If I could turn back time…
No, I’m not starting the classic song by Cher (like you wouldn’t sing along), but it is a great intro line when you start thinking about things you wish you had done.
As a young and newly minted real estate investor, you’re so excited about getting started and you’ve got so many big plans that you want to accomplish…
But sometimes, in your eagerness to jump in with both feet (and legs and body and head), you put the cart before the horse, as they say, or in our case, we put the hopeful outcome in front of the reality of the situation.
When I first got into real estate investing, I knew nothing about it – only that people were doing it and were making a lot of money in the process; surely I could do the same. And while others around me didn’t think I could do it, I managed to get my first deal and I’ve been investing as a real estate wholesaler ever since.
My journey, as exciting as it has been, was not without challenges and I made a lot of missteps and mistakes along the way…
Here are the 10 biggest mistakes that I’ve made in real estate investing so that you don’t have to repeat them.
#1 – Not Comping Houses Before Signing a Contract
If you’ve been reading the blogs or following me on social media, you know I am a big cheerleader for knowing and understanding the value of a property before you even start signing contracts.
Comping is such an underrated skill that many investors aren’t using. And it might surprise you to learn that, at the beginning of my career, I was one of the many.
Today, of course, I know how to comp like I was straight outta Compton, but it took me a while to not only learn that skill, but to be good enough to do it to the point that it gave everyone involved in the transaction a win.
I had a lot of canceled contracts in the beginning. One such incident is so etched in this particular real estate agent’s mind, she still refuses to work with me.
Being able to comp efficiently and effectively makes you an invaluable asset to everyone you work with, so it’s important you know what you’re doing. If you want to learn how to comp houses, click here to subscribe to my Straight Outta Compin’ playlist:
#2 – Not Having an Investor Friendly Title Company
Title companies can be an investor’s greatest friend…
But only if you use ones who know and work with other investors. The amount of problems you’ll run into as an investor when using a non-investor friendly title company are many:
They won’t allow you to use assignment contracts
They don’t allow double closes
You end up spending more on fees
You end up losing money at the end of the day
Finding and working with an investor friendly title company means you avoid all of those hassles and more importantly, you build a relationship with that company and create a lasting partnership.
Now just because a title company is investor friendly doesn’t mean they have everyone’s best interests at heart. Ensure that the title company you choose is professional and has the credentials to work with you.
I’ve worked with Fidelity for many years and, for me, they are my absolute go to for title.
#3 – Getting Emotionally Attached to Deals
As an investor, you are going to be working with sellers who are in desperate need to sell their properties.
And the reasons can be many:
Divorce
Death in the family
Foreclosure
Relocation
You should always have empathy in these situations and respect the homeowner’s position because they are emotionally attached to their property; at the same time, remember that they’re trying to get as much money as they can.
And while our goal is to help them do that, you have to look at the numbers – this is where knowing how to comp comes in clutch – and work from there.
When I was first getting started, I was working on a deal with a sweet little old lady who, of course, reminded me of my grandmother. And because of that, I wanted to do right by her and help her sell her house.
Unfortunately, that meant letting her drive up the price of the property to the point where, by the time I got it under contract, it was far too high to sell.
As it turns out she had sold the property to someone else!
On the flip side of this, I once had an individual come to me in the midst of both a divorce and a foreclosure. Luckily in this case, I was able to not only get the property sold, but get the homeowners the money they needed, while allowing them to stay in the home while they finished packing and preparing for the big moves.
#4 – Working with a Small Number of Buyers
When you’ve got a deal under contract, you should be getting as many eyeballs on the property as you can. Not only does this give you a well of interested buyers, it also means you aren’t sitting on a property for far longer than you should.
I once held onto a property for a buyer who assured me that he was interested and wanted it, he was just headed out of town for a few days. So I waited.
And waited.
And waited.
And waited.
And sure enough, when he returned, he told me that he had changed his mind. The market was making him a little skittish and he was holding off on it.
Needless to say, I lost money on that deal because I didn’t have a buyer.
#5 – Reducing the Inspection Period
Inspections are essential when buying and selling properties and the last thing you want to do as an investor is shorten that period.
I was in a deal once where the real estate agent insisted that I shorten the inspection period to two days and because I wanted to close, I agreed to it. What I hadn’t anticipated was that there was still a tenant in the home and the tenant had NO intentions of leaving soon.
The tenant needed a 48-hour notice to allow anyone to enter the premises, so of course that inspection period didn’t happen.
If I had done the inspection period and had access to the property, I would’ve been aware that there was a tenant and could have planned accordingly. Inspection periods can also reveal if there’s any damage or repairs that need to be done on the home.
Those are the first 5 mistakes to avoid and in the next blog, I’ll go over the remaining ones, including not being present when multiple buyers are at a showing, not planning for the future, and the ultimate mistake that cost me millions.
Or…
You could avoid all the mistakes from the jump by joining us in the AstroFlipping community.
Just saying ;)