What is the fastest way to lose money in real estate investing? Paying too much for a property? Selecting bad tenants? Taking out adjustable rate mortgages? It’s none of these. But all of these guesses can result from not knowing the fastest way to lose money in real estate investing.
Let’s examine the steps a typical new investor in real estate may take to start up a business
1. The new investor hires a real estate agent to find him a good investment property. There are good agents who can truly help a new investor, but not all are. The agent in this example unloads a house on the new investor that has been on the market for a long time. The new investor isn’t in love with the location, it seems like a rough area, but he likes the fact that it’s a fixer upper, and he buys the house.
2. Since the new investor is not handy with tools, he pays professionals to paint, landscape and repair the house. It turns out to be expensive, but the house now looks nice.
3. The new investor isn’t a people person and thinks tenants may take advantage of him, so he hires a management company. He assumes the company knows what they are doing, so he rarely goes by to check on his new rental property. Later the new investor finds he is not making money on his property. The house it is difficult to rent because of the location. And, he finds that the management company has been making unnecessary repairs.
The new investor is discouraged and decides to cut his losses by selling his house for less than he put into it. He vows to never watch another Carleton Sheets infomercial.
What Went Wrong?
The critical mistake was that the new investor relied on “experts” to do everything for him instead of learning to do things himself.
The key is not to rely on the so-called real estate professionals. It is in your long-term best interests to learn to do all of these things yourself, just as you would learn all aspects of any profession or hobby that you pursue. It is more difficult to do it all yourself, but it is more financially rewarding, more deeply satisfying, and you will learn wide assortment of skills that that will serve you well throughout life.
Adopt a new philosophy that moves you in the direction of becoming independent and self-reliant
My philosophy in real estate is that you make money through careful attention to detail, finding houses in need of repair, adding value to them by fixing them up yourself, renting out the property, managing tenants, and making repairs when tenants leave.
I believe in hanging on to what I have and in being self-reliant. My money is made in the trenches, in doing what many people are unwilling to do, or don’t feel that the hard work is worth the reward.
But let me assure you, it is worth it.
If you learn:
1) to analyze and identify investment properties that have potential,
2) to enjoy doing the repairs, and
3) to apply the proven ways to deal with problem tenants, then you will succeed where many people fail.