9 Mistakes Made by Novice Real Estate Investors

As a real estate investor and advisor, I often see novice investors make the same exact mistakes. As a result, I decided to create the following list to help novices understand what these common mistakes are and how to avoid them. The good news is that all of these mistakes can be easily corrected. The bad news is that any one of these mistakes will seriously limit your potential for success. In my experience, these are the 9 most common mistakes I see novice real estate investors make:

1) Not getting an education

Getting an education is a critical part of becoming a successful real estate investor. It’s much easier and less costly to educate yourself than to make mistakes in the real world. We are lucky to live in a country full of educational opportunities for whichever endeavor we want to pursue. Surprisingly though, not everyone takes the initiative to learn before they take action. This exposes these people to costly (and sometimes career-ending) mistakes that could have easily been avoided. Some misguided people even complain that the books, courses, or seminars promoted by real estate experts are too expensive. I guess that depends on where you stand. To me, they seem cheap compared to what I know can be earned in this business. Perhaps to a novice though, they may seem expensive. But as the saying goes, “If you think education is expensive, try ignorance.” Think about it. Is a $500 course worth it if what you learn only makes you $5,000 on a single wholesale deal? What if it could save you a mere $5,000 on a single rehab? Or what if it helped you create an extra $200 per month cash flow on a single property for just one year? Would it be worth it to you? The value of an education often doesn’t reveal itself until you’ve stepped up to the plate and put yourself in the game.

2) Not getting an education from the right people

The internet is a great tool. But it’s also saturated with too much information – good and bad. Oftentimes, from less than credible sources. So don’t confuse the information you find on the internet as necessarily being quality information. For example, there are a number of real estate investing newsgroups and blogs that have proliferated the internet. Many so called experts on these sites are more than willing to share enough information to get you into trouble. Do you really want to get your information from “rei-man-TX” or “investor-guy75?” Carefully consider whether these are truly reputable sources to be obtaining information from. I can’t believe some of the misinformation I’ve seen posted on these sites. Remember, anyone can post on a newsgroup and anyone can create a blog. But just because someone has a blog, doesn’t mean they necessarily know what they’re talking about. The misinformation you get may be costly…in either lost profits or reputation.

Novice investors may also get misinformation from friends or family members. Perhaps they dabbled in real estate at one point. Now they feel entitled to tell you what little they may know about real estate investing. Be extremely wary of people who have “dabbled” in anything. Dabblers are rarely experts in anything. As the saying goes, “Jack of all trades, master of nothing.”

3) Not taking action

If you’ve managed to get a good education from a good source, the next step is to take some action. Knowledge is only power once you begin to apply it properly. Merely buying a wide array of real estate investing products or attending bootcamps isn’t going to make you any money. Some novices neglect to take action because they’re still searching for that magical secret that is going to make it start raining deals. The real secret is hard work! Others are paralyzed by fear of what might happen if they get one of their offers accepted. Or, they may give up making offers if they don’t experience instant success. Whatever the reason, not taking consistent action is a sure way to fail at anything. Personally, I believe that initial failure is the universe’s way of forcing us to make sure we truly want what we’re pursuing. In the end, persistence is what leads to success. And the more we persist, the closer we get to success.

Many novices regularly attend their local real estate clubs. Clubs and associations are excellent way to network with other like-mided people, learn techniques and strategies, and have fun. Unfortunately, I’ve met countless club goers who have never done a deal before. Instead of using the club as a spring board into taking action, they tend to use the club as a warm blanket because they fear being out on their own. When I meet these people, my advice to them is to stop sitting around with the other novices talking about all the deals they would like to be doing. My advice is simple, go out there and get some deals done. We all need a good education. But that is only one step in the process. There is no substitute for hard work.

