A business is best run with the least mistakes possible and as obvious as this is, I have managed to ignore all of the following 5 common mistakes in real estate investing before… in every one of my previous companies.
When I look back at each company, its rise and fall, I can pinpoint where each of these mistakes were made.
The best thing I did moving into Real Estate investing was identify and then correct them before I repeat the past.
Here is a list of five common mistakes in Real Estate Investing –
Mistake #1 – Lack of Cash Flow
This may sound obvious but there are many investors who routinely ignore this rule, sometimes without even knowing it. For instance, if you are analyzing a property at today’s current rates and it barely cash flows, it could be a challenge when interest rates rise and the income has not increased enough to allow for the adjustment.
Make sure you have enough buffers in your expenses to carry the load when expenses change or move on to another opportunity that GIVES you that flexibility. Real Estate is NOT a race and there will always be another deal.
Mistake #2 – No Business Plan
A business plan is the most important detail you need to ensure business success. It forces you to look at all areas of your business, derive goals and create solutions for future challenges. All of my previous businesses were driven by the seat of my pants and I thought I was a genius having success ‘without that pesky business plan’; I had no time for that, I needed to keep everything running.
In not knowing where I wanted to go and how to get there eventually caused each business to break down. In one example I grew so fast I needed to literally get out of my bedroom and open a retail outlet…or so I thought. I took money that was supposed to be for inventory to build my outlet and never recovered. I continuously tried to catch up and pay back my internal loan with ‘next months’ sales’ and was eventually sued from my suppliers for non-payment.
Mistake #3 – Too Busy
Everyone is “busy”, especially when you talk to an entrepreneur. But is busy always good and does it mean you are successful? I would argue in most cases it’s the opposite because all you are doing is working IN your business.
You have successfully created a JOB, not a BUSINESS; and probably one you can’t quit from.
Successful people are not ‘busy’ running the day to day operations of the business – they are out looking for ways to improve it – in other words they are working ON their business.
Would your time be better spent looking for investors and new opportunities or doing your bookkeeping? ‘Busy doesn’t equal success’.
Mistake #4 – Lack of a System
This common mistakes in real estate investing tip relates to #2. You first must have a plan and within that plan lies your ‘system’. Your system supports your overall plan and leaves no room for ‘shiny object syndrome’.
I have a specific goal in mind for my five year plan and each property I purchase helps me keep in line with that goal. I don’t look to other ‘deals’ even though they may be great, I just follow my system to get me closer to my goal.
The more distraction you have, the less success you will have.
This doesn’t mean you can’t ADD to your system, it just means don’t keep CHANGING your system.
Mistake #5 – Ignoring the Small Things
As your business grows so will the ‘little fires’ which can be almost anything. Because these tiny challenges are so insignificant at the start, many investors choose to ignore them.
Almost every time, the ‘little challenge’ becomes a major issue and it’s too late.
A popular ‘little challenge’ is property management. If you are taking care of mistake #3 and have hired outside people to help run the daily operations of your properties you need to be sure they are doing what you want them to do. If they are not, you need to step in and correct the issue immediately because it will only get worse.
I’ve been on the other end of the telephone listening to “well why didn’t you tell me this in the FIRST place?” You know what? They were absolutely right. Communicate often and clearly and take immediate action when things go sideways a bit.
Great Speed Forward in your Real Estate Investing !!!
if this list of five common mistakes in real estate investing has helped you out a bit,let me know below – let’s get a conversation going!