Here’s the Biggest Mistake I Made Starting Out in Real Estate: What’s Yours?

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G’day, everyone.

It’s 12:30 a.m. EST on a Friday night/early Saturday morning, and I’m just getting ready for a live Skype interview with the Seoul Real Estate Meetup group. So while I am waiting, I thought that I might as well write a blog for you all.

My questions to you TODAY are: What are you doing right NOW to get you a step closer to where you need to be? Where are are you going and WHY are you going there? WHY do you do what you do and for whom? Is it for yourself? Is it for money? Or is it for a bigger and better purpose than just yourself or money? I hope it’s the latter, as your PURPOSE and WHY in life shouldn’t be about yourself or money. Doing what you do solely for these two things is not powerful enough to push you through the many tough times that you will come across. And I can guarantee you that there sure will be many of them.

Now, let’s get into this week’s blog.

As many of you know by now, I am not the most educated individuals, and I can be quite rude and raw at times. I’m proud to say that I never cheat, steal or lie — but I do make many mistakes, though they are are always honest ones. In this blog article, I will share with you one of the biggest mistakes I made when I first started investing in real estate.

Related: The Top 7 Costly Mistakes Seasoned Real Estate Investors Make

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Learning How to Say No

You must learn how to say NO to the good opportunities so you can say YES to the great ones.

When I first started investing in real estate, I was buying properties for the purpose of being able to call myself a “Real Estate Investor/Entrepreneur.” Boy, was that a bad idea. Although I did build a substantial portfolio in only a short time, the amount of debt I got myself into was just plain stupid. I had over $1M in debt on a $40k salary and a portfolio of properties that were costing me money each month.

Buying on hope that a property will go up in value is not a sound or sustainable strategy. Also, I believe this to be the main reason why the US real estate market tanked so much. Investors were buying “high” and hoping to sell “higher.” I, on the other hand, jumped the gun way too soon, as I was young and eager — which almost got me into a ton of trouble.

Another lesson I learned from my mistake stemmed from the fact that while I was holding these non-performing properties, my personal funds were tied up within the existing properties in the portfolio, which in return didn’t allow me to purchase any other good deals that regularly came across my desk. I was fortunate enough to wake up and smell the roses very quickly, and soon after started cutting my losses and liquidating.

If I could turn back time and start all over again, I would definitely be more patient. I would not just buy for the sake of buying, but would make sure that I had an established end goal in mind with a set timeframe. The timeframe of my end goal would give me insight into how much risk I would need to take. The shorter the timeframe, the more risky investments would be needed, and the longer the timeframe, the less risky investments would be taken. I also would’ve made sure to focus only on the numbers in the deals and not to speculate on appreciation. The numbers in the deals would need to make sense, and every property I purchase would need to get me a step closer of achieving my end goal.

Another thing that I would like to touch on is that I see many investors trying to get the perfect ROI by getting caught up in the different types of complex formulas. To be honest with you, I have no clue how any of them work, and I only use this simple formula that I wrote about in one of my previous blog posts, “How to Crunch Real Estate Numbers Painlessly Using This One Simple Rule.”

Related: Confessions of Serial Mistake-Maker: How I’ve Found Real Estate Success Through Failure

A perfect example of keeping things as simple as possible is best described in the book How To Pick Stocks Like Warren Buffet. In chapter 7, “Avoiding the Chain Link of Errors,” it is described that the more links you add to a chain, the more chance there is that something could go wrong. If one link is broken, the entire chain becomes useless. I believe the same to be true when calculating ROI on properties. The more stats and figures you add when calculating an ROI, the more of a chance that you will get something wrong and your whole formula will be useless.

Conclusion

At the end of the day, something that you will always find me stressing is to make sure to focus on establishing trust and relationships with the key people that you are looking at working with before you get caught up in the many different stats and demographics. No matter how good the area or capital appreciation may seem, the people you surround yourself with will either make or break your investment.

Team work makes the DREAM work.

What’s the biggest real estate mistake YOU’VE ever made? What lessons did you learn from it?

Leave your comments below!

About Author

Engelo Rumora

Engelo Rumora “The Real Estate Dingo" is a successful property investor, motivational speaker and serial entrepreneur that quit school at the age of 14 and played professional soccer at 18. He is also a soon to be published author along with becoming a TV personality in his very own real estate house flipping show. To find out more go to engelorumora.com . Engelo Rumora has been involved in over 400 real estate deals and founded five businesses in Ohio. The most successful is Ohio Cashflow, a company that specializes in providing turnkey properties in several Ohio markets. The newest venture is List’n Sell Realty, a real estate brokerage based in Toledo, Ohio and soon to be known as the #1 discount broker in the country.

19 Comments

  1. Daniel Ryu

    Thanks for the shout out, Engelo. The members of the Seoul Real Estate Investing Meetup got so much value from your talk. And of course the importance of TRUST is etched firmly in all our minds. Thanks for sharing your experiences. And I’m glad you were able to do something productive while waiting for us!

    • Engelo Rumora

      My pleasure Daniel mate 🙂

      Thanks for having me and you have created a very cool Meetup.