4) Not having realistic expectations

Most novice real estate investors have unrealistic expectations. It may be about the amount of repairs a property needs, the time it takes to complete a project, or the profit they should get from a deal. They’re expectations are either too high or too low. If they’re wholesaling properties, they may get too greedy and try to charge the rehabber too much. If they’re rehabbing properties, they may underestimate the repairs required. If they’re landlording, they may underestimate the amount of maintenance a property will require or forget to factor in vacancies. While getting an education plays a large role in these mistakes, another reason is that they did not leave enough room for error. They assumed everything would go as planned. Real estate deals rarely go exactly as planned. Experienced investors understand the importance of planning for the unexpected. This way, when things don’t go as planned it’s not the end of the world.

5) Not treating real estate investing as a business

Contrary to popular belief, real estate investing is not like the stock market. It is not a passive investment. It is an active investment. Whether a novice investor’s intentions are to flip or to own rentals, they sometimes think owning real estate is going to be a lot easier than it is. While the profit potential in real estate is usually much greater than owning a stock, it inherently requires more effort than most passive types of investments. Whether you’re wholesaling, rehabbing, or landlording, real estate requires your time and constant attention. In this way, it’s more like a business than an investment. For example, you must be disciplined about your business. You need to set a schedule for yourself and stick to it. You need to set policies and procedures and adhere to them. You need to set goals and do whatever you can to achieve them. Not everyone has that level of discipline without a boss telling them what to do. When you run your own business, you are the boss. You must be willing to make sacrifices to succeed. For you this might mean that you need to turn off the television and read your home-study courses. It might mean that instead of spending money on new clothes, you invest that money in your business. Or it might mean that instead of going to the park on Saturday you search the MLS, look at properties, and familiarize yourself with your target neighborhoods.

6) Not being patient

It can take awhile for novice investors to see positive results when starting out. You can’t expect to immediately find deals and make money. It may take several months to get your first deal. As a comparison, new real estate agents are often told by their brokers that it may take up to six months to close their first transaction. Similarly, real estate investors should expect to wait a few months to close their first transaction. Furthermore, it can take years for your real estate investing business to become a thriving venture. There aren’t too many businesses that become profitable immediately – no matter the type of business. It often takes several years for most businesses to get to a point where they make steady and reliable profits. Running your own business can be fun and extremely rewarding. But rest assured, the early years can be unpredictable. As a result, you need to have a lot of patience for things to take off.

7) Not concentrating on quality deals

This is one of the biggest mistakes I see novice investors make, especially after they have done a few deals. After they have some success, they begin to focus too much on quantity instead of doing quality deals. This mindset leads them to do less profitable deals. And once an investor begins to do thinner deals for the sake of doing more deals and outdoing their competition, they eventually find themselves in trouble. For example, I know many wholesalers and rehabbers who became too confident before the housing downturn of 2006 and loaded up on properties. When the market went south, these investors were left holding a lot of worthless inventory. Most of these investors went bankrupt and lost all of their properties. Unfortunately, this is a lesson that most investors learn the hard way. For some reason, avoiding the temptation to focus on quantity is a principle that most investors have a hard time accepting. Their natural inclination is to do more. They might feel the pressure to tell their friends what new project they’re working on. They might feel bored unless they’re working on something new. Or they might feel guilty about not “staying busy.” Whatever the reason, novices must learn that investing is an activity in which “staying busy” is not always smart. Sometimes, the best deals are the ones you don’t do. When an investor learns to concentrate on a small number of quality deals, they enjoy not only better profits, but also a better lifestyle since they’re not running around managing a huge portfolio of properties. For most people, the whole point of getting into real estate investing in the first place is to live a better quality of life, not to work longer and harder.

8) Not moving on from bad deals fast enough

Since novice real investors usually don’t have a steady stream of leads coming in and don’t know what a truly profitable deal looks like, they tend to overanalyze bad deals far too long. They get anxious and want to get deals done. And even when they put the numbers of the deal into their spreadsheet and see the deal clearly doesn’t work, they still find a reason to justify it. They logically know that a deal should be avoided, but they try to justify it anyway. While I believe everyone needs to start somewhere, the ideal place for a novice real estate investor to start is in a good deal not a bad one. What novices eventually learn is that not too long after taking on a marginal deal, a greatdeal is not far behind. But because they’ve tied up their resources with the marginal deal, they can’t pursue the great deal.

