I’ve read a lot lately about the mistakes made by real estate investors and how to avoid them, and it occurs to me that they all come down to one single error. There is absolutely nothing wrong with learning from the mistakes of others, in fact it’s the smart thing to do. But rather than keeping a list of the mistakes people make, there is one thing that if done well, will naturally eliminate those errors.
At the end of the day what matters is that your real estate investment business runs as smoothly as possible, and to do that you will need to be prepared for a whole bunch of eventualities. Just like any other business, you should be doing some good planning to ensure that you are maximizing your opportunities and minimizing your threats. If you’ve been reading this site for a while, you’ll know that we are big investors preparing a real estate investment business plan that fits their business, style and goals. The reality is that you can avoid the vast majority of common mistakes just by completing this simple step in business planning.
It’s not a painful process, or a waste of time: in fact, it’s the opposite. Taking to time to get your business plan together is an investment in the future of your business, and will save you a bunch of pain in the future because you will be prepared if and when things don’t go according to plan.
I’ve seen a bunch of mistakes listed as common (and the biggest) mistakes made by real estate investors:
- Procrastinating – or failing to take action
- Not shopping around for finance
- Buying the wrong type of property
- Having the wrong type of tenant
- Selling at the wrong time
- Making emotional investment decisions
- Playing lone ranger – you cannot do everything yourself
- Planning on the go
- Thinking that you’ll get rich quick
- relying on miscalculated estimates
I could go on and on – but I’ll spare you the details. I agree that all these mistakes can cost you a whole bunch of money – and put you out of business, especially if you are just getting started in real estate investment. All these mistakes are very common – and all of them can be avoided by having a decent investment business plan.
However this brings me to my final point…
Just having a real estate investment business plan does not mean you don’t make any mistakes. It’s not an automatic thing. You can’t sit down and come up with a rock solid plan and then think that everything is going to cruise along just fine and your investment business will be a success – it’s not like that at all.
So the biggest single mistake that real estate investors make is… not sticking to their business plan. it doesn’t matter how successful you are, or how many properties your investment business has – the moment you stop following your business plan, you’ve returned to being an amateur investor – and amateurs make mistakes. So make your plan, regularly review it, and you’ll be pleasantly surprised at the results you achieve.