If you’re relatively new to the real estate game and are yet to see any profit from your investments, it’s probably because you’re doing at least one of three things. I’ve identified these common mistakes that beginners in the real estate business make. Without changing your behavior in these areas, you won’t be successful. There is a common misconception that getting into real estate will lead to easy money and that once you’re on the property ladder, your bank balances will simply soar whilst you sit back and watch with a smile on your face.
While this can and should be the case further down the line, starting out is a completely different matter. There are many steps to take and pitfalls to navigate before you can become a successful real estate tycoon. Luckily for you, I’ve put together a list of the top three reasons why new real estate investors fail to make money, so by reading this blog, you should be able to avoid them yourself and begin turning a profit right from the start.
The 20 Best Books for Aspiring Real Estate Investors!
Here at BiggerPockets, we believe that self-education is one of the most critical parts of long-term success, in business and in life, of course. This list, compiled by the real estate experts at BiggerPockets, contains 20 of the best books to help you jumpstart your real estate career.
The Top 3 Reasons Why You’re a Real Estate Failure
You don’t have an end goal.
Remember when the careers counsellor in school asked you what you wanted to be when you were older? Well, it’s time to ask that question again now, except answer it in more detail. It’s a fact of life that when you have a clear aim or goal in regard to your work, you’re automatically more likely to achieve it because you are capable of planning towards it. If you’re just wandering aimlessly through the real estate market, you’re going to struggle to identify which deals are going to help you get where you want to be, and your business will have little to no direction.
To be clear, there’s more to the real estate market than saying, “I want this” and waiting for it to fall in your lap. Trust me, that won’t work. Once you know what you want (number of properties in your portfolio, monthly cash flow, etc.), you’ll need to determine a plan for how to get there.
A good strategy is key to any successful business, and you can’t devise this without an end goal in mind. By identifying what you’re aiming for, you can then begin to research the best way to achieve that target. Research is also vital — know not only your end goal but also the path you must follow in order to succeed. Know your market, know your properties, and most importantly, know where your money is going to come from. These three concepts should be the cornerstones of your plan and research.
Related: Of 7 Common Reasons Investors Fail, This ONE is the Most Deadly
Think of it like a ladder. You’re standing on the ground holding a pole in either hand, not a rung to be seen. Then suddenly, at the top glitters a shiny, golden rung. That is your goal: a mansion, a secure financial future, a happy family, the ability to live life on your terms. Sound great? I agree. The problem is you can’t get there without building the rungs lower down the ladder. And as always, you need to start at the bottom. Work step by step, deal by deal, and form a cohesive strategy that will allow you to eventually stand on that golden rung and achieve your dreams.
You’re trusting or working with the wrong people.
You may really like your property manager or your broker as a person, but if you’re constantly losing money, they’re probably not very good at their jobs. In today’s world, the value of most real estate properties is not adversely affected by market fluctuations, and if you were happy with the deal in the first place, there must be another reason why you’re losing money. That reason is probably the people you are working with and is something you need to change at once.
The myth about real estate agents being liars is, in some cases, accurate. Some people in this industry will lie or steal to line their own pockets, cheating you out of your rightful profit. Others might attempt to scam you through deals, creaming off a tidy sum themselves and leaving you with the crumbs. More still are just plain lazy and don’t put in the effort needed to make a success of a real estate business. In order to succeed in this world, you need a dedicated, trustworthy, hardworking team around you. When looking to expand my own workforce, I always look for people who are:
- Experienced. If you can learn from them, great! Don’t pretend to know everything because as a beginner, you don’t. Be open to advice and accept that you are going to be facing a steep learning curve.
- Trustworthy. A person should be reliable, honest, and effective in their position. If you have to check over their shoulder every five minutes to keep them on track of a specific task, they’re not adding any value to your team.
- Committed to you. Your team members should all be people you can trust to do what is in your best interests. If they’re only concerned about making money for themselves, they won’t be putting the aims of you or your company first. Loyalty to the business is vital.
- Well-referenced. If they have successfully helped real estate newbies in the past, this should cement their credentials for you. Speak to others in the real estate business who have worked with potential employees before you hire them to get a feel for their reputation. Remember, if they’re working for your business, you must trust them to represent you in the best possible light.
Now, what I should point out here is that you should not go it alone, despite all the difficulties working with a team may bring. Just because you’ve had a bad experience with a few people doesn’t mean you’re capable of success without a team. You simply need to take the time to find the right one for you. And that’s OK. Don’t rush into this, just as you shouldn’t rush into any deal. But given time, you will be able to surround yourself with people you can trust and work with to help you achieve your goal.
You aren’t working hard enough.
Real estate is a tough business. It requires hard work, dedication, and patience. No one in this world owes you anything. If you want something, it’s up to you to go after it and make it happen. Remember why you decided to get into real estate in the first place. It may be that you want to secure your financial future, you’re tired of working for someone else, you’re passionate about homes, or any other reason you may have had. Whatever your motivation, always remember it. And now that you’ve taken that leap, you must commit. Yes, it’s hard. Yes, it can be exhausting. Yes, it can seem like it’s taking forever to see any significant profit. But I promise you that if you persevere, you will reap the rewards.
It’s also vital that you understand it’s not only you who has to work hard. After all, this is not a one-man/woman show. Motivate your team regularly to ensure they are putting in the effort to make your business a success. Lackluster team members should be kicked out quickly before they bring down the energy levels or morale of everyone else.
As the boss, you must lead by example. Work your evenings. Work your weekends. Give up your holidays to clinch that crucial deal. If your staff see your commitment and hard work culminating in more money for the company, they will be inspired to do the same. Sometimes the market moves quickly, forcing real estate investors to make decisions on a time crunch. Don’t just say, “Ah, what the hell.” Do your research, understand the market, and consider your options before committing. This doesn’t have to take you over the deadline, however. It may simply require a few late nights in the office that you should be able to sacrifice to achieve blissful financial freedom. Work hard, play hard.
3 Things You Should Do as a Beginner Real Estate Investor
Now that you know what not to do, you can focus on what characterizes a successful real estate investor.
- Establish your end goal on day one and work towards it.
- Surround yourself with a great team.
- Work hard.
If you do all three of these things, you are guaranteed to see results soon. Yes, there are challenges you will inevitably face; yes, the path won’t always be straight; yes, you’re probably going to have sleepless nights in the future worrying about certain deals. But in the end, when you’re standing on that golden ladder rung, surveying your property empire, I promise you, it’ll be worth it.
Any other actions you’ve see that commonly result in failure?
Let me know your thoughts with a comment!