Why Do Most Beginning Real Estate Investors Fail?Each and every year someone is looking at getting into the world of real estate investing. Formany they look at it as a quick way to make money. It’s because of this ―get rich quick‖mentality that over 75% of all new beginners fail.Newbies to the real estate investing world have a tendency to go in the ―all or nothing‖ mode.They invest in courses and books and hope for this amazing windfall to come their way.Unfortunately, many will never even purchase their first property.So why do these individuals fail?Many new real estate investors fail because they simply don’t walk into the situation with theright mindset. They are too focused on the money aspect of the business that they have simplyforgotten the basics required in the world of real estate investing: excellent communication skillsand negotiation skills.These as well as general knowledge and skills where the world of real estate investing areconcerned should be the focus of the new investor; not the money aspect. It’s a given that themoney is a nice aspect of the investing world but without the basic foundations underneath yourbelt there is no hope of success.Once the new investor has bought their first official property these basic skills will see themthrough to the eventual financial success that is waiting for them. The real estate investor has thechance to make money in any economy when most people can’t. It’s those that are prepared andthose that have the right skills that can make money in any economy.Many come into real estate investing with the expectation that this is an easy business. While insome cases it can be easy; for the most part it takes a lot of work. Sellers aren’t lining up justwaiting to buy your properties. While buyers are out there, you have to find the ―right‖ buyer foryou and your property.Avoid being the Dreaded SalesmanCar salesmen have always had a bad reputation. Many people used to make fun of them as theydrove by the car lots and watch them circle like buzzards. That’s why many people dreaded by avehicle because they dreaded having to deal with the ―salesman‖. Since they work oncommission many fear that these sales people will say and do just about anything to make a dealhappen. That may often mean sometimes stretching the truth. The same can often hold true whenit comes to real estate investors. Being a person of credibility and merit is important. Being aperson of your word is even more important. Buyers need to know that they can trust you. Theyneed to know that what you say about your property is the truth; that what you say you will dowill get done.
As you can see, the world of real estate investing takes so much more than a get rich quickmindset. It takes true skills to get you to where you want to be in the world of real estateinvesting. With the right skills, there is money to be made. If you are new to this business be surethat you have the skills to build a solid foundation for yourself. If you do that then you arestarting off on the right path.
The Truth and Risks of Real Estate InvestingLife is a game of chance. Therefore it’s only natural to assume that there are some risks involvedin some of the tasks we will do throughout our life. When we look at people who are trulysuccessful, we see that they are people who have learned how to manage risk instead of runningfrom it.Life is also about having a certain mindset. Knowing how to deal with risks mentally is also animportant aspect of being able to manage risks. In the world of real estate investing there will besome risks and knowing how to foresee these risks as well as prepare for dealing with them isimportant.Potential Real Estate RisksReal estate has its own set of risks. Some of these are: Having Negative Cash Flow – If your property isn’t generating positive cash flow then you are going to be left with a negative cash flow. Many investors have banked on appreciation values to help them with this but you can’t always bank on appreciation values going up. Landlord/Tenant Issues – For the investor who chooses to buy property to rent out, finding quality tenants is always an issue. If you don’t attract the right tenants to your property you could end up with a tenant who doesn’t truly value your property. For investors in this situation this eventually equals more money out of their pockets for contact repairs and damages. Preparing for Maintenance and Vacancy Costs – Many investors forget to factor in ahead of time for property maintenance costs as well as money to tide them over until a piece of property is either sold or rented. The longer a property sits empty; the longer the investor goes without making money. Extensive Workload – As a real estate investor you need to understand that managing real estate takes work. Many new investors start out working their investment business while working a fulltime job. This is where effective time management comes into play. Some investors who decide to rent their property may want to also consider hiring a property management company until their investment business takes off. Waiting on Appreciation – We all know the housing market has its fair share of ups and downs. You can’t always bank on the value of a home or property going up. There may be down times as well. The successful investor prepares for these potential down times. You have to have a plan to get through a down economy.As you can see there are various risks when it comes to real estate investing. However thesuccessful investor looks ahead at some of these potential risks and formulates a game plan to getpast these risks.
