I remember the excitement of
being a new investor. I was so excited that I wanted to buy every deal that
came my way. The excitement of "the deal" can get you into trouble.
Because of that excitement, many new investors don't always look at the deal
from an objective viewpoint.
I think one of the biggest mistakes new investors make is that they want to
rehab the property themselves to save on the rehab costs. This is fine if
you have the skill, the tools, and the time. Unfortunately, what I often
see happen is that new investors try to work on the property on weekends and
in their free time. BIG mistake! Picture this, you worked hard all week
and now the weekend is here and it's time to work on your new rehab
project. The first weekend is so exciting. You see such great results
after the end of the weekend that you can't wait until next weekend to do it
again. The next weekend comes and you're tired, but it's time to work on
the house. You sleep in late on Saturday and end up putting in a half-day
on Saturday and full day on Sunday. You still see results, but you are
tired and have to go back to work in the morning. The third weekend comes
and now you're really beat from no time off for three weeks. You sleep in
Saturday and work on Sunday. As each weekend passes, less work is being
done. Soon you are either exhausted or going every other weekend. Now
several months have passed and you are making extra hard money payments,
your property is still not finished, and you are beat. What did you save?
Nothing! It would have been cheaper to hire a crew and pay them as opposed
to making extra hard money payments and burning yourself out. The worst
part is...your property is still not sold!
Another mistake I often see is investors collaborating with people they
don't really know because they don't have the money to do the deal
themselves. Just because you meet someone at one of the investment clubs,
does not mean that person needs to be your partner. Take the time to
investigate anyone you may be thinking of collaborating with. Call a group
leader and ask for a reference, ask the person for bank statements, go to
the courthouse and see if they truly are buying and selling properties. Do
your due diligence now, draw up a detailed partnership agreement (be sure to
discuss loses), and pray for the best.
How about overextending your self? I see many new investors who have a few
dollars saved, but more than one property. Unless you have a lot of
carrying money and free time, this can turn into a bad situation...fast. Do
you have the time to oversee several crews, do you have the time to take all
the ad calls, can you show the house everyday and then do open house on the
weekends? Be careful not to get so excited that you buy everything you see.
Until you have some first-hand experience, stick to one deal at a time, hire
someone to do the rehab, and when the property sells, and buy another. Being
an investor is a great way to earn a living, just be cautious.
Dwan Bent-Twyford is the Co-Founder and
Faculty Head of The Investors Edge University,
a company that specializes in training new and seasoned investors in a wide
range of real-estate investing techniques through live workshops and
seminars
Dwan is President of Financial Freedom
Through Foreclosures. Her company specializes in educating new as well as
seasoned investors through a series of home study
