5 Biggest Mistakes my First Year as a Real Estate Investor!
The 5 Biggest Mistakes my First Year as a Real Estate Investor are lessons that I had to learn the hard way. This list will help you become a more successful real estate investor.
I know that some of these mistakes seem like no-brainers, but I, apparently, like to learn the hard way!
1. Not writing more offers!
As a young investor, the fear of buying a bad investment can be overwhelming.
In fact, one of the biggest mistakes a lot of new real estate investors make is getting stuck in “analysis paralysis.” This is when you get so focused on finding the perfect investment (it doesn’t exist) that you never actually pull-the-trigger to buy a property.
The easiest way to get over this paralysis is to write offers. I had an epiphany that shaped the way I looked at offers.
If your offer gets rejected, that is good! It means you weren’t offering too much money for the property. I think a good rule of thumb is that no more than 1 out of 10 offers you make should get accepted.
If your offer gets accepted, that is good! Once the offer is accepted, you still have the due-diligence period to validate the property is a good deal. This was the hardest part for me to grasp. You can renegotiate the deal, or walk away, if necessary repairs are in the inspection.
Pro Tip: Find a real estate agent that understands investors and is okay with writing multiple low offers. Also, see if your agent/market allows for verbal offers. In my market I have a realtor who will pick up the phone, and say “we are going to offer you X, will your buyer be interested.” This saves her a ton of time because she avoids drafting contracts on the properties that won’t budge. We have had great success with this, but I wouldn’t recommend it in very hot markets.
2. Not asking about seller financing!
The next big mistake was not asking about seller-financing. Since this mistake, I have received seller financing on both my 10 unit apartment and my large mixed-use building (~40 units).
I have talked to the seller of my first duplex, and he confirmed that he probably would have been open to seller financing. I just didn’t ask!
Creative financing opens a lot of doors with real estate investing, but only if you ask the seller. There are a lot of great reasons to utilize seller financing, for more information check out this post.
3. I didn’t network with local wholesalers!
I told you these were big mistakes, right?
Seriously, I didn’t network with any local wholesalers! I live in Hawaii and have been actively embedded in the real estate game out here.
In Hawaii wholesaling, and flipping, are currently the two biggest non-development real estate strategies. As such I’ve built a pretty substantial network of wholesalers, flippers, and all-around great investors!
Six months ago, I received a direct mail letter for one of my Missouri properties. I realized that I had never networked with any wholesalers in this area. This was a HUGE rookie mistake!
I fixed this mistake immediately, and within two months received a deal that I tried to get under contract (somebody beat me to the punch).
The point is. NETWORK WITH LOCAL WHOLESALERS! DO IT!
4. Not increasing my savings gap!
For the first year or two that I invested in real estate, I did little else to improve my finances. I neglected the number one thing you can do to build wealth, increase your savings gap!
Your savings gap is the difference between the income you receive, and the expenses you have. The more you can increase this gap and save the difference, the faster you build capital in order to invest for the future.
Don’t get me wrong, I wasn’t terrible with my money, but I wasn’t intentional with it either. I have become much more intentional with my savings gap this year, and I’m currently saving 45-50% of my paycheck every month!
Increasing my savings gap, and piling that money into the investment account was a great decision!
I urge you to focus on increasing this savings gap in order to build investment capital faster! Also, news flash, income is seldom the problem here…there is (almost) always something we can cut out of our expense column.
For more information on this download my FREE E-book on building wealth!
5. NOT THINKING BIGGER!!!
In December of 2017, I was set the goal of buying three rental units. At the same time, I finished reading the 10X Rule by Grant Cardone. After reading this book I decided to increase my goals by ten-fold, and “shoot for the stars.”
…We bought 50 rental units this year!
Now, I may have grown a little too quickly, and I’m not advocating for buying this many units next year. However, the fact is that by thinking bigger, I accomplished over 16X what my original goal had been!
Imagine the possibilities, when you don’t set moderate goals, but set challenging, seemingly unattainable goals!
TL;DR – 5 Biggest Mistakes my First Year as a Real Estate Investor!
1. Not making more offers – write the offers, and use the due diligence period as your safety net.
2. Not asking about seller financing – Ask about seller financing!
3. I didn’t network with local wholesalers – Network, Google-search, and talk to local wholesalers.
4. Not increasing my savings gap – Save as much as you can. The more money you save, the more money you can invest!
5. Not thinking bigger – Think big, plan big, go big, and see what happens! Life may hold you back, but that doesn’t mean you should hold yourself back first.
5 Biggest Mistakes my First Year as a Real Estate Investor
The 5 Biggest Mistakes my First Year as a Real Estate Investor were lessons I learned the hard way. Hopefully you can fix some of these mistakes early on, and have a more successful first year of real estate investing!