Winning in real estate is as much about knowing which mistakes to avoid as it is about knowing what to do. There are some very obvious blunders to avoid, of course: failure to launch, expanding at the wrong time or even budgeting mistakes. There have even been some very painful failures that should have been avoidable; like not learning how to prepare a scope of work and budget
The point is simple: mistakes will be made. However, it is up to you to avoid making mistakes that are possible to navigate. Learn from those that have come before you, and you should find an easy path to follow. Below you will find some of the biggest mistakes of this year, and how to avoid them yourself:
1. Inadequate Insurance: Real estate investors need insurance. There is really no other way around it. Some insurance is mandatory, other types are just a smart move. Investors that try to get away without insurance when mandated by lenders can lose their properties to foreclosure. Sometimes this goes beyond basic homeowners insurance to flood and storm insurance. It may be intelligent to have life insurance, health insurance, business insurance, liability, and umbrella policies as well. There is no telling when disaster will hit, and it may never, but the protection it provides is well worth it should something happen.
Adding layers of protection, such as trusts, LLCs, and separating business and personal assets is smart, but it does cost money. If you walk into a legal deposition, one of the first things those seeking a judgement are going to do is run down every asset and entity you have an interest in. If you cannot bring yourself to hand over insurance premiums to a third party, then at least start putting that same amount of cash into reinsurance. Truth be told, you will want to make sure you are insured adequately. There is no substitute for the protection the proper insurance will cost you.
2. Lack of Diversification: Low interest rates and asset prices aside, failing to diversify is a big mistake. If you’ve spent everything investing in northern California and it all got wiped out in the forest fires, you’re cooked. If you haven’t branched out yet, make a plan to make 2016 the year that you really diversify your real estate assets. Look at different strategies, property types, and locations.
3. Listing Too High: Yes, the U.S. real estate market has made tremendous progress over the last four years, but some has been unrealistic. While some properties have sold in hours, others are still on the market, and have been since January. Even if you own a property free and clear of a mortgage, there are still property taxes, insurance, and maintenance costs. This still might average several thousand dollars per year in holding costs. Some have given up selling after a year, and went back to leasing with the hopes of selling later. Yet, if you have a mortgage that prevents you from selling low, and then put in the holding costs, owners can be looking at $6,000 to $10,000 out of pocket. If the property has that many quirks, it may have been better to accept a creatively structured deal.
4. Failure to Fill Rental Properties: With U.S. homeownership rates diving toward 50 percent, and new housing starts below their previous peaks, there appears to be little reason for most landlords to be experiencing vacancies – especially extended vacancies. Those that have had this issue this year may need to revisit their leasing operations and demands. Do the math again and weigh the cost of vacancy against making it a little easier for tenants to move in.
5. Saying Too Much Online: Of all the horrific blunders real estate investors and professionals have made this year, perhaps the biggest is saying too much online. Just in the last couple months, there have been Realtors ranting and raving about things that they are completely wrong about. I don’t think I need to tell you that this is a bad way to go about doing things. If you are going to post information online, make sure it is correct. Fact check everything and become a reliable source for your audience.
6. Failure to Market Consistently: No matter how you are involved in the real estate business, you’ve got to be marketing consistently. According to Inman News, one of the top 5 real estate business mistakes is not spending at least 10% to 20% of your targeted gross revenue on marketing. That means if you want to make a million dollars next year, you need to spend $100,000 to $200,000 on marketing. That’s around $10k to $20k per month, and you need to start NOW.
Even if you have no budget, the key is consistency. If you would have blogged every day, made one new personal connection a day, and syndicated content to all of your social media profiles for the last year; you’d have 365 more people in your database, 365 blog posts, and at least as many Tweets, Google+ updates, and Facebook posts. There’s got to be a deal or two in those numbers!