9) Not writing down goals

Don’t try to run your business without a clear plan. Clarify your goals by committing them to writing. Then, revisit them once a week until they become reality. Something magical happens when you write down your goals on paper. They begin to take root. When you focus on them repeatedly, you nurture them and they begin to grow. It’s important to write down your purpose, strategies, and goals. Begin by asking yourself the following questions:

What strategy am I pursuing?
What will I do with the properties I will buy?
How many deals per year will I do?
How much profit will I earn per deal?
How many offers do I make to make this happen?
What kind of life do I want to live outside of the office?
When you’re clear about your goals, you have a much easier time accomplishing them. And if your goals are unrealistic you should change them as necessary. Don’t get stuck in an unrealistic set of goals that will only produce frustration. At the same time, you shouldn’t change your goals too often either. It’s hard to hit a moving target. You want to strike a good balance between having reasonable, achieveable goals and also setting goals that will force you to get outside your comfort zone.

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Getting REAL About Real Estate–Home Staging and Feng Shui Make a House a HOME

Staging a Home with Style and a Good Dose of “Chi”

Feng Shui Long Island

No longer thought to be just a passing fad, more and more people are using Feng Shui to sell their homes. Why? Simply because it works! With not only celebrities using it, the rich and famous are finally admitting they’ve been using it as well; with the likes of Donald Trump, Mayor Bloomberg, Companies such as Newscorp Corp. and Nordstrom’s, Feng Shui is finally out of the closet. And helping to get those sold signs up and the moving trucks moving.

It’s funny that while it seems Feng Shui is being more widely used, home staging to prepare a home for sale seems to be overlooked. Real Estate agents have long been able to give fabulous advice on what a homeowner needs to do to prepare for a sale but there IS more then just cleaning and decluttering. Leaving homes empty is leaving them lifeless and cold looking. Using a minimum of furniture, techniques and props can make a home look and feel lived in and loved. And isn’t that the way we want to feel in our home; after all, it’s our own personal sanctuary, our oasis form the sometimes crazy lives we lead.

If you haven’t tried hiring a professional stager in this market, think about it. We’ve learned the “tricks” to make that home stand out from the rest. Adding to that a home that has had Feng Shui principles and blessings and you’ve got a winning combination. We seek to balance the energy in a home, the very feeling a home gives off from the first minute a client pulls up.

How do we do that and when did we start? Long before the buzzwords of “curb appeal” and “home staging” became popular, we have been implanting Feng Shui principles to draw a new or old homeowner into their home and make them feel supported there for many years. Since the front door is, in Feng Shui Talk, is the “Mouth of Chi” and is considered to be where all the good energy enters. It tends to follow that the path leading to the front door have always been very important aspects in Feng Shui Principles to make people feel drawn into a home. Outside we may suggest lights, creating a nice pathway, seeking a balance and welcoming someone into our space with techniques like wind chimes, fountains, and crystals.

Inside we check furniture placement to seek a good flow of Energy in the space. There is a mental checklist of hundreds of Feng Shui “cures” we can put into place, easily and inexpensively. Incorporating a variety of Feng Shui methods such as Black Sect blessings (where we firmly set our Intentions for what we want to create) along with more Western methods allows us to help attract the right buyer and have a person love their home.

With the new and now famous DVD, “The Secret” coming to light, we can finally back up what we seek to instill in clients of Feng Shui. It is not simply the changes you are making in Feng Shui, it is the very Intention put behind them. Setting clear and certain Intentions for what you seek to create from a consultation simply helps create them. Energy is able to be measured as well as thoughts. And our thoughts, actions and intentions are more powerful then imagined. I know for some this is a new concept, for practitioners of Feng Shui and all Wholistic Health, it is our belief system.

