As a real estate professional, you are constantly being challenged. You need to make decisions that ultimately affect your buyers and sellers and, of course, your business. These choices can lead you down one of two paths: success or failure. Mistakes are inevitable, as with any venture, but your response to those mistakes can mean the difference between a successful business and an early exit from the industry.
1. Understand Your Investment Personality
Gaining a deep understanding of your style of investing is crucial with real estate. Some like to be adventurous and flip for profit, others like a steady cash flow. Whichever you choose, make sure it’s something you see yourself doing day in and day out. Otherwise, you’ll wake up in 10 years having created a job for yourself and not the dream you wanted.
2. Hire A Professional Home Inspector
Spend the time and money to hire a professional home inspector. Even for smaller deals that might be all cash, an inspector can help you negotiate a better price or avoid a money pit altogether.
3. Don’t Always Listen To Building Inspectors
Knowing the political and local landscape with inspectors is critical as you choose where to develop property. In the process of developing our ocean properties, a building inspector advised us to move in a certain direction to save us time and money. We took his advice and are still paying for it. The inspector was fired for multiple issues; the town was not responsible for his lack of judgment
4. Trust, But Verify
Relying on representation about a property’s condition when investing may not always work out favorably. Having independent reviews by licensed professionals can allow you to validate any representations about a property’s condition. For example, an inspection report or an appraisal before buying a property can provide an independent opinion on the potential risks that need to be addressed.
5. Don’t Be In A Rush
As the old saying goes, “bulls make money, bears make money, pigs get slaughtered.” The real estate market is cyclical. If you have the wherewithal to hold an asset long term, you should not be in a rush to sell over market speculation. However, if you are looking to offload an asset quickly, ask yourself if it is really worth that extra percentage point or two by holding out for a specific price.
6. Keep Your Cash And Make Huge Profits
I grew up learning that you pay cash for everything, including your house. Living debt-free is a great way to live. However, real estate investing is a different breed. Spend a fraction of your liquid cash to purchase 10 homes instead of one. Have the renters pay off your mortgage in 10 years, and now you have 10 homes providing cash flow instead of one. Let renters pay off loans and you profit.
7. Make Yourself Scalable
Early in my real estate investing career, I tired of self-property management. But seasoned landlords told me, “No one cares about your property as much as you. Keep self-managing.” I soon found that it’s not worth self-managing for the last 2% of perfection. By outsourcing management, I quickly grew from eight to 20 units and freed up my time. Don’t self-manage for too long. It’s not scalable.
8. Stick To Your Criteria
You know that sickness we all get from time to time, called “dealitis?” When you just need ONE more deal or feel excitement around a property so you loosen up your buying criteria? The side effects can be lost money, lost time, frustration, sleepless nights and general malaise. Leave yourself open for better deals. Stick to your guns; an ounce of prevention is the only cure.
9. Make Sure You Hire The Right Contractors
Contractors will make or destroy a beautiful, rehabbed house and investment. They can break the bank or work with it! Find a good and reliable contractor when doing rehabs. This is the best advice that I can give from my experience.
10. Don’t Hold On For The Turnaround
I bought my first home at the top of the real estate market in Los Angeles in 1989. Then it crashed. I had over-improved the house. All the money I sank into it, gone in a snap. All that sweat equity? Vanished overnight. Instead of killing myself to get out from under it, if I had found a way to hold on to it, I would have made a killing instead of losing $50,000. I took the wrong way out.
11. Stop Overthinking
One of the biggest mistakes I ever made was overthinking and letting the six inches in between my ears get in the way. Also, being overly optimistic on timelines and costs associated with the purchase (always prepare for the worst-case scenario) and not thinking big enough on my investment decisions — I should have gone for more units. The effort and work are the same, the rewards are just greater!