Successful Real Estate Investors Set GoalsWhen you take a road trip, you generally map out where you want to go and what you want to dowhile you are there. Before GPS systems were in place, people had to actually sit down and thinkabout the travel route they wanted to take to get to where they wanted to be. Even with thedevelopment of GPS system you still can map out the best route for you based on a variety offactors.Well the same is true for just about everything we do in life. In order to achieve something; inorder to be successful, you need a plan that is based on goals that you want to achieve. Statisticshave shown that those who set realistic goals; review them often and keep moving towards themwill most of them; if not all of them. Having a clear vision and direction brings a sense ofpurpose. It’s that purpose and drive that makes a real estate investor successful. Some of themost successful investors know how many properties they want to obtain each year or ho wmuch private capital they want to raise. Having a measureable goal allows you to clearly see howclose you are coming to achieving that goal. It also lets you see what is working and what is notworking so that your plan can be modified to fit your goals.You’ve probably heard of S.M.A.R.T. goals. This acronym stands for:S – SpecificM – MeasurableA – AttainableR – Realistic/RelevantT – Time FramedLet’s look a little closer at each section as they are defined by the University of Kansas:Specific (and strategic): Linked to position summary, departmental goals/mission, and/oroverall School of Medicine goals and strategic plans. Answers the question—Who? and What?Measurable: The success toward meeting the goal can be measured. Answers the question—How?Attainable: Goals are realistic and can be achieved in a specific amount of time and arereasonable.Relevant (results oriented): The goals are aligned with current tasks and projects and focus inone defined area; include the expected result.Time framed: Goals have a clearly defined time-frame including a target or deadline date.
In order to achieve your goals for real estate investing you need a through; in-depth plan and youneed measurable and realistic goals to help you achieve your overall plan. Using the S.M.A.R.T.goals concept, you can develop goals for your investment business that will help you get towhere you want to be. It starts with a goal and develops into a plan for success.
Things to Consider If You Want to Hire a Property ManagerFor many real estate investors, the thought of renting sounds enticing. For many it’s a way tobeing in a source of income while they work on the rest of their investment portfolio. For somebuilding a portfolio of rental property is a great way to build and investment foundation. Manyinvestors have stated that they started out in property rentals as they worked their way up theinvestment ladder so to speak.However, if you build a large rental portfolio it can be quite time consuming. There is alwayssome unforeseeable maintenance issues that need to be taken care of, there is through screeningof potential new tenants, collection of rental payments and more. This can eat up a lot of yourpersonal time.This is where hiring a property manager could be the key to not only maintaining your sanity butalso allow you the time to build up your path to success. A property manager can handle theseminute details that can eat up a great portion of your day. This gives you time as the investor toactually ―build‖ your investment portfolio instead of having to focus all your time on your rentalproperties.When considering hiring a property manager, be sure to keep these things in mind: Maintenance Experience – What is their level of experience where maintenance issues are concerned? If they don’t have first-hand maintenance knowledge, do they have a reputable network of maintenance vendors at their disposal? Maintenance issues must be handled in a timely manner in order to keep your tenants satisfied. Professionalism – Is the potential property manager professional yet assertive? Can they deal with tenants who are late on payments in a professional manner while still being assertive? This is an important aspect that every property manager should have. Knowledgeable – Is your potential property manager knowledgeable in landlord/tenant laws as well as housing regulations? It’s vital that your property manager is up-to-date on all current policies, laws and regulations where landlord/tenants are concerned as well as housing codes. Reputation – Does your potential property manager have a reputation of excellence? Are they reputable?As a real estate investor, you don’t always have time to manage your properties and build yourportfolio at the same time. In this case hiring a property manager may be just what you need. Aswith anything you’ll want to check them out thoroughly but they can help alleviate some of thestress of property management and save you valuable time.