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Top 7 Mistakes Rookie Real Estate Agents Make

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IRR Real Estate

7 mistakes made by both beginners and more experienced investors. It’s well known, in real estate, we juggle several thousand dollars at each stage, so each of the small details is important and can have a major impact on the profitability of your project. Have no doubt, this short list is worth its weight in gold if you apply it.

ERROR NO. 1: Pay too much

In the current market, prices are relatively high and that is why you must be more than careful and not rely solely on the potential increase in real estate agent in california value over time. Paying too much for a building will slow down your expansion considerably because you will have to wait several years before you can use it as leverage.

Make your profit with the purchase!

However, you could, in certain cases, pay the market price if the building has a strong potential for increased income and reduced expenses, which would have the effect of giving value to your building and thus allowing it to be refinanced in order to free up cash for the purchase of another building.

ERROR NO. 2: Rely only on your broker to find deals

Receiving descriptive sheets from a broker is not looking for a bargain, it’s waiting for a bargain! This is a major mistake. Do you believe that the windfall will appear as if by magic, that it will fall from the sky? It’s possible, but unlikely.

How many people do you think receive the same Centris listings at the same time?

Several hundred people, even thousands. When a bargain comes along on Centris, you better be quick on the trigger because most investors only look there.

Look against the grain. Search where most people don’t bother to search. Go for it ! Be proactive and don’t rely solely on brokers.

ERROR NO. 3: Try to do everything yourself

Imagine for a moment that you do all the renovations yourself, show the premises, mow the lawn, clear the snow, collect the rent, do the bookkeeping, etc. You may run out of time.

You may save some money right away, but at what cost? By doing all the work yourself, you’ll have less time to research and find bargains.

How much profit do you think you will make when you find the rare pearl? $25,000, $50,000, $100,000? Certainly much more than what you will pay to have someone else do the work.

Dare to delegate. In the long run, it will pay more.

ERROR NO. 4: Not following up rigorously

Here is a mistake made by many, even by more experienced investors. They don’t follow up on a property and say, “The seller won’t want to drop that much.” They say NO instead of the seller and this in business can be very expensive. Without good monitoring, beautiful profits will slip through your hands without you knowing it.

Once the offer to purchase has been refused, for example, it is not the right thing to do to put the file in file 13. The file should instead go into your tracking system. Who knows, the seller may accept your offer in a few weeks or even months.

ERROR NO. 5: Not building your dream team

It is well known, in business, your success will depend on your relationships. The more competent and reliable people you surround yourself with, the more likely you are to succeed.

Do you know the following old proverb? :

“The strength of a chain is equal to the weakest of its links. »

In terms of real estate, you could have an excellent project offering interesting potential, but it could very well not materialise due to the error or inexperience of one of the stakeholders you have chosen. We have only to think, for example, of an incompetent contractor who does not carry out the renovation work on time and/or at the expected cost, a mortgage broker who does not deliver the goods and who cannot find the required financing , to a building inspector who does not detect a major problem that could affect the value of the building. This list could be very long!

Surround yourself with good people. Surround yourself with competent people.

ERROR NO. 6: Not having an action plan

In business, the most successful people develop and follow a plan. They set short, medium and long term goals. But setting goals isn’t enough. It is still necessary to take action in order to achieve its objectives. Without sustained actions every day, your goals will not be achieved, or at least will be delayed.

Here is a non-exhaustive list of questions that you should ask yourself in order to establish your action plan, if it has not already been developed.

– How many hours per week can you devote to real estate in general? Five, ten, twenty, fifty?

– How many hours per week can you devote to research?

– How many purchase offers per month do you want to write?

– How many site visits per month do you want to make?

– How is your credit? Do you have a good track record?

– What kind of buildings do you wish to acquire?

– Do you want to “freak out” or accumulate buildings? Maybe both ?

– What is your age ? Do you still have several years ahead of you to achieve your goals?

– How much cash do you have?

– What is your personality type? Careful ? Reckless ?

– How many hours per month do you want to devote to building your network of contacts?

– What is your level of knowledge? Do you need to take more training?

Etc.

If you haven’t already, start writing your plan now and tell yourself that you will modify and revise it often during your career. There is no perfect plan.

ERROR NO. 7: Over Finance the building

It goes without saying that every investor wants to obtain the best possible return on his investment. In the best scenario, he can expect to realise infinite returns by buying without cash. In other words, using maximum leverage.

That’s all well and good, but a danger awaits the investor. That of “overfunding” its buildings. In other words, having more financing than the building can support. All buildings have a self-financing threshold based on the income generated, the expenses incurred and of course, the financing used.

When one wishes to invest for the long term and not in speculative mode, it is very important to acquire buildings with positive “cash flow”, that is to say buildings which will generate a surplus of cash each month.

Having a building or two that are cash flow negative due to “overfunding” is fine, but you’ll find that trying to build a building stock this way is next to impossible unless you’re generating huge extra personal income. In other words, work even harder so that you can keep your buildings, which is not the way to go, you will agree.

Finally, I leave you with a non-exhaustive list of mistakes not to make. They were collected during a survey of several active real estate investors.

– Do not increase rents because they are good tenants

– Not having the building inspected

– Rely on the information provided by the seller

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