Causes for Failure in Real Estate Investing

What are the Causes for Failure in Real Estate Investing?

Most individuals who become successful through real estate investing understand that it usually takes a few deals to process before profits start to really show. The first deal may yield a nice profit, and easy street will seem to stretch for miles and miles. Once a quality house is found, with a reliable tenant, the incoming monthly rent will give hope for the next shiny item you can’t wait to cash in on. If your deal with the tenant includes an option to buy at the end of the lease, you definitely can’t wait for the big check that seems to be getting closer every day. We all know that counting eggs before they hatch never works, so making big purchases and plans that depend on this big paycheck isn’t a great idea just yet.

Avoiding disastrous situations begins with ensuring that you really know what you’re buying. A wink and a smile, coupled with encouraging words from a realtor does not guarantee that your deal is transparent. Consistently questioning and familiarizing yourself with the property you hope to utilize as an investment will keep you informed, and keep the possibility of surprises low. A huge mistake first time investors make is to be naive to any facts or issues that can lower their profit margin. If the realtor/broker/seller seems fishy, or in a rush to let go of the property in question—take a closer look. There is no such thing as a stupid question, especially when it comes to your money!

It takes the ability to be patient, and live with realistic expectations to save yourself from disappointment in the long run. Understanding that there isn’t a way to “get rich quick” from real estate investing is paramount. Once in awhile, a successful real estate investor will pitch stories of a single deal that catapulted him/her to success, with promises that they have the secret to riches.  While most training workshops offer great advice, and can really set you up with the right connections to succeed in the business, it’s not going to be passive money. Even though your real estate mentor/coach might be basking in the sun, making it look easy, they didn’t get to that level of success overnight. Unless there’s a huge profit in selling your rental property soon after your acquisition, these types of investments are typically meant to be held for longer periods of time, to see substantial benefits.  Keeping your motivation up through the times when you feel stuck in the mud is important if you want to see long-lasting wealth.

Starting off on the wrong foot should always be avoided, especially when variables like taxes, insurance, and maintenance can dwindle your profits away if they haven’t been accounted for in your business plan. Realistic expectations involve knowing that a single repair for the home you’re hoping to cash in on can eat up a good part of your expected profits when you aren’t ready for it. Success in the business of real estate investment requires a “never give up” attitude, ever if your first deal (or first few) go sour. Plan for the worst, hope for the best, and have a standard operating procedure on how you’ll deal with any negative variable that may chip away at your profits. Learning from the mistakes of others can greatly help you avoid wasting time and money trying to find a solution to an issue that may be holding your investment back from performing at its maximum potential.

Investors can make the mistake of losing it all if they haven’t planned for the variables that can hurt, or stunt their success. Many individuals who make millions in real estate investing will vouch that it’s the best way to earn passive income. Keeping a constant push to fix small issues will help in avoiding larger, more convoluted issues. With the right amount of motivation, an expectation of the costs that may arise in your investment’s lifecycle, and the patience to deal with (and execute) a realistic timeline of success, real estate investing can be a very lucrative venture.