For many new investors, there is a fine line between success and failure. In most cases, it is the little things that can make the biggest difference. One of the most important things you can do as an investor is to be prepared when a fresh deal comes your way. How you act in these precious early hours will often determine how the rest of the deal goes. It should go without saying, but avoiding mistakes is critical. Below are the five most common investor mistakes and how to combat them. Regardless of your experience, these can be a problem if you are not careful.
1. Not knowing your numbers: With any potential deal, it is critical that you know everything about it. The best investors can make it look easy, but this typically takes years of experience to become fully comfortable with. Without experience, you need to put the time in and mind your due diligence. This means knowing not only the property, but the local area inside and out. You need to know all of the numbers involved in the deal and leave nothing to chance. Time is always of the essence with any new deal, but not at the expense of being comfortable moving forward. If you feel something is off or doesn’t make sense, wait until you have all the numbers. Passing on a deal is sometimes the best move you can make.
2. Poor property valuation: A deal is only as good as the price you can get it for. With all of the online property valuation sites currently available, it is easy to rely too heavily on unproven numbers. Many of these sites can be informative and helpful, but they should only be used as a starting point. There is plenty of information that these sites don’t know about the property. It is up to you to fill in the gaps when formulating a value in your head. Put more weight on comparable sales and current listings. Get inside the listings and see what features add value and which aren’t important to the local market. How well you can determine the property value will have a direct impact on the purchase price, the work you do and ultimately the end sales price.
3. Overzealous: It is important to stay patient as a real estate investor. Regardless if you are just starting out or not; if you do not have leads coming in it is easy to overvalue the next deal. This will eventually lead you to take on a deal that you may have otherwise not have. One bad deal can set your business back for months. It is important that you find the ability to look at every new property the same, regardless of how your current pipeline may look. Having a checklist or a system for evaluating new deals can help. You can make the numbers be whatever you want them to be, but you are only hurting yourself. Trust the information in front of you and make your decisions based on what you know to be fact. Getting started on a property and trying to figure it out from there is a recipe for disaster.
4. Doesn’t develop team The investing team that you surround yourself with is one of the most important things you can do. It is not enough to reach out to the first realtor you find online and think your work is done. You need to be on the same page with your realtor, contractor, attorney and anyone else you work with. Without the support of a good team you will spend time, money and effort pulling the weight of everyone else. Additionally the deals you do close won’t be as profitable. Building a team takes time and patience. You may go through a handful of contractors before you get the best fit. This will be frustrating and at times you will want to just go with the people you have in place. If you settle with your team, you will end up settling with your business. Even the best investors can’t do it alone. You are only as good as the team you have around you.
5. Lack of lead generation: Many new investors don’t grasp the importance of lead generation. As busy as you may currently be; if you don’t have new leads coming in, that success will be short lived. You don’t need to spend thousands on a new bandit sign or letter campaign, but you do need to do something. New leads are the lifeline of any business, but particularly for real estate investors. Deals will not just fall on your lap. You need to constantly do things to get your phone to ring. This could mean joining investment clubs or attending local networking meetings. Whatever you do, you need to be committed to it. It is better to do something over and over again than to constantly stop and start campaigns. How you attack your lead generation will go a long way in determining how many deals you have on the table.
If you focus on just these five areas, your business will reward you accordingly. The deals you do get will be stronger, and how you work them will improve as well. These will impact your bottom line and keep you busy moving forward. Starting out can be very overwhelming, but the transition can be easier by focusing on these five areas.
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