Hey folks, Blade Johnson here from Finishing Touches in Fort Worth, Texas. Today, I want to chat about the top five mistakes I see investors making all the time in the real estate world.
Mistake 1: Mismanaging Start Dates and Timelines
You’ve just closed on a property and you’re eager to get started, but things aren’t always that simple. Closing on a property doesn’t automatically mean you can start work the next day. A lot goes into planning before you even pick up a hammer.
Imagine you got an estimate from us three weeks ago, but then went silent until you closed. Reaching out the day of closing, thinking we’ll start immediately, is unrealistic. It takes two to three weeks to slot you into our schedule. Do your homework upfront, get everyone on the same page, and once you know you like a contractor, move forward promptly. The days of holding out for three bids are fading fast. If you don’t like a contractor during the initial chat, cut them loose and focus on the ones you trust.
Mistake 2: Constantly Changing Plans
Once you and your contractor agree on a scope of work, stick to it. Changing plans halfway through wastes time and money. I’ve seen clients halt progress because they got a new idea from a TV show. Redefining the scope of work sets us back weeks. If you must make changes, adjust your expectations. Getting back on track isn’t instant. Be thorough with your initial plans to avoid this pitfall.
Mistake 3: Hesitating to Walk Away from Earnest Money
I get it, losing money hurts. But sometimes, you have to cut your losses. Spending $5,000 on non-refundable earnest money isn’t the end of the world if the property isn’t right. I’ve had clients push forward with bad deals despite my advice. If I tell you I can’t help rehab a property due to its condition, believe me. Trust the experience; don’t stubbornly invest in a bad deal.
Mistake 4: Getting Emotionally Attached
Real estate investing is about business, not feelings. Don’t let your emotions cloud your judgment. Investors often liquidate their 401k or take drastic measures to gather funds. Remember, the property isn’t your home; it’s a financial vehicle. Detach emotionally and focus on what will sell. Follow the market comps, not your personal preferences.
Mistake 5: Ignoring the Need for Cash Reserves
In today’s market, especially in the Dallas-Fort Worth area, inventories are low, pushing investors to rehab older homes. Older homes come with unexpected issues. If you’ve spent all your cash on the purchase and rehab budget, leaving nothing for surprises, you’re in for trouble. Always set aside extra funds for incidentals. For example, raising a foundation might break plumbing lines, costing you an additional $2,000 or more. Be prepared for these surprises.
Conclusion
In conclusion, real estate investing can be a highly rewarding venture, but it requires careful planning, clear-headed decision-making, and a willingness to adapt when necessary. By avoiding these common mistakes—mismanaging start dates and timelines, constantly changing plans, hesitating to walk away from earnest money, getting emotionally attached, and ignoring the need for cash reserves—you can increase your chances of success.
Stay informed, trust your contractor’s expertise, and always have a financial buffer to handle unexpected challenges. With these strategies in place, you’ll be well on your way to making smart, profitable investments in the real estate market.
Get started with Propelio and unlock all the tools you need to succeed in real estate. Sign up now for a 14-day FREE trial: Start Free Trial