We attract what we receive into our lives, consciously or unconsciously. Even the very things we don’t want. Why? Often times it is because that’s what we are focusing on: the bills, traffic, problems at work. We ask our clients to be as mindful as possible, to try and change every negative to a positive. After a bit of work, it’s not at all difficult. A little practice and you’ll get it. In dealing with my mother on any given day, I’ll ask her simply how she’s feeling that day. She goes immediately to the negative; her leg is bothering her, she has difficulty walking, she is sad. I then ask her what’s good about how she’s feeling that day. Some days she has to think to come up with an answer but I wait; I want her to send up her blessings and count them every single day to bring more in.

How does all this relate to Real Estate? Easy. We work on different energy and different thought patterns then some Realtors. And it is with that energy, some good home staging and a dose of Feng Shui that attracts the right buyer and gets that home off the market.

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Real estate Investment Success Series Tip #5 -3 Ways to Get More Out of the Real Estate Agent if You

Real estate brokers are the greatest asset of small investors since brokers deal with more properties than the individual real estate investor could ever deal with. That said, however real estate agents usually act for the seller so tend to act directly opposite to that of the buyer. In addition, their commission depends on the price that they can sell the property, so the higher the price they sell the more they can earn.

This article acknowledges this and lists four things you can do to get the most out of the real estate agents that you meet when you are shopping for your next real estate investment deal.

Tip #1- Use their knowledge

Most people know that some places have higher rental yields than other similar properties in the same class of real estate. If you are new to an area, you would want to tap on the vast knowledge of the real estate agent’s local knowledge. Ask him what areas command a better rental and why. Then ask him to show you those properties. In this way you would get a better return on investment as opposed to him showing you the properties he wants you to see.

Choosing a property in a good area good as it allows you have a maximum upside when the economy turns around. Let the real estate agent know that you are a committed real estate investor and when he knows that you might be a potential return purchaser, he will let you know of any new real estate deals that come his way that might interest you.

Tip #2- Go early to scout out the area

This is a simple tip that most people seem to miss out when looking for a real estate property. If you are the potential buyer, spend some time going to the property in question earlier then the said time and check it out. You want to spend some time observing the neighbourhood and talking to the neighbours so that you can find out all you can about the neighbourhood before you talk to the real estate agent who would try to paint a glowing picture of the area. Look out for things like crime problem, bad neighbours and other things that can turn away potential tenants.

For commercial property real estate investments, you might want to go there a day before so as to scout the area for the purpose of ascertaining walkthrough traffic. The greater the walkthrough traffic the higher your potential rental returns. Its no good purchasing a commercial property in an area that has no visitors since your rental returns would be very low.

Tip #3- Compare stories with other agents

Once you have figured out what type of real estate investment property you are interested in and what area you want, you would want to make appointments with several real estate agents so as to learn more about the potential area that you are acquiring property in. Since real estate agents are competing with each another so you can find out the downside of another agent’s proposed property at no charge at all.

In addition to learning the downside of your possible real estate investment, some of these real estate agents can give you valuable information that you can use tell your prospective tenants to rent out your property like for instance proximity to bus stations, the proximity to the subway, low crime rate and secured vehicle parking.

Tip #4- Get an agent that is qualified and in a medium to large agency

In general novice investors should contact a long-established real estate agent that is very familiar with the area that you intend to invest in. The reason is that you want an agent that knows that area very well and knows what properties are on sale and a bargain. The agent will also be able to tell you which areas are good for rental purposes and these areas should be the areas that you should spend your energy on.

Another thing to take note is that your agent should be a medium to large agency so as to gain access to a large database of properties for sale and rental. This would facilitate your search for high rental yielding properties through the agent. A medium to large real estate company would also not fold so easily and leaving you in the lurch while in the midst of a real estate transaction.

In conclusion, real estate agents are a useful part of the real estate investment process but if you mentally know what you want, you can benefit greatly from their years of industry knowledge. Effective real estate investment requires education and massive action on your part.

Joel Teo takes a keen interest in real estate investment as part of a larger investment portfolio. For more tips on real estate investing check out our real estate investment success series at our real estate investing resource

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Loans for Real Estate Investing and Its Basic Features

Undoubtedly, it can be said that dealing in real estate is an expensive affair. In such cases, one needs a bulk amount. But every time it is not possible for everyone to arrange that much amount. In such cases, the assistance of hard money lenders is unavoidable. Hard money lenders are mainly commercial lending organizations, those who solely deal with real estate sector. The loans for real estate investing are mainly short terms loans.

