A Ten Part Series on Mistakes Real Estate Investors Make and How to Avoid Them Part 2 and 3 of 10.
Big Mistake Number Two: Waiting for the Perfect Deal
Some investors never take action due to a strong fear of failure. Fear of failure is a perfectly normal feeling to have when venturing into a new business and it just takes some courage to overcome. Some investors mask this fear with a determination to find the one perfect deal out there that has no chance of going wrong. There's a balance between being selective about the houses you buy and never actually taking action. The only guaranteed way to become unsuccessful is by doing nothing. To overcome this state of immobility the best thing to do is revisit your investment goals, set some specific and realistic underwriting standards for future deals, and buy the very next property that meets those standards, regardless of the twisted knot in your stomach. Even if you happen to get lucky once per year and find that perfect deal and make an easy $40,000 profit, while you waited you would have missed out on the 4 average deals that would have brought in $15,000-20,000 each, and you would have gained a heck of a lot more experience and contacts through the process, meaning you would be better equipped to find more of those ‘perfect' deals in the future.
Big Mistake Number Three: Lack of Preparation
Although having a burning desire to invest in real estate is helpful to become successful investor, it's not the only thing you will need. When a new real estate investor charges ahead at full force before knowing basic information about what he is even capable of buying he is bound to waste loads of valuable time. Proper preparation is the key for any real estate investor looking to start out and the first step is obtaining a simple pre-approval from a lender. This allows an investor to get a good snapshot of his/her credit score, financial situation and overall buying capacity. The results of this process could vary from building a solid foundation of confidence in your buying abilities to the realization that you may need to work on some things before you dive into the world of real estate investing; for example creating a savings plan to build up more cash reserves or pay off some negative items showing up on your credit report that could keep you from refinancing out of a high interest hard money loan. Having proper financing in place before you begin your property search is the most important step an investor can take. Contracting a great deal without financing in place is never a good idea, especially if you have earnest money, potential profit, and your professional reputation on the line. Make sure you do not miss this simple step.Other examples of good preparation are aligning yourself with the contacts you will need to accomplish your goal. A good consultation with tax professional could change the entire direction of your strategy and save you years of time and money down the road. Finding good and reliable tradesmen ahead of time is important too. If you find a great deal then there's bound to be lots of competition and often times you'll need to act quickly. If the foundation is a bit scary and you want a foundation professional to estimate the damage before you jump in then the yellow pages is not the right place to start your search for a fast and reliable response. Proper preparation is generally the first thing to be overlooked as new investors excitedly race forward to find properties, and it is still true as it has always been, an once of preparation is worth a pound of cure.
Part 4 of this article will cover “Banking on Speculation“.