Sometimes investors are their own worst enemy. It isn’t always market conditions, the economy, or a dud property that brings your real estate investing success to a grinding halt.
Steer clear of these six behaviors sabotaging your investment growth!
Behaviors Threatening Your Real Estate Investment Success
1. Neglecting to Set Standards
Investing in real estate requires planning and diligent re-assessment. From the very beginning, investors need to have enough knowledge – or at the very least, the right questions – to determine their standards. To a degree, you will modify and refine your portfolio as you grow. It will become clearer what kind of investments work for you and accomplish your financial goals.
You should, however, develop a framework or guideline for what it is you’re looking for in an investment property and what you want your investments to do for you. This includes setting goals for passive income, understanding what to look for in your debt-to-income ratios, cash on cash returns, cap rates, and so on. The more specific and focused you are with what you’re looking for, the better your choices will serve your portfolio. Don’t buy just any property – buy with purpose and intention.
2. Doing It All on Your Own
While real estate investors imagine they’ll be saving money if they fly solo, that’s not necessarily the case. It is particularly disadvantageous for new real estate investors who lack the experience necessary to avoid common portfolio killers. Even if you have experience, working alone costs you in other ways. You might save money, but you expend valuable time and energy on minutiae that fail to effectively advance your goals.
As an owner and investor, you don’t need to be the hands-on guy. You need to be the big picture guy. Utilize your abilities where you’re most impactful and outsource everything else to a trusted team. You’ll find your investment efforts will be more streamlined, effective, and sustainable.
3. Overlooking the Data
Investing in real estate is a matter of the head, not the heart. You set yourself up for failure if you neglect facts and diligent analysis over feelings. Never assume a property is good-to-go until you’ve performed necessary due diligence. This is an ongoing task, too. Revisit your projections and key benchmarks compared to monthly performance. This will determine if a property is meeting your expectations or belongs on the chopping block.
4. Planning on the Fly
Spontaneity is not an investor’s friend. While split-second decisions may serve you well in other areas, never assume the same when it comes to your real estate investments. There’s no winging it! Never buy and plan to sort it out later. Go in with a plan and a vision. You may feel like you must act immediately when an opportunity comes your way, but it is more prudent and effective to do your due diligence. This may cause you to “lose” a “great opportunity.”
If you skipped crucial steps and lacked vision, however, a potentially great opportunity becomes your downfall instead.
5. Overextending Your Resources
Ambition is admirable. With ambition, however, must come restraint. Real estate investors can and must scale their portfolios to be effective. With that said, portfolio growth demands prudence. One of the greatest mistakes investors make is to move too quickly. Growth happens in its own time.
There’s no standard for when and investor should scale or how many resources they should dedicate to it. Every investor varies in terms of experience and assets. It may be unclear as to how much you can handle. As a rule of thumb, avoid a situation in which you are unable to keep a comfortable cushion or emergency fund on standby to cover unexpected investment expenses. This demands the careful assessment of your ongoing costs, planning for the unexpected, and projecting how those funds need to grow with the acquisition of additional properties.
6. Trusting Too Eagerly
Inexperienced investors are often blinded by their optimism and hope for success. While being excited about investing is good – preferable, even – it can’t come at the cost of sound judgment. Not every company, seller, or potential partner prioritizes or values your success. Before you hire any service, partner with anyone, or add to your team, ask the difficult questions. Never take anyone at face value. Investigate. Question. Scrutinize.
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