4 Mistakes to Avoid as a Real Estate Investor

"I've been investing for 10 years and this strategy has always served me well," defended Alan*. (*name has been changed)

"Looking at your portfolio, I can see there is a lot of equity here but you're feeding these properties over $1,000 a month on the good months," argued my husband Dave.

Nearing retirement years, and getting a little anxious with his poorly performing portfolio, Alan had hired us to help him. He'd been trying to add to his portfolio and improve his cash flow for two years but wasn't making any progress.

His investing strategy made him money in the boom years when prices were increasing but now it was just costing him. To continue to succeed, he needs a new plan. One that avoids his past missteps and the missteps too many new investors make when they are just starting out. That's what I want to help you with today.

Mistake #1 - Chasing Deals
Ever seen the movie UP? The cartoon dogs in the movie are on a very serious mission. They are focused and moving quickly towards their goal ... until they spot a squirrel!

Suddenly all attention is directed to the squirrel and they are no longer worried about their plan.

This is what seems to happen to a lot of investors. They either don't have an investment plan to follow so they are always looking for squirrels or they allow themselves to get easily distracted from that plan when a new squirrel appears.

Sticking to a well thought out plan, based on the fundamentals of real estate investment (buying for cash flow in areas with good economic fundamentals), instead of chasing the latest deal destination will help you make more money, put in less effort and minimize the risks in your investments dramatically.

Mistake #2 - Buying a Property for the Wrong Reason

There are three ways to make money from a real estate investment:

 

Ideally you find a property that is highly likely to deliver on all three.

Unless you are happy gambling or speculating, or you know how to create value through redevelopment, renovation or repurposing the use of a property, you should never buy ONLY for the third reason.

It's speculation, not investment and it is a very high risk game.

Focus on finding properties that will generate enough rent to cover the mortgage payments, taxes, insurance, maintenance and management of the property on a monthly basis and ideally, leave a little in the account afterwards.

When you stick to that formula you'll find that you're able to weather the ups and downs of the values, and you won't have to make sure you are making extra money each month to pay for a short fall generated by one or more of your properties.

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