The best advice for new real estate investors is more subjective than anything else. After all, every residential redeveloper has their own opinion and unique way of doing things. However, I am convinced that there is no more important lesson than the one those that came before you already learned. Your predecessors, or at least those that have been investing in real estate successfully for quite some time, have already endured a trial by fire, which means they have been awarded the opportunity to learn from their own mistakes; fortunately, that means you can too.
I maintain that the best advice for new real estate investors is to avoid making otherwise avoidable mistakes. And there is no better way to do so than to learn from those that have come before you. If you want to get your new real estate business off the ground, take a page from my book, and avoid making the following mistakes.
Advice for new real estate investors can take many forms, not the least of which may be gleaned from their predecessors. If for nothing else, advice should come from those that have enough experience to impart it on others. It’s worth noting, however, that advice isn’t relegated to telling people what to do; sometimes knowing what not to do is equally as important — off not more so. Fortunately, new real estate investors are awarded the opportunity to learn from the mistakes of those that have come before them. Let’s take a look at some of the best advice for new real estate investors I have managed to compile from my own experience:
1. Doing Everything On Your Own
I want to make it abundantly clear; I have the utmost respect for those investors that can flip a property without enlisting the services of others. Few — if any — are able to even attempt such a miraculous feat, let alone do so successfully. But I digress; just because you can complete a deal by yourself doesn’t mean you should. In fact, I could very easily argue that doing everything on your own is one of the biggest mistakes you can make as a residential redeveloper.
In taking on every little project that comes your way, you are effectively removing yourself from where your services are required most: those that focus on bringing in money. While you could essentially save a couple hundred dollars by installing baseboards throughout the house yourself, don’t; your time is better spent elsewhere. The amount of money you may end up saving doing the job yourself typically won’t be enough to offset the amount of time spent away from marketing and lead generation. All things considered, receiving just one hot lead is worth more than all the work you could do on a property. Time spent away from your most productive activities is anything but well spent.
Having said that, don’t hesitate to enlist the services of others. The idea is to delegate most of the work to the professionals — whom, with all due respect, are probably better at the job in question than you are — and free up your schedule to focus on more important matters. Why swing a hammer (a job every contractor can do) when you can light a fire under your lead generation campaign or even land your next deal?
It’s not a coincidence that the most prominent residential redevelopers of our time are simply a cog in a greater machine. While they are an important cog, their success is nonetheless contingent on a team effort.
2. Exercising Complacency
It’s impossible to overestimate the importance of an inherent degree of confidence. In fact, you could argue that confidence is the foundation of every great investor. It’s worth noting, however, that confidence can be overextended; so much so that it becomes a burden. By all means exude confidence, but don’t let it change the way you look at a respective deal. The last thing you want to do is rest on your laurels, as that is the clearest grounds for complacency to take effect.
Despite how confident you may be in your latest endeavors, there are never any grounds for complacency in the real estate industry. While an inherent degree of confidence is absolutely necessary — and coveted even — there is a fine line between certainty and complacency. While both are centered around a degree of self-satisfaction, confidence is earned, whereas complacency is nothing more than a fallacy,
In order to avoid becoming complacent yourself, mind due diligence. Not surprisingly, this industry favors those that are ever vigilant. Strive to learn as much as you can, and never stop trying too better yourself; it’s the only way that I am aware of to effectively combat complacency.
3. Neglecting What The Numbers Say
Investing in real estate has more to do with the numbers behind the deal than the homes themselves. If for nothing else, subject properties are nothing more than the physical embodiment of the numbers; the data used to evaluate a deal’s viability. In viewing a property, nothing should speak more to an investor than the data presented to them, but far too many new investors get caught up in the aesthetics. Just because a home looks great doesn’t make it a good investment opportunity, and vice versa. In fact, more often than not, the best homes are those that need the most attention. But I digress, nothing impacts a deal more so than the numbers.
Often times, new investors have a tendency to try to fit a square peg into a round hole; they inadvertently force something that is otherwise advised against — simply because they ignored the numbers. For example, one would assume that every dollar put into the property will come back at the time of sale, but that’s not always the case. In fact, it rarely is. Simply making improvements for the sake of doing so is a blatant disregard for what the numbers will tell you.
Instead of projecting numbers that are unrealistic, look at the real data in front of you. More often than not, local comparables will hold the answers you seek. By not trusting the numbers that are in front of you, you increase the chances of making bad decisions, or worse: an expensive one.
Mind due diligence and gather the appropriate data you will need to make an informative decision. Don’t simply assume a property is a great deal; make sure the numbers back it up.
The best advice for new real estate investors is ultimately what they are willing to take to heart, but I would argue that the most valuable advice would be that which allows you to avoid making unnecessary mistakes.