“Smart people learn from their mistakes. But the real sharp ones learn from the mistakes of others.” – Brandon Mull
Hi, all. It’s Liz (Matt’s wife) back this week to discuss the most common mistakes experienced investors make in this business! There are a ton of articles written here on BP for newbies and rightfully so! When you are starting out in this business, there are A LOT of mistakes to avoid. However, as you grow your portfolio and move from being a “newbie” to being experienced, there are different (and new) mistakes to avoid. I think there is a lot of truth to the quote at the beginning. If you can learn from the mistakes of others, then why make them yourself?
My husband Matt and I have been in this real estate investing game for more than 10 years, and we certainly continue to make mistakes. We are far from perfect. However, we have improved our business and success rate over the years as well.
As you become a seasoned investor, you want to avoid these more costly mistakes. The key is to not only learn from your mistakes, but also to improve yourself and your business as a result. As an experienced and seasoned investor, here are the top seven mistakes to avoid.
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The Top 7 Costly Mistakes Seasoned Real Estate Investors Make
1. They stop doing the necessary due diligence.
I can’t stress this one enough. I have seen so many seasoned investors not do their necessary homework and due diligence on deals because they think they know all the numbers already! Obviously, as you become more experienced, due diligence might look a little different. As a seasoned vet, you are more confident and you are able to make decisions faster. However, this does not mean you don’t have to run the numbers and ensure the deal you are buying (as a rental or flip or whatever) makes sense financially.
2. They stop surrounding themselves with people who have more experience/success.
It is really easy for seasoned investors to surround themselves with new investors. Many investors enjoy teaching others about their mistakes and helping those who are starting out. And that is great and should always continue happening. That is what is great about this business. However, it is imperative for seasoned investors to also surround themselves with investors who have more success and experience. If you own 10, 20 or 50 rental units, find someone who owns 100 units. If you flip 10 properties a year and want to expand, find someone who flips 25 a year. Remember the old saying, “You become who you surround yourself with.”
3. They try to do it all by themselves.
I know of a few guys in our local REI club who make this mistake. Quite honestly, you can be successful and seasoned and never build a team. But the question is, will you be able to grow? I know one gentleman in particular who owns about 25 rental units and as a result was able to quit his day job. It seems like he runs a very successful business.
During a recent networking meeting, we were chatting about business together. He made a comment that he is done trying to find help rehabbing his properties. He told me he can’t find anyone who can fix up his properties as well as he can. I certainly understand his challenge. Finding great contractors is not the easiest task; however, this investor’s time is maxed out at 25 units. He won’t grow if he does it all by himself.
4. They don’t review (and reassess) their plan ALL THE TIME.
Seasoned investors may or may not want to grow their portfolio. And that is fine. Many seasoned investors grow their portfolio to a point and focus on managing it instead of continuing to build it. Regardless, they still need a plan to keep them focused and need to assess the plan on an ongoing basis. I hate to use this word – but seasoned investors can get lazy. When you look at the top athletes, companies, and people in the world, a habit that ensures success is that they are always reassessing their plan and committing themselves to new actions and goals.
5. They don’t use or learn new technology.
Last night I was at an event and heard a couple of ladies (younger than me!) talking about “Snapchat.” I have heard of it, but was not familiar. So I asked what it was all about. I felt a little stupid, but technology and social media apps are evolving fast! I don’t need to tell you that technology is always changing – even as we speak. I can attest very personally to this one. Our team certainly needs to do a better job of utilizing technology for achieving our goals. From using social media more effectively to better optimizing our website, we have lots of room to grow. However, we at least realize this and are making a plan to improve this area!
6. They don’t seek new financing strategies.
Seasoned investors get in the habit of paying their bills and don’t review their financing strategies often enough. Maybe you have grown as much as you can and have been avoiding looking for private money. Maybe you have an “interest only” loan on one of your rentals that you have been dragging your feet to refinance. Maybe you are over leveraged on a property (in other words you have too much debt on the property). Whatever the case may be, you have to continually (at least yearly) review your financing strategies and look for ways to improve your financial situation.
7. They stop “sharpening the saw.”
I wish I could take credit for this phrase “sharpening the saw,” but I can’t! It is actually one of the habits Steven Covey discussed in his international bestseller The 7 Habits of Highly Effective People. This book was actually published in 1989; however, it is probably one of my favorite business books of all time. With the habit he calls “sharpening the saw,” he discusses the importance of taking time for yourself – mentally, spiritually, physically, etc. I can’t stress enough the importance of this one, not just for effectiveness in your real estate business, but in your life in general. The key is to find out what “sharpening the saw” looks like for you and then create habits to make it happen in your daily and weekly life. No excuses!
Thank you as always for reading and commenting!
Seasoned investors – which mistakes am I missing? What would you add to this list?
Leave your comments below, and as always, happy investing!