      Might need some pointers from you on the recent one we created here in Toledo – “Toledo Under40 Real Estate Meetup”

      Thanks again and have a productive weekend

  2. Joe Harper

    Mate I really needed to read this. I made seven offers this week. Three accepted and already my capital is gone.

    So because of my confidence/greed I am trying to figure out how to do all the deals, by finding a new private lender. all the self help material I read makes me feel irrepressible but I do need to say NO to the less good deals and focus on the great deals.

    Part of me thinks that deals will be running out and prices will spike. I need to avoid rhino like that if I want to survive and stay in the game.

    The great deals are the ones I need to focus on. Thanks for this on-time reminder. I just did a deal with B2R Finance so I have a pile of cash and I should slow down and take my time.

    • Engelo Rumora

      Awesome stuff mate Joe 🙂

      No matter what the market is doing, there will always be good deals for the taking so don’t feel pressure to buy up quickly.

      Be patient, sit on the cash, become a market expert, negotiate well and pounce while not thinking twice as soon as something pops up.

      If I did very very minimum with my commitment to networking and the numbers, even then I would have 3-4 deals just fall into my lap ever year from which I would make at least a $20k profit on the flip.

      Thanks and have a great weekend.

  3. Ben Stout

    My biggest mistake was listening to books like HOLD:How to Find, Buy, and Rent Houses for Wealth. This book preached that as long as a house is “cash flowing just $1 a month, it’s a great investment.” This is complete and utter b.s. When most people start out, they are not well-capitalized and don’t understand what cash flow really means. As you mature and learn to realize the true implications, you take a step back and a good deal becomes much easier to see. Great writing, Engelo. I always enjoy hearing your thoughts.

    • Engelo Rumora

      Hi Ben,

      Thanks for your comment.

      100% agreed mate.

      One key work to take away from my blog is “patience”.

      That single word has cost me a lot of time and money haha

      I am still quite impatient but have learned to adjust my mind when it comes to certain things that are out of my control.

      Thanks and have a great weekend.

  4. Daren H.

    What are you doing right NOW to get you a step closer to where you need to be?

    Increased marketing, increased showing people what I am doing and trying to do, increased focus, increased doing

    Where are are you going and WHY are you going there?

    I am a buy and hold investor. I plan to stay focused on growing my portfolio each year until the income gives me freedom of time. My primary goal is time. Money is nice but it cannot buy time.

    WHY do you do what you do and for whom?

    I am selfish, I do it for me. My wife loves her work so its not like she wants to sit around with me everyday, ha ha ha. I do it for my kids too, but more because I want to be present in their life journey. I make sure they are going to be straight if I am working a 9-5 or not, so this is about me, lol.

    Is it for yourself?

    For me, the people I help, the people I can inspire (even Jesus had to get a little kick out of saving people, ha ha ha)

    Is it for money?

    No, but I do want the luxury of money. Money is all relative to your situation. There are people making $100,00 who are happy and people making $1,000,000 who are miserable. Money is just one factor in the game of life.

    Or is it for a bigger and better purpose than just yourself or money?

    Maximizing the talents I was blessed with (we like to think we got all talents on our own but that’s not 100% true)

    Erasing mental barriers for my children, friends, family (I grew up with great values from great parents but they could not teach me to be wealthy or free because they were not.)

    Grow my community (I am a proud African American and I want to be a positive example to my community that we are more than the negative images that the media blasts all over TV. There are millions like me and capable of more than me.)

    I think the biggest mistake I made initially is not trusting myself and my talents. I think I am a pretty sharp dude generally speaking. I think the biggest difference in those who get started and succeed, and those who do not, is belief in yourself and what you are capable of. There are some real nuts in the world who are successful. They simply believed they were not nuts, ha ha ha.

  5. Kevin Thomas

    Engelo, sir, you now have a stalker. LOL. I want to read more. Your attitude and mentality on the game is so much alike mine, or should I say mine to you? Regardless, even your bio has me looking at you as a true inspiration. Just someone who took this feast or famine battlefield of Real Estate by the horns. Bravo mate, truly a perfect mentor. I would love for you, if given the chance / time, to read my 1st (and only :] ) post. I would love if you could tailor make some advice for me starting off, your words would go along way in the beginning chapter of my personal book of real estate knowledge. Thank you again for even reading this man. Take care!!!! Hope to hear from you.

  6. Curt Smith

    I agree re: “saying no”. I talk to new investors all the time in my REIA and the new persons struggle is always to make a deal out of every lead.

    I wished I started sooner. But we can all wish this one. To solve this REIAs need to market to younger folks. Not that easy.

    I feel it’s not realistic to use 20-20 and lament why didn’t I move to my best deal type today only much earlier (double wides on their own land). Learning is an organic evolutionary process!!

    My role within my REIA I see new flippers getting into bad deals. I can offer to new folks, be VERY careful attempting your first flips!! Today the margins are razor thin and it’s easy to even loose money. Be leery of the Guru’s saying flipping is easy and you make shockingly high take home checks at closing. Those numbers are rare and probably deals from 2013-2014. Mid 2015 the sellers have been holding out for way too much to leave much margin for the new flipper, least in the hot markets of Atlanta. Know your MAO, rehab costs and have top contractors that work cheap. This is hard!

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