While there’s no doubt that real estate is one of the best investments you can make, too many newbie investors go into it without considering the risks. They think because they own their own home or have rented in the past, they know what they’re looking for.
Whether you’re new to the real estate game or you’ve been in the industry for years, we could all use a reminder of some of the big mistakes you can make…and how to avoid them!
Risky Mistakes Turnkey Investors Should Work to Avoid
#1 – Not asking enough questions
In this business, you can’t take anything at face value. There’s a reason due diligence is the cornerstone of real estate investment success! When you scope out partners to work with – contractors, property management, turnkey providers, lenders, lawyers, CPAs – you want to make sure you’re pairing up with the right people. Not only do they need to be excellent in their field, but they need to be on the same page regarding your goals.
It's your financial future on the line. Ask every question it takes to give you peace of mind.
#2 - Going in without clear parameters
A lot of people recognize that real estate is an awesome investment, but they fail to craft a focus for themselves as an investor. A lack of focus results in a hodgepodge portfolio that may or may not give you what you really need. Having focus means knowing what assets you want to target, what strategies you want to employ, what defines success, what metrics you value most, and how all your assets come together to achieve your goals.
#3 - Trying to buy as cheap as possible
On the surface, reducing your expenses as much as possible is a good idea. That’s how you increase your income without an actual numerical increase. But in real estate, you’ve got to establish high-quality systems, services, and partners to achieve lasting success. Cutting corners only gets you so far but investing in great property management and partners is what takes you to the next level. Sure, there’s a premium involved. You’ll pay more.
Wise investors, though, put their resources towards properties, services, and partners that will give them a strategic advantage: increasing appreciation, rental rates, lease renewals, and the capacity to own – and earn – from more investment properties.
#4 - Defaulting to your local market
New investors are usually wary of buying outside of their local market. After all, they know their market. They have connections there. But resigning yourself to where you are isn’t always advantageous. When you expand into other markets (with the support of expert management services, of course), you not only mitigate your risk through diversification, but you may be able to take advantage of their unique economic circumstances.
Buying in another market may be more cost effective or come with a stronger rental market. Local might be the known, but sometimes the unknown holds far greater potential!
#5 – Underutilizing expert leverage
While current interest rates may have you wanting to ease up on debt leverage, investors have another kind of leverage at their disposal. The biggest blunders in this business happen when investors go in with zero experience or a false sense of security. Going at it alone is risky. Through turnkey providers, property managers, and any number of SFR-adjacent professionals, you reduce your risk significantly. These people have been in this business longer. They know what it takes to succeed and what leads to failure. Use that experience to your advantage!
Your investment success doesn’t have to be hard-won.
#6 – Ignoring your growth plan
Investing in real estate isn’t an aimless, “go with the flow” endeavor. Establishing a growth plan for your portfolio is essential. Scaling is key to building real wealth and planning for regular property acquisitions keeps you moving forward. Don’t be aimless, be intentional. It’s not about waiting for any opportunity to come along, but carefully preparing and planning to buy the right properties at the right time with a financial cushion prepared well in advance.
#7 - Making bad assumptions
You know what they say about assumptions…
Here’s a piece of advice: define your terms. You’ll find out very quickly that not everyone shares the same definitions in the real estate business. Some properties marketed as “turnkey,” for example, include fresh renovations, current residents, and an established property management team. For others, “turnkey” might mean “livable.”
Find out what people really mean. Don’t assume: investigate.
Invest with a reliable turnkey partner, along thousands of other investors!
