Why People make Mistakes in Real Estate Investing

Making mistakes is human. Most times when we do things that are new to us we make mistakes. Sometimes we make mistakes when we first start driving, or start working with a new set of people, or start working in a new environment.  Mistakes are inevitable. The good news is that there are lessons we learn from these mistakes that are turned into blessings for us. Someone said the only real mistake is the one from which we learn nothing. So if we carefully pay attention every mistake has some blessings wrapped in it.

Having understood that mistakes are generally inevitable in life the question to ask is why do people make mistakes in real estate investing? There are a number of reasons for this. Here are a few I like to share in this session 

One, many do not learn before starting. This was very true of me as well. People underestimate the amount of learning in real estate and just dabble into it. Looking back now I realize that  dabbling into real estate without first taking the time to learn is taking a very huge risk. Real estate is capital intensive and simple mistakes can be very costly financially.

Two real estate is fairly very complex, but it is very rewarding. When things are complex, the possibility of making mistakes is very high

Three, real estate is very broad. because of how broad real estate is.,, people tend to drift from one aspect of  it  to another without being properly grounded in an area of it. This means that with every area they dabble into, they will have to go through the learning curve of making mistakes all over again 

Four,. Lack of proper guidance. The knowledge of real estate is not very common. People who know real estate are few  and far between in any community. Therefore, it is not easy to get someone to guide one.This results in a lot of trial and error with attendant costly mistakes.

Five, people minimize the work involved, and do not do their  due diligence properly especially in the area of underwriting 

There’s no way we will not make mistakes even if we still have people who are guiding us. Some mistakes are  minor while some are major and very costly. Here are some of the major ones

One, inaccurate crunching of the numbers when doing the underwriting for cash flowing property . Crunching the numbers involves making some reasonable assumptions. If the assumptions are not reasonable, then one may come to the wrong conclusion 

Two, buying the wrong type of property that will not have cash flow . Sometimes people do not realize this until they have bought the property

Three. Lack of understanding of the fundamentals.. The fundamentals that are important include good roads, hospitals, schools, jobs, and population growth around the area. If these are all missing i in the area it may not attract good tenants

Four. Lack of understanding of the financing options. Sometimes people are lured in with small amounts as initial first deposit and have no idea where to pay the remaining therefore defaulting in payments. 

Five,  people using the wrong realtor who is not experienced. Such a realtor may stir one into the wrong direction.

Six, Improper tenant screening and lack of understanding of landlord tenant regulation. If the landlord does not understand proper tenant screening, he may bring  in the wrong tenant. This problem could be compounded if the landlord does not understand the regulations around evictions process.

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