Usually, these loans are known as hard money loans, because these loans are available with stringent terms and conditions, higher interest rate as well as higher upfront fees (charged between 3 to 10 points). These loans are a sort of secured loans; here real estate plays the role of collateral. The loans, available for investing in real estate, come with the interest rate of 14%-18% and these loans are repayable within 6-12 months.

Lenders however check the collateral before providing the loan. Besides, they may gather information like, tax returns, bank statements and sometimes they may examine the property as well. Borrowers’ credit score as well as their economical condition are also taken into account.

Depending on the various factors, such as, involved risk, the type of deals etc, the fees are charged. While availing loans for real estate investing, borrowers need to present their business plan too, as, lenders want to confirm whether the investment is risky or not. In such cases, the importance of borrowers’ income is unavoidable as well. A fixed and higher income enhances the possibility of availing loans for real estate investing.

Such kinds of loans are available for all types of real estate investing. To name a few, we can talk about these loans can be used for purchasing homes, rebuilding homes, purchasing leases etc. Unlike traditional bank loans, these loans are approved fast. At last investors are advised to check the pre-payment penalties before opting for loans for real estate investing.

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Real Estate Investments – Philanthropic – Yet Profitable

Real estate is a great vehicle for investment, if you have the cash required to get started! Real estate is considered one of the most stable investment vehicles because honestly, there is no chance of the market disappearing completely. And, when was the last time a million dollar home sold for a loss of more than ten percent?

Generally, the outlook for real estate investments is positive. Sure, it is important to locate a housing or commercial location which is flourishing and presents the greatest possible return on investment.

The main goal of anyone interested in real estate investment should be first and foremost to provide a solution for an individual or company’s needs. Just like any other area, if you want to help someone solve a problem, you had better get educated about the problem and what options exist for solving it. Real estate investing is no different.

Someone needs a rental home, a company needs a larger storefront, a developer is interested in placing a shopping center in your home town… These are all distinct situations where you, as a real estate investor can get involved with the solution!

By attending classes on real estate, talking to others in the business and reading the recommended books you can get educated! But that is not enough, you need to watch the real estate listings and you must know how to spot a good deal. Practice is the only true way to learn this, however many professionals are doing it now and will be happy to share some tips. So get out there and make connections in the real estate community.

We recommend making some friends in the real estate brokering field, the mortgage field and with real estate agents. Networking is the best way to gain success, and to guarantee that people are looking out for your interested as well as their own. Good service gets return customers; this is no different for the real estate business. And, if you feel that you are not receiving the best service from one person or company, move on to someone else because there are always people willing to make a commission sale from your investment.

This is just a brief overview of real estate investing, we definitely recommend researching the topic thoroughly if you are interested in making a real estate investment.

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Easy Action Steps to a Successful Start in Real Estate Investing

If you happen to watch cable or satellite television on the weekends, you can find between 20 and 30 channels early in the day with get rich quick infomercials hawking everything from books, tapes, seminars and even personal coaching services. Most are centered around real estate and I am not sure they are worth the time it would take you to order them by phone. I have spent thousands of dollars on real estate home study courses through the years and will continue into the future. I am always looking to further my education and understanding of what is really working in the investment real estate world.

Because of the time, energy and dollars that I have spent in the past, I have a pretty good idea of what a real estate investor wants to avoid as well as the best steps to take for a successful start. Education definitely plays a role in the success of a real estate investor as well as business savvy, attitude and at times, luck!

Here are a few detailed steps that an investor can take to improve the chances for success.

- Learn the basics of real estate in general.

As with any investment strategy or business, real estate comes with its’ very own lingo. There are terms and phrases that many of us have heard in the past, yet may not know the exact meaning. It is very important from the get go to do the research and learn the basics such as the meaning of the terms and phrases that are used in the real estate industry every day. You can start by using a search engine and searching the phrase “real estate definitions”.

