Even experienced real estate investors make mistakes sometimes. Real estate investing is such that you grow and learn something in every deal you make. Of course, as time goes by and as you take in more deals, you should be able to have learned from your past mistakes and not do it again.
As experienced as you may be, mistakes are still common. Beware though, because some mistakes can be very damaging to your portfolio and career.
5 Mistakes of Experienced Real Estate Investors
- Failure to Check the Balance Sheet
In any type of business, the balance sheet shows just about all the operational finances that would show you how to best optimize and utilize your assets. It may not show your cash flows, but it shows the growth of your assets, equity, different expenses, and tax benefits.
Hiring an accountant or having your accounts checked is great, but you have to make sure that you yourself aren’t ignoring your balance sheet. If you cannot understand how to analyze the balance sheet, you can always ask for help from an accountant.
- Getting Bad Deals and Working With Bad Partners
You should learn how to spot an unprofitable property when you see one. As your experience builds up, you should become increasingly aware of the type of deals that will bring a profit and those that are a loss.
This “bad deal” includes only those properties that will require huge amounts of payments that would only end up swallowing you whole. Properties that only have minor problems like rehab and staging are potentially good. You must learn how to calculate the amount of fixtures and expenses of a property before deciding whether you’ll take the deal or not.
Sometimes, the problem isn’t the property but the people. Being comfortable and trusting your partners is important in making great deals. Make sure you hire people who you can completely rely on to make a good job. Make sure that terms and conditions are entirely agreeable to the both of you, too. Work out any problems before shaking hands upon a deal.
- Jumping Ahead Without Any Knowledge
One thing that all successful real estate investors have in common is their never ending search for more information on the real estate market. They know that knowledge is important.
It’s not just knowledge, too. Effort and perseverance is also needed. Do not just jump into a deal where you have no idea on how to fix, market, and sell. Make sure you have targeted the type of niche that you would be into, and in what area. Knowing your area well will certainly allow you to gain more opportunities and leads.
Once you’ve mastered all there is to know on one specific thing, or a niche, then you can broaden your horizons and attack another area that you can target, study, and get deals from.
- Holding On To Properties Incurs Expenses and Don’t Give Much Profit
Sometimes a real estate investor comes into a situation wherein he or she has got more land than he or she can handle. This is basically what happens when you combine the first three mistakes above and hold on to the properties still.
Look over your list of assets, find out which ones are only incurring costs. Look for further improvements that can be made to the properties to make them profitable. Dump the properties that only gives problems and focus more on the properties that are worth your effort and money.
- Not Using Your Knowledge On the Local Market
While the internet, magazines, and media all talk of real estate, be aware that it generally refers to the national state of the real estate market. Knowing what goes on with it is good, but you should focus more on the local market you’re in.
In reality, all real estate is local. The value of the properties is, after all, determined by the local market conditions and rates. Local markets may also have their own pace and trends. Being successful in your market means to always gather information about your market and anticipate new trends and developments.