A Written Cash Flow Plan Is Also Known As 10 Common Real Estate Investing Starting-Out Mistakes

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10 Common Real Estate Investing Starting-Out Mistakes

Interested in real estate investing? Or, maybe you’re already an investor and wondering why you’re struggling? are the following 10 Common Real Estate Investing Start-Out Mistakes:

  1. Failing to learn the basics.
    When starting anything new, including real estate investing, there are easy ways to learn the basics. You can visit a local library or bookstore, join a local Real Estate Investors Association (REIA), spend money on boot camps and educational seminars, or study online on your own. No matter how you go about it, there’s plenty of opportunity to pick up the basics of real estate investing. The most successful investors study and establish a solid foundation from which to grow.
  2. Lack of a plan.
    I often meet new investors who are not sure what they are looking for, they are not sure what they really want to do, they believe that real estate investing is a solid way to invest in their future. They don’t know how to start, they don’t know who to work with, they don’t know what to buy or what strategy to use. What they did was watch a few “fix and flip” TV shows and decided they wanted success too. However, to be successful you must have a plan. Start by writing down your goals and deciding how you are going to achieve them.
  3. Having a short term vision.
    Real wealth creation requires long-term investment. You can’t build real wealth by getting in when you feel good about it and getting out when things get a little rough. The real estate market always fluctuates – up and down – so does real estate investing for wealth Must be long-term. Renovating and reselling offers quick cash today, but wealth requires you to keep your money in the property you own for the long term and it will provide permanent ongoing income.
  4. “Get rich quick.”
    Refer to mistake number three. This is not a “get rich quick” venture. “Fix and flip” the way you see it on TV is just one small part of the strategy to grow your investment portfolio. You may find that the tax benefits of holding (rental properties) increase your wealth over time. And there’s nothing that allows you to pay off your note while you’re collecting rent and positive cash flow every month. It’s not getting rich quick, it’s building permanent wealth over time. Eventually, when your home is paid off and the full rent is your cash flow, you’ll find that you’ve built amazing wealth along the way.
  5. Quit your day job.
    Many new investors are bored with their jobs. They are ready to move on, quit their day jobs and go into real estate investing full time. We understand that! But wait until your real estate business is profitable before quitting your W2 job. You are acquiring a property that is going to be paid for by someone else, appreciate in value and generate cash flow for you every month. However, it is very difficult to replace a full year’s income with $200 per month of rental cash flow. Real estate is an expensive business. So until you build your portfolio, use it as an investment strategy, not as a way to quit your day job immediately.
  6. Lack of multiple exit policies.
    When you buy a property, you need at least three exit strategies. Perhaps you plan to renovate and resell quickly. What if it doesn’t sell? Can you put tenants in it and hold it? Perhaps you can sell it to another investor (wholesale) without renewal for a small but quick profit. If you’re just locked into an exit strategy when you buy (“I need to renovate and resell quickly”) you can back yourself into a painful corner. Before you buy, determine how many and which exit policies are possible for the property. Always have a back up plan in case option number one doesn’t work.
  7. Lack of cash.
    Lack of cash can really slow you down. And banks don’t like lending for speculation. A great source of funding, and one you desperately need, is an investment partner with cash. Cash isn’t always a pile of green. The money is in a CD, money market, 401k or IRA; It’s in areas you sometimes don’t think about.
  8. Don’t understand the cost of renovations.
    Two main renovation mistakes: First – underestimate the cost of rehabilitation. Over time, you’ll be able to estimate the cost of repairs by visiting the home. You will also get to know the neighborhood, know the exit strategy and know your personal plan from the moment you move into the property. But it takes time to learn. Second – not sticking to a budget. Maybe you start the property with a fairly accurate budget. However, once you get into it, you can be personally attached and, the next thing you know, the planned laminate countertop becomes Corian. Or, what could be laminate becomes a hard surface. You put updated fixtures where you don’t need them, new appliances where you don’t need them. The little things start adding up to big dollars and, pretty soon, you’ve blown the budget. What is needed is a mentor, someone you can bounce ideas off of, someone who holds you accountable. If you meet the basic cost estimate for the job, the guide doesn’t allow you to go over budget but helps keep you in line. It is important.
  9. Waiting too long to start.
    We knew a 25-year-old boy who owned seven properties. His policy was to own twenty to twenty-five properties by the age of 40 and pay off those properties. His goal was to average $1,000-$1200 per property per month. net profit. Minus some expenses, he had made good returns at a very young age. The moral is, don’t wait to get started. If you don’t buy now, in five years you’ll be sorry you waited!
  10. going alone
    To succeed in almost any business, you need a mentor. Real estate is no different. A mentor is someone you work with, someone you trust, someone who agrees with your business philosophy. Finding a good mentor to lead and guide you will pay off big. Never be afraid to ask for advice. No need to learn by yourself. Know when to seek out an expert and follow their expertise. Bringing in someone with more expertise will prevent you from making big mistakes. I promise, you will either pay for your education – you will either pay the coaches or you will pay for your mistakes. Going it alone can be very, very expensive. Surround yourself with like-minded people who can guide you on the path to success.

Of course, there are more investing mistakes to make, but we consider these 10 important missteps to avoid. Hopefully, you can learn from others here so you don’t have to repeat these things.

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