7 Deadly Real Estate Investing Mistakes to Avoid – Part I

Real estate investing can be fun and very profitable. So, learn from the mistakes of others and get started on your road to financial independence.

To the new real estate investor going out and making your first deal can be a very scary event. Although making mistakes are just part of the game, none of us wants to make a mistake that costs us lots of our hard earned money. However, learning from other real estate investor’s mistakes can help you go a long way in your real estate investing career. In this 3 part series I will show you 7 deadly real estate investing mistakes to avoid.

1. Never buy a negative cash flow property. I know this sounds like a no-brainer, but there are those out there “helping” new real estate investors get into properties with such incentives as no money down, seller pays down payment, seller pays for first 8 months negative rent, and seller pays closing costs, etc. However, once you sign the papers, you are now responsible for any short fall, and if it takes you 4 months to find that first renter, then your stuck making up the rest of the payments. There were those who touted this “strategy” speculating that real estate always increases over time and that will make up the any differences in the end. Don’t fall for it! Never buy a negative cash flow property no matter what the so-called benefits.

2. Never use your own Home Equity Line of Credit to purchase real estate. You are putting your own house at risk. Always get a hard money or private money loan for fix and flips and a regular loan for cash flow properties. These days many banks require 20% down payment. So, if you are buying a $150,000 house, that means you need $30,000 just for the down payment. You’re probably thinking, where am I going to get that kind of money? Well, one way is getting a hard money loan to initially buy and fix the property and then getting a regular fixed rate loan using the equity of the property as your down payment. There are other methods, but this is just one example.

3. Never buy the first deal you find. The first deal is very, very rarely a great deal. Sometimes you might find something that looks great on the first look, but do your due diligence to make sure of any potential issues. Remember, there will always be other deals out there. Just have some patience and have some fun. There’s a 100-10-1 rule that I have heard a few times in my circle of real estate investing… Look at 100 properties to make 10 offers to get one accepted.

The rest of the 7 deadly real estate investing mistakes will be found in Part II and Part III which will be posted in the near future.