After 30 years of investing in real estate, I’m often asked what my biggest mistakes were or whether I would do anything differently if I could do it all over. The funny thing is that it’s never been the actual real estate itself that proved to be the biggest challenge; it’s usually been something else.
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The 5 Biggest Mistakes I’ve Made in My Real Estate Investing Career
One thing that I overlooked when I first started out was the macroeconomic picture of the real estate I was investing in and where it was located. By that, I mean I didn’t even really look at things like population and job growth. Looking back now, many of my cash flowing rentals are in an area that has pretty much peaked — in fact, job growth is pretty stagnant. I just started investing in the county where I lived.
Sure, my numbers worked as far as the rent being more than my payment, but it wasn’t until I started investing nationally and looking at various emerging markets that my perspective shifted. I realized you can swim with the current and invest in a market that’s poised to appreciate with a strong rental market due to increases in things like jobs and population.
Going it Alone
To be quite honest, I’m embarrassed to say that I was a bit of a loner for the first 20 years of my real estate investing career. Little did I know that I didn’t know everything, and it wasn’t until I started networking more and joined some real estate groups that my real estate investing business catapulted. It was from the shared knowledge and strategies. It was like a big brain trust and pool of resources from folks who had already been there and done it (much like BiggerPockets). I do wish I had found those groups and resources earlier.
I’m not sure if it’s ever too late to start investing in real estate. My father was in his early 70s when he bought his first three investment properties, mostly due to my mom not letting him. Although he was handy, she just didn’t want to hear about it. Her father had some rentals in the past and always complained about the tenants. Years later, after their divorce, pop finally got some rentals, and he loved it. It actually gave him purpose (and cash flow) in retirement.
For me, I started when I was 29. My initial goal was to acquire one house per year. In a two year period, I bought 16 houses, and then it quickly rose to 40 units. Next, my goal was 100 houses, but that was before I discovered note investing. My one buddy had over 150 houses by the time he was 30, but he was also lucky that he started at age 18. Although I wish I had started investing earlier, my next mistake was probably not using the right leverage.
Not Using Leverage
In the beginning, I just worked two jobs and then some. My theory was if I worked like an idiot and lived off of one job, I could save the rest. What a tough way to get ahead. Yeah, it works, but I wish I knew then what I know now.
I thought you had to save all of the money and then go out and find a deal, but it’s really the other way around. Go find a deal, and the money will find you. If you already have a good deal, just find a money partner, whether it’s private money, hard money, or a traditional bank.
I thought I needed my own money, but this just goes to show that at the time I didn’t have enough financial and real estate investing knowledge.
There’s an old saying about how it’s better to learn from the mistakes made by others. Of course, you can’t be afraid to try and fail yourself, as long as you learn along the way.
But probably the only time I really lost money was when I gave up control.
Giving Up Control
What I’m really referring to are those deals I’ve invested in, where I didn’t have some type of management control of where the deal would go. Many things can go wrong when investing in real estate, but it’s really the way we react to situations that is most important.
If something throws you for a loop, try to read up on it at first. Then, try to mention your situation to those with more experience who may have encountered something like it already.
Most importantly, don’t be afraid to ask for help, as well as offer help to others. Over the years, I’ve tried to help others as often as I can, and the karma from that has helped me out tenfold whenever I’ve been in a jam.
So, what are some of your biggest real estate investing mistakes?
Let me know with a comment!