Real Estate Investing – 10 Common Mistakes (part 2) of New Real Estate Investors
Real Estate Investing is the greatest wealth builder in history, but it requires a focused plan,determined effort and time. And,like all endeavors,it won't always go as planned.We've all made mistakes.It's just a part of living,trying,and learning.And,it will happen to you as part of your investment career eventually,if it hasn't already.In this two part series you'll learn the 10.common mistakes of new real estate investors.
In part 1,we started talking about the 10 common mistakes new real estate investors make.
In part 2, we cover the remaining 5.
We bring this to you, simply because we’ve seen these mistakes made over and over.You don’t have to start from scratch.You can learn from others on what to do and what not to do.
Enjoy and learn…
6.) Analysis Paralysis – Investors get “stuck” running the numbers over and over (and over and over)again.So afraid they are missing something…anything.Or they play out all possible scenarios to see what happens.
If you can’t break through this syndrome you may never buy…or worse you’ll take too long and regret it forever.
Getting unstuck requires breaking through the fear.The magic cure for fear is knowledge.If you’ve analyzed and understand the market,you know the neighborhood,you have the best teams and you’ve consulted your team of experts and you look good on all levels,invest.Leverage their knowledge,make a decision,and make some money.
7.) Under insuring Property – Do this now,and always:Get the recommended amount of insurance on your rental property.Be smart and protect yourself from the unforeseen and unpredictable.
Ensure that you have:
Full replacement coverage.
Rental coverage (income replacement in case of a repair event where the tenant has to move out).
Satisfactory liability coverage.
Umbrella liability coverage.
Many investors cut corners by purchasing the minimum amount of insurance and are sorry for it later.
There is a wise saying: “You can’t purchase insurance after the fact”…Be safe not sorry!
8.) Not Protecting Your Assets - As your portfolio grows, asset protection becomes increasingl important.Yet, many investors either forget or put it off until “later.”
Create entities and leverage qualified legal council to protect your personal assets (we use LLCs –Limited Liability Companies). These are crucial to protect you from lawsuits.And let’s face it folks,we live in a sue-happy country.
Think of an LLC like a “fire wall” placed between your property and you for legal and financial protection.Should an accident occur at one of your properties,a person can only sue the owning entity.Without the entity in place,they can sue you directly.
If you own rental properties and haven’t already, put the structures in place today to protect your personal wealth and limit lawsuit exposure.
9.) Purchasing Property Without Ample Reserves - One more common mistakes of new real estate investors is not understanding that you need to have a “reserve fund” until the property can create its own during the first year of operations.
Having adequate reserves is vital to weathering storms that come when owning property (and they will come).Be it an unforeseen market shift or something else, you will need your cash reserve to get by in tight times.
We always raise funds to both acquire and provide sustainable reserves to protect our assets.We have the discipline to be conservative and keep the reserves liquid in the bank to protect against that rainy day.We do this for all deals and so should you.
Remember,the market always wins…plan correctly,raise funds adequately,and be disciplined/conservative in maintaining your reserves.
10.) Letting Your Business Run Your Life -We teach our students/investors to treat your business as if you are in a slow 10 year marathon race.Create systems and controls for your real estate investing business…create your machine.
With systems in place we then teach – “If you work on your business you will gain wealth; if you work in your business you will burn out”.
Do not do everything yourself.Delegate tasks whenever feasible to team members – leveraging their strengths and expertise.This allows you perspective and vision to truly lead.
Every investor has war stories they can share with you. Feel free to share in that “learning experience”….and chose to emulate success.
Find someone (or a team of mentor’s) who’s done what you want to do.Follow their advice.Do what they’ve done.And you’ll get what they’ve gotten.It’s just that simple.
We at 37th Parallel Properties are dedicated to mentor and coach you to be a Successful Real Estate Investor.This is why we have shared these 10 Most Common Mistakes Investors Make.If we can save you from these mistakes you will climb that ladder of wealth much faster with less cost–emotionally and financially.
Keep this list handy and refer to it as you invest…it will save you a lot of money and heartache in your investing career.
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ABOUT THE AUTHOR
Dan Chamberlain has a passion for solving complex problems and teaching and mentoring others.As the Director of Operations, Dan oversees 37th Parallel's real estate acquisition, renovation,and sales processes in conjunction with managing strategic internal projects.This includes working with field partners in 5 different states and across several different disciplines.