What is the fastest way to lose money in real estate investing? Paying too much for a property? Select bad tenants? Take adjustable rate mortgages? It is neither of these. But all of this guesswork can result from not knowing the fastest way to lose money on real estate investments.
Let’s examine the steps a typical new real estate investor can take to start a business.
1. The new investor hires a real estate agent to find him a good investment property. There are good agents that can really help a new investor, but not all of them are. The agent in this example offloads a home to a new investor that has been on the market for a long time. The new investor isn’t enamored with the location, it seems like a tough area, but he likes the fact that it’s a fixer-upper, and he buys the house.
2. Since the new investor is not handy with tools, they pay professionals to paint, landscape, and repair the house. It turns out to be expensive, but the house now looks good.
3. The new investor is not a social person and believes that the tenants can take advantage of him, so he hires a management company. He assumes the company knows what they’re doing, so he rarely drops by to check on his new rental property. Later, the new investor discovers that he is not making any money on his property. The house is difficult to rent due to the location. And he discovers that the management company has been making unnecessary repairs.
The new investor gets discouraged and decides to cut his losses by selling his house for less than he invested in it. He vows never to see another Carleton Sheets infomercial.
What went wrong?
The critical mistake was that the new investor relied on “experts” to do everything for him instead of learning how to do things himself.
The key is not to trust so-called real estate professionals. It’s in your best interest in the long run to learn to do all of these things yourself, just as you would learn all aspects of any profession or hobby you pursue. It’s harder to do it all yourself, but it’s more financially rewarding, more deeply satisfying, and you’ll learn a wide variety of skills that will serve you well throughout your life.
Adopt a new philosophy that moves you in the direction of becoming independent and self-sufficient.
My philosophy in real estate is that you make money through careful attention to detail, finding homes that need repairs, adding value to them by repairing them yourself, renting the property, managing tenants, and making repairs when tenants leave.
I believe in holding on to what I have and being self-sufficient. My money is earned in the trenches, doing what a lot of people aren’t willing to do, or don’t feel like the hard work is worth the rewards.
But let me assure you, it’s worth it.
If you learn:
1) analyze and identify investment properties that have potential,
2) enjoy doing the repairs, and
3) to apply the proven ways of dealing with problem tenants, then you will succeed where many people fail.