Don’t learn the hard way when it comes to protecting your real estate assetsWe all make mistakes, and as individuals involved in business, many would claim if mistakes were never made—lessons would never be learned from those mistakes. However, when it comes to real estate investing mistakes equal money lost. And new real estate investors can make so many mistakes that they lose the shirt off their backs on their first property. A successful real estate investor will still make mistakes. However, he or she needs to create a focused plan, as well as a team of professionals to turn to in need of advice and support.
Sure, mistakes are part of living and learning, and you can expect to make a few during your investment career. However, in order to save time and money, I’m happy to share the most common mistakes that new (and sometimes veteran) real estate investors make—because you can learn from the mistakes, as well as the successes, of others…
1. Ignoring your budget and real estate investing plan
It’s important, especially if you’re dealing with multiple properties, to create a budget as well as a real estate investing plan (outlining your short and long term goals) and stick to both consistently. For example, you’ll have a figure in mind when it comes to renovations, leveraging on your projects, or how much (percentage) of investable assets you’ll want to risk on any one project. Whatever your budget is, stick to it and don’t falter.
2. Not asking for advice when you need it
The professional team you rely on for advice and support is a vital asset to your real estate investing business. Your team should include the following:
- A tax accountant and strategist
- Your real estate investment attorney
- A mentor (a veteran real estate investor) or partner
3. Lack of knowledge
Successful real estate investors know how to play the game. And when they don’t know something, they turn to their team of professionals (see number 2). It’s vital to learn about your craft. In the case of real estate investing, you should be versed in the following:
- Real investment due diligence
- Risk management
- How to develop a stable real estate portfolio
As a real estate investor your reserve fund is vital to your real estate operations. Buying a property or renovating a project without the adequate reserve fund in place can be a huge mistake if you fall on hard times. The real estate market is especially turbulent, so it’s vital to have the liquid capital in your bank reserves to protect your assets should you fall on an unexpected emergency.