Common Traps Investors Should Avoid
Posted by JD Esajian // April 19, 2019
No two real
estate investors are the same. You may have similar styles & tastes but
there is always something about you and your business that makes you start at
the same point but where we go from there is completely up to us.
There is no sugarcoating the fact that investing is difficult at times. Without the right mindset you can easily get frustrated and swallowed up by the business. There are several common business traps and pitfalls you need to avoid. Falling for even one of them will cause your business to get off track, making it difficult to get back on. Here are five common investor traps you need to be mindful of.
- Short Sided Thinking: Regardless if you invest on a part- or full-time basis you can’t expect immediate results. Entering the world of real estate is much like entering any other business. There will be a period of adjustment and a learning curve you need to deal with. It is extremely rare to generate revenue in your first 90 days without a little bit of luck involved. Too many investors expect leads to fall in their laps, and when they don’t they get frustrated with the business. The reality is that it takes some investors months before they close their first deal. Even if you enter the business with established contacts, it could be rough going until you get the feel of things. Simply browsing the MLS or looking at real estate websites doesn’t mean you are committed to the business. Doing this for 90 days and seeing what happens is not a recipe for success. You need to commit for six to twelve months of working hard and grinding regardless of the results. If you can’t commit to that your business will be in trouble.
- No Business Planning: Real estate is one of the few careers where you don’t need a degree or license to enter and be successful. Literally anyone can make an offer on a property and own real estate. However, the best investors are those who map out a plan before they start. This doesn’t mean you need to write out every move you plan to make for the next twelve months. It means that you should have an idea of where, when and how you are going to invest. Even answering the most basic questions will help guide you and streamline the process. You won’t jump at every new property that becomes available that doesn’t fit you’re your criteria. This will help not only save time but increase the likelihood that you will get deals you actually want. Many new investors forget that the goal of real estate is to generate a profit and not simply get an offer accepted. The more you know about your business and where you want it to go the more successful you will be.
- Slow To React: Investing in real estate happens in real time. In most cases, those investors who react the fastest get a leg up on their competition. Sellers are not going to wait for you to run your numbers and present an offer. You must be able to make quick, decisive decisions in short time. Investors who get into trouble are often slow to change. Real estate markets are constantly fluid. Something that worked for you even just six months ago may not apply today. If you are relying on outdated and inaccurate trends and data, you will find yourself in trouble. On the flip side, if you are one step ahead you will get the best price on deals and be able to generate the best leads. You need to be able to process data as it comes in and know how to decipher it. If you are slow to react your competition will soar right past you.
- Unrealistic Expectations: There are more real estate investing shows today than ever before. There is a good chance you can find a show to your niche any day of the week, on multiple channels. While these shows do a great job at providing some of the pitfalls investors face daily, they are often unrealistic with the numbers. Most new investors don’t have the ability to pay for a $400,000 property with cash. They don’t have residual capital to cover up their mistakes that can help them generate a higher profit. The returns you see on TV can happen, but usually with an established investor in the right market. Don’t think that every deal you are part of will turn into a home run. These deals are the exception and not the norm.
- No Networking/ Contacts: Every good business relies on contacts. This is magnified in the world of real estate. Even if you haven’t closed a deal you need to get out there and meet people. Go to investment club meetings and networking events. Don’t be intimidated by the fact that you don’t know as much as others in the room. Everyone started in the same position you are in now at some point. Even if you only make one connection in a meeting it is well worth it. Every meeting you can add someone else to your network and before long you will have a solid list of people you can turn to for help, deal generation or team building. Without making an effort to network your business won’t be nearly as strong as you need it to be.
There is a
fine line between success and disappointment in any business. As you are just
starting out in real estate, beware of these common investing traps.