Inc. | [email protected] | (225) 238‑3923 | http://www.hamiltoninvestmentschdo.com

@Joe Pickett, great advice. Focus is my next topic, I will address it later on this forum. Some investors try to run before they can walk. I have made more money on bread and butter properties than I made on so called luxury homes. I used to do rentals, but quickly learned my lesson when I became property rich and cash poor. Thanks to Ron Legrand who slapped me back to my senses with his quick flip formula. 

Exactly alex. Buy under market value and resell for a profit. that's what it all comes down to. A million ways to find the deals. in my case, my mentor (free) feeds me profitable deals. He makes money when I buy, and I make money on the deals. Works well for me. ! 

We have done luxury homes and got stuck with them in the crash. The best properties for me performance wise, hands down, are the 50-60k houses I buy for cash and owner finance. I focus like a laser on affordable homes in my town and don't do anything else. Very profitable and very good for the community. 

Others on this board can enjoy being a landlord. Not something I want to do again. 

Staying focused I think is key. It's so easy to get distracted and go in 20 directions in REI.

I call it the "Paralysis of analysis", I know from experience. To much information and not enough action is correct. Also, thoughts of being sued or ending up in court because I used some downloaded investor friendly contract from a "guru" crossed my mind. I looked through my folders and I have probably 10-11 contracts from courses I've taken over the years. Who wouldn't be confused? That's why it's important to have a good mentor to learn from, not a guru. It's important to get the first few properties under your belt for confidence, knowledge and experience.

This is definitely a great encouraging post as I would consider myself in the 95% at this time. I guess it's the fear of not knowing enough or being taken advantage of, as others have stated. I, as well as others facing the same fears, need to trust themselves and ask BP for advice when needed and know everything will work out. In the end, knowledge is acquired whether it's a great deal or a not so great one so its time to part of the 5%! :) thanks for your post!

@Alex Hamilton, I share your good advice. the process is so simple, but complicated if you are on the outside looking in. I used to think that if you teaching it, you are probably not doing it. Most college professors who teach business have never been in business. For some reason, I feel compelled to want to teach others how I did it. But, I am so busy doing it I simply don't have as time to teach. But I am trying. The guru's make it seem complicated. Your formula is correct. 

FIND IT

BUY LOW

SELL LOWER

 Class Over

FOR EXAMPLE, I JUST PAID $10 FOR THIS HOUSE. OVER 50 OTHER INVESTORS PASSED ON THE DEAL... EXIT PROFIT IS HIGH FIVE  FIGURES

@Amber Scavone, I like your honesty. My advice, just go out and do it. Start today, Find your first deal, find any seller and make an offer or just talk to them. Speaking to sellers actually give you confidence even if you are afraid to make the offer. If you find a seller in your area, call me, put them on a three way call and you can listen in as I grill them about their property and how willing they are to give me the information I need to buy their house. For a newbie, I would like to help you show the world that its not as complicated as it seems. Spend one hour today to identify a few sellers from your local newspaper or craigslist, and I will show you how to take the first step. we might even write up an offer while we are at it. Always remeber, the sellers need you more than you need them. 

@Toyin Dawodu Thank you for that great post! Like you said, the 3-day seminars are just too packed with information. BP has that much info and more, but unlike a seminar, we can take it at our own pace...Listen to a podcast, for example, digest, then listen again, and post any questions about it. Virtual mentoring all over the place here! 

@Ryan Dossey  Yes, yes yes to "Buy houses not courses"! No no no to their mentoring for a fee! Now that's a true contradiction!! 

@Toyin Dawodu ,

"Why do most investors fail to buy a single property?"

Trick question! Not an investor if you never buy anything!

THERE ARE A MILLION REASONS AND EXCUSES TO NEVER BUY A PROPERTY. BUT IF YOU'RE DRIVEN ENOUGH TO MAKE REAL ESTATE YOUR PASSION AND PUT ALL YOUR ENERGY INTO IT, I THINK ALMOST ANYONE CAN BLOW IT OUT OF THE WATER.

Leverage the resources on this site, meet other investors at local meetups, help others succeed, let people know what you do and what you're looking for, and tenaciously call, email, and prospect for deals until you land one and make some money on it!

@Ryan D. , @Judah Hoover, I like your philosophies!

Medium logoJ. Martin, SF Bay Summit | [email protected] | 510‑863‑1190 | http://www.sfbaysummit.com

Hello, new potential investor here.  I have been using the stock market to save money and increase capital over the last few months in order to get started in real estate.  I am very passionate about the field and come from a family of extremely successful investors.  There are a couple things holding me back from my first deal. 

The first, and most important, is that I am still renting my personal residence and have never bought a home before. My credit is solid, but would it be possible to purchase an investment property first? If so, would I be able to get an FHA loan when I do buy a personal residence since it wouldn't be my first buy? I have a list of lenders in my area that I am going to call on Monday so I figure that would be a good start.

Another thing would deciding on how to start. Should I just wait out my current lease and purchase a duplex when it is over? Live in 1 side?  I have also found a great deal on a manufactured home w/ land that would provide excellent cashflow.  That could be another option.

@Steve Babiak  , you are very correct. the term "investor" is misnomer.  I stand corrected, I don't even like the word myself because everyone looks at you as another one of those ";;;". I prefer to tell people that I buy and sell houses. 

@Bradley Heath, You should immediately buy something. Unless you are making money in the stock market and you know what you are doing, it's a dangerous place to be. First you have no control over the stock price or the direction of the market. With real estate, you know exactly where you are. You have complete control. My first home was FHA financed, I bought it for 30% below market and paid $78,000 my intention was to live in it for a few years and buy another one, but I never got around to moving. Eventually, I took out one of those FHA 201K loans and used part of it to fix the house and the remaining to start a business. I later sold the house for $284,000. That is the magic of real estate. If you have good credit, you should immediately begin leveraging your credit to buy real estate and accumulate wealth.

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