10 common mistakes newer real estate investors make

The 10 Common Real Estate Investment Mistakes

by Eric Karwowski

1. Starting with a “get rich quick” mindset
2. Paying too much for a property
3. Failing to seek professional advice
4. Spending too much on renovations
5. Not having a plan B
6. Doing everything on your own
7. Not insuring the property
8. Underestimating expenses
9. Investing all your money in one property
10. Not taking time to learn the market

Real estate investments can be a challenging and exciting experience. The specialized industries in these sectors require creative problem solving expertise and negotiation skills. You will probably be a novice property investor who has made some mistakes. Having learned from others mistakes is a better way of teaching people. I bring you the list of ‘The 10 biggest mistakes new property investors make’.

Starting with a “get rich quick” mindset

Thinking you'll get rich quick when investing in real estate

Real estate investors can be very profitable, but success does not happen overnight. Building the network and growing your portfolio takes time and investors that rush in and don’t make enough money immediately become frustrated. Real estate investment is more than a sprint. Investing in one asset builds up to another. New investors usually commence with small residential homes or condominiums but gradually move onto large single-family homes or multifamily property.

Paying too much for a property

Paying too much for real estate investments

Marketing is always the most expensive part to run. The real estate industry is similar, I don’t think that would be true. Often the advertisers are paying for ads that get people looking at the ads and they get tenants quickly. While it’s an excellent plan, keep an eye on the costs: You can find great deals on advertising, but you can get inflated advertising rates from the very first companies. Don’t waste your time looking at properties. Remember you’re interested in making a profit and you don’t need it. Do not be lured by sellers who want more of the property.

Failing to seek professional advice

Failing to take advice from construction and real estate experts

Ultimately, it is essential that you get the help of an experienced investor to purchase and manage your property. It was something most of us failed at and could be very costly. Whenever you are looking at properties you want an appraisal by professionals. They can give the buyer an accurate estimate if this home is really worth your money. An appraiser can also advise on possible problems that could affect property value in the future. You can make a huge saving by hiring professionals. If you are planning on moving forward, you should also seek legal guidance.

Spending too much on renovations

Spending too much money on your real estate rehab

If we want to start flipping our houses, we need improvement in terms of property worth and a good price. It may be tempting to renovate the house in a bid to become the most beautiful house on the block. Just because you dropped money on renovating the building doesn’t mean the buyer will drastically reduce their purchase price. You must maximize your ROI, so a lot of renovation expense can cause a headache.

Not having a plan B

No plan b when your real estate investment starts to go side ways

If investors don’t invest properly, it can be disastrous. Nothing goes as planned. Maybe it’s just your tenant leaving and your economy goes down. Whatever happens ensure your plans are solid. Plan B involves a different scenario. Depending upon what happens if the economy crashes you could have a problem renegotiating the mortgage or finding the next tenant immediately. You need a backup plan if you have no idea what you want or what you’d like to achieve. Having backups means you can have flexibility without putting in unnecessary risk to your investment.

Doing everything on your own

Doing everything else when flipping real estate

Many buyers believe in knowing everything and completing an entire transaction by themselves. While you may have done many good transactions previously, your process may not be smooth in a down economy—there’s nobody to contact for help with a bad property deal. Real estate investment is best done by tapping into the best resources and partnering professionals. A list of potential specialists should at least contain a skilled realtor / property agent, a competent inspector/ handyman. This expert should alert investors if they discover faults in the home.

Not insuring the property

Not getting home insurance on your investment property

Property insurance may not be the hottest aspect of an investment however. The idea that investors are not insured for their homes may seem tempting to them as they want to save a bit more upfront. Many investors unfortunately find this to be incredibly difficult. The coverage you choose varies according to the type or location of your property and local laws. New investors who skip it frequently have to pay the repair or legal costs themselves without any assistance from any outside source.

Underestimating expenses

Under estimating your rehab budget

Everyone who has lived in the house can confirm it: Having a house means more for the owner and not just putting down the money on the home. But the real estate industry is not as different. It can be costly to keep the yard up to date and to maintain the appliances in the house such as an oven, washing machine, dryer, refrigerator and dryer without removing any of these items. You need insurance taxes as well. Best advice is that if the house is running at its highest possible cost then the house should be listed before the actual sale.

Investing all your money in one property

Putting all of your money in one property

Despite having an asset it is better to invest in many properties instead of just a single property. It is unlikely that the return on an investment will increase as quickly as you expect. If you keep all the ingredients together, the economy won’t increase to the point where your income could be enough to pay for your retirement. Spread your money out so you get the most out of your investment. In other words, in order to retire after 0 years of employment you need between $3,000 to $3000 yearly to maintain the lifestyle.

Not taking time to learn the market

Not taking time to learn the real estate market

One of the biggest mistakes an investor makes is focusing largely on their property rather than selling. The state of the market (whether the buyers market or the sellers market) determines the success of an investment. In most situations you would buy in buyers markets and sell in sellers. However, this doesn’t always work out for everyone. Seasoned investors can tell that a buyer is on the way: home sales are slow, and the properties for sale can be purchased more quickly than the people who are looking for a home.


Making a lowball offer on a property 😱

Low balling offers

Often times the lowest-ball offer is advisable even though it is not an immediate possibility. This could cause problems with buyers, who could then reject your future bid. This can also hurt who makes the offer for you.

Some sellers take offense to lowball offers and can continue not to do business with you, regardless of your offer. I’ve seen it happen. 🙁

A lot of flipping and DIY shows do a great job on showing common mistakes the professionals make, some unforeseen events that happen to all of us investors, and some good design tips.

I cover in my article, Real Estate Platform for Investors, how time can be saved by utilizing the resources and properties provided via the platform. You can also download the California Homes® app on the Apple Store and Google Play.

Compare listings