- Begin home study education.

There are great benefits to home study and I do not mean the courses we eluded to on weekend cable T.V. At your local library, in the real estate investing section, there will be multiple titles recently written by authors with experience in their topic. Check out as many titles as you can read in a week and o to work reading. Write down sentences and topics that come up in the books that interest you and that fit into your reasoning for starting to invest in real estate. This will be the start of your plan for getting started.

- Develop a game plan.

By this point, you have an idea of the general terms and phrases for the property investing world and have begun to grow your interest and understanding of the specific strategies for real estate investing. It is time to formally develop your plan and start taking action. Each of the real estate investing books that you will be reading give specific advice about team building. It is a crucial step for your success and the best books offer advice about who to put on your team, where to find them and how important they are to your over-all success. Before you can start investing, you must have a plan for where you are going and how you are going to get there.

- Join local organizations for investors.

In every city, county and state there are multiple organizations whose missions are to assist real estate investors. Each of these organizations holds monthly meetings and some of the best even hold weekly meetings, where investors can network and learn. These meetings are crucial to a beginner investor because they offer the opportunity to build your team with experienced members. They also are fantastic groups to attend for tips, tricks and education. Join a group close to you and make your attendance mandatory. Attend as many meetings as possible each month. Often times, the simple step of surrounding yourself with like-minded individuals who are positive and re-enforce your determination to succeed, can have the biggest benefit on your future success.

- Find partners & Do not fall for get rich quick!

One mistake that is easy to make in the beginning is to set off on the path of “go it alone”. Another is to believe that just around the corner is a pot of gold if I can just find a deal like those guys on T.V.! One thing that is seldom talked about is the fact that most real estate investors have used partnerships in the past if they are not using them now. Partnerships are a great way to spread the risk of investing while learning the ropes. Those risks include using less of your available capital, credit and time. Partnerships can also be structured to be a simple 50/50 partnership splitting all costs and profits or a slightly more complicated partnership with one partner providing money and the other providing the deals, follow through and managing the investments. Either way, going it alone can be a lonely, long and expensive way to get started investing.

- Do not quit your day job!

This is a biggie and is a MAJOR mistake made by some first time real estate investors. Investing in real estate requires a total commitment – a “burning of the boats” mentality. There is no turning back when you decide to go all in. And in that statement lies the problem with leaving your day job first. Take time to develop your team, to build cash reserves, to learn the ropes. Take time to make small mistakes before you leave your full time employment and make a big mistake! Investing in real estate is a big picture endeavor and as an investor you have to be able to clearly see your future and plan accordingly.

These last two tips really go to the heart of why some investors not only fail, but fail miserably. Many times you can overcome the mistakes with the first few tips here by perseverance and a little luck. If you make one of the following two mistakes, they can quickly break a new investor and sour the experience for a good long time. Then again, if you follow all the previous tips, chances are you will have the team around you to guide you right past these last two tips and onto smooth investing.

- Once started, DO NOT under estimate repairs.

When you are estimating the repairs to a property for investment, unless you have an experienced contractor and trusted advisor on your team, you can miss the mark wildly. Even the best home study courses are not able to provide you with an accurate ability to estimate costs. It takes experience and time before you can accurately guesstimate repair costs. Missing the mark on estimated repairs can quickly break a bank account and take a property from profitable to money pit quickly!

- Do not purchase investment property for equity or appreciation

There is no bigger mistake an real estate investor can make today than to purchase property for its equity holding or future appreciation. Long-term investing today is centered around the ability of a property to perform with a positive monthly cash flow. In my home city for investing, Memphis, real estate investors purchase properties at extreme discounts, but over look those discounts if the property does not provide a high enough monthly cash flow. Equity and expectations of future home values are not good reasons to purchase investment property.

Many individuals will purchase their first investment property in 2010. Some will view their purchase as strictly an investment and others will look for real estate to provide a new profession. Either way, it is extremely important that first-time investors seek all of the help, advice and experience they can get from other investors.

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