Let's Not Make that Mistake Again

After many years of making mistakes, one of my favorite things to do is consult. I want to give value to the investor and home-hosting community by saving them from the many headaches I've suffered. My experience in Airbnb Arbitrage, property managing, real estate and being an investor myself gives me a unique and valuable perspective.

5 Mistakes Investors Make

In a hurry to purchase

Often when you come to the place in your life and you finally have your ducks in a row, you will be eager to make an offer on an investment property. Once of the biggest mistakes first time investors make are purchasing a property they don't have solid numbers on. It is imperative to run those numbers because guessing income potential without pulling comps will cost you thousands. There should be a process to buying your investment property. Number one, run the numbers, then run them again. Get comps for income potential, pull tax information, find out from the buyers what their utilities where. Take into account how old the major appliances are and factor that in as well. Drive by (or have your Realtor drive by) several times during different times during the week and different times during the weekend. Before you make an offer, you should be confident that this property (as long as it passes inspection) will actually produce a net profit. Slow down and make sure this is the right move.

Not fully prepared when making offers

Investors often stumble upon the right opportunity, particularly when they are involved in the investor community and real estate industry with a lot of networking. When this happens, many times investors are scrambling to move money around, sell one property to buy another or any number of scenarios that could cause an error in this time of urgency. Again, take a deep breath, make sure your ducks are in a row. If you need to move money or sell a property to become more fluid, make sure you review the original plan with that cash or asset. Is this really the right move, and if it is, make sure that your new plans do not mess up previous plans. When you are ready to make an offer, make sure funds are already in the right account, make sure you already have a lender that is willing to work with your current situation, make sure everyone on your team is aware of this move. Communicate with loved ones and prepare them for this new project you are working towards. This will save you headaches and panic attacks and make way for a smooth real estate transaction. This will also set the pace for the management of the property. Always be proactive and not reactive to the best of your ability.

Giving up without thinking critically or creatively

This is a big one. There is a time to quit, when everything is telling you "stop" and you no longer have confidence in one or more aspects of the transaction. However, there are many times when there's just an obstacle and opportunity to overcome it. As a realtor, we are faced with a new obstacle with every unique transaction. There are so many moving parts and factors that there is bound to be an opportunity for error, disagreement, roadblocks and heartbreaks. For instance, I had the buyer's side of a real estate contract and the buyer's financing fell through after 5 weeks of being under contract. The buyer wanted to give up, the seller's agent did not. She was confident that her sellers did not want to start over, so the two of us brainstormed and came up with a plan. In the end, the buyer was able to get financed through another bank, but didn't care for the terms. We also had an opportunity for owner financing. Where there's a will, there's a way. Don't be afraid to work with your real estate professional to come up with the best solution for anything that might get in the way of closing on your investment property.

Buying at the wrong time

This is not about timing the market, this is about timing your life. I've known some brilliant young Navy guys who took their enlistment bonus and invested in their first home. When they moved, they held on to that property and it was their first investment property. I've known some not so smart people who were surprised by a large some of money and thought I'll just buy an investment property in Florida. They had a high-pressure job in a city far away, a wife and two kids. They didn't know the area or the resources. They invested and spent most of their profit being over-charged by repairs or giving away their condo for free to friends and family. This is a TIMING issue. The Navy guys knew their plan and made time learning the area, getting their team together, making a plan for their investment property. The out of town investor had no time to spend working on his own property, he didn't understand that an investment property can't be given away to friends and family and he didn't take the time to build a network in the area that he could trust to have his best interest in mind. Don't buy at the right time for your life plan.

Not having resources set up by closing

If you are new to the area, never stepped foot in Panama City, FL or have lived here your whole life, if you are investing, you have to have a network of trusted resources for your investment property. It's not just a housekeeping company you need, but also insurance company, maintenance, HVAC, plumber, handyman, specialty cleaners (carpet and tile), trash removal, landscaping, septic. There are many more that you'll want to have in your contacts list on your phone. It's impossible to do business and self-manage without a solid network of resources. Your Realtor and property management company should be able to direct you to all of these resources.