During your first year of real estate investing, you’re going to make mistakes. There’s a learning curve you have to go through, of course, but if you do your research and learn from other people’s mistakes, you won’t have to suffer the same ones. Whether you’re interested in a fix and flip, investing in an apartment building, or any other kind of real estate investment for profit, read on to learn which mistakes you can avoid during your first year.
1. Don’t Fail to Keep Records
Get a notebook, or five, and be sure to keep records of everything. Transfer receipt amounts into a spreadsheet immediately. Either scan your receipts to file on your computer or be sure to keep them neatly tucked away in one spot. You will need all this information to determine profit/loss and for your taxes.
2. Don’t Spend Profit You Haven’t Earned
It’s great to imagine dollar signs coming your way when investing in real estate. You may be so sure of your investment that you start spending your profits before they even materialize. Don’t put repairs on credit cards thinking, “Oh, I’ll just pay it back when the house sells or when the first tenants move in”. That credit card interest will eat away at your upcoming profits from month to month.
3. Don’t Do all the Work Yourself
If you try to do everything yourself, you’ll wind up burned out. Besides, can you be sure the quality of your work is up to par? Take on only the tasks you know you will finish and excel at and leave the rest up to the professionals.
4. No Exit Strategy?
First of all, if you need an alternative loan for your investment property, you’ll need to have an exit strategy. There’s a reason for this: things may not go as planned. Most investors have at least one to two exit strategies in place when investing in real estate.
5. Not Running the Numbers First?
A property comes on the market and you want it. You know it will be scooped up fast so you put in your bid — without crunching the numbers. You may get lucky. You may not. It’s a big gamble and one a first time investor shouldn’t take.
6. Make Sure You Look Off Market
There are a lot of gems listed off market, and it’s a good idea to for a first time investor to check out these properties too. This is where you can find some of the best deals. Build relationships with real estate agents who will contact you with off market properties for you to scope out.
7. Don’t Forget to Build a Deal Funnel
When investing in real estate, think momentum and flow. There needs to be more properties looking for you than the other way around. To get this flow, you’ll need to build a business that keeps up momentum by constantly getting leads on new properties to purchase. All in all, it’s a numbers games so the more leads you get, the more deals you will find to keep your bushiness flowing.