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9 Top Mistakes Real Estate Investors Make When Starting Out

Hey there! I’m Kaylee from Re by Kaylee, and I’ve got Jason Bible from Mr. Texas Real Estate with me today. Together, we’re diving into the nine biggest mistakes new real estate investors tend to make. We’ve made many of these mistakes ourselves, so we’re speaking from experience here! Let’s get into it.

Waiting Too Long to Start Real Estate Investing

One of the most common mistakes is simply waiting too long to get started. Many aspiring investors let fear hold them back. They worry about everything:

  • “What if I can’t sell or rent the property?”
  • “What if I run into refinancing issues?”
  • “What if the contractor does something disastrous?”

These fears are understandable but largely unfounded. The truth is, countless others have jumped into real estate investing and succeeded. There’s no reason you can’t do the same.

Suggestion: Partner with someone who has experience. This can boost your confidence and help you get your feet wet without taking on all the risk yourself.

Not Having a Plan

It’s shocking how many people dive into real estate without a clear plan. You may meet someone who boasts of 20 years of experience, but when you dig deeper, you find they’ve been all over the map—wholesaling, flipping, renting, and everything in between. And yet they have little to show for it.

Having a structured plan is critical. Think of it like a degree plan in college. You wouldn’t enroll in random classes and expect to graduate. The same logic applies to real estate.

Set Clear Goals and Steps:

  1. Define your long-term objectives.
  2. Break down what you need to do each year, month, and week.
  3. Stick to the plan, adjusting as needed.

Not Requiring Written Bids Every Time

Always, always get written bids for any work you plan to do. It doesn’t matter if it’s a small repair or a major renovation.

What to Include in a Written Bid:

  • Scope of work
  • Timeline
  • Cost breakdown
  • Payment terms
  • Signatures from both parties

This protects you from misunderstandings and disputes down the line. Even minor changes should be documented in writing.

Paying for Repairs/Construction Before 100% Completion

Avoid paying for any work until it is 100% complete. You may come across contractors who ask for a percentage upfront, another payment at halfway, and the rest upon completion. This can lead to unfinished work and disputes.

Best Practice: Only pay once the job is fully completed and you’ve inspected the work. A reputable contractor should have the resources to start the job without upfront payment.

Allowing Real Estate Business to Run Your Life

Balancing work and life can be challenging in real estate. It’s easy to find yourself saying yes to every opportunity, every deal, every networking event.

Tips for a Better Work-Life Balance:

  • Be selective about the deals you take on.
  • Schedule downtime just as you would meetings or inspections.
  • Learn to say no.

Success isn’t just about closing deals; it’s also about maintaining your sanity.

Over-Improving Properties for Flips/Rentals

Your property upgrades should match the neighborhood standards. It’s tempting to add luxurious features, but those won’t necessarily yield a higher return and might even turn potential buyers away.

Stick to the Neighborhood Comp Standards:

  • Look at what other houses have.
  • Match those features.
  • Avoid adding unnecessary luxury items.

Running Out of Cash

Liquidity issues can plague investors at any experience level. It’s crucial to manage your finances wisely.

Strategies for Maintaining Cash Reserves:

  • Keep at least 50% of your construction budget in reserve.
  • Set aside funds for at least three months of operational expenses.
  • Diversify your investments to spread risk.

Over-Analyzing Properties

Many new investors get stuck in “analysis paralysis.” They focus too much on minute details, often missing out on good deals.

Simplify Your Analysis:

  • Focus on key comps (comparable property values).
  • Don’t overthink minor details like paint color or minor upgrades.
  • Make decisions based on solid, but straightforward, analysis.

Inability to Sell Rehab Properties or Rent Rentals

When you can’t sell or rent your property, it’s often due to one of two reasons:

  1. Pricing Issues: Your price may be too high or too low.
  2. Quality Issues: Over or under-rehabbing can turn potential buyers or renters away.

How to Avoid This:

  • Research comparable properties thoroughly.
  • Match your renovations to the neighborhood standards.
  • Adjust your pricing strategy to current market conditions.

Wrap-Up

Diving into real estate investing can be both thrilling and daunting. By avoiding these common mistakes—waiting too long, not having a plan, skipping written bids, paying upfront, letting business run your life, over-improving properties, running out of cash, over-analyzing, and struggling to sell or rent—you put yourself on a solid path to success. Remember, the key is to learn from those who have gone before you and take actionable steps based on their proven strategies. Happy investing!

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