The 5 Most Common Reasons Why Real Estate Investors Fail TodayPosted on September 10, 2012 by
Today I am seeing all too many investors making mistakes that are costing them thousands of dollars of profit every year simply because they lack focus. Any truly successful investor will tell you that you must focus on what you are doing and become the very best at what you have chosen. Having been an investor for over thirty years, I learned there are five common reasons why many investors fail to make more money, especially in today’s market of properties with mortgage balances higher than what the properties are worth and thousands more properties in the foreclosure process.
Believe it or not, there are many more properties that are not over-leveraged and have a possibility of being bought at a fair price without wondering if a Bank will take your low-ball ALL CASH offer. To be able to better understand what the problems most investors face I want to talk about what I believe are the five most common mistakes most investors make.
1. They Don’t Know Where to Find the Good Deals
Most investors don’t know what to look for. All too many investors are looking for deals in the same places all of the other investors are looking. If you want to set yourself apart from the other investors in your area you must have a different strategy in the way you are buying your properties.
The smart and seasoned investor knows that not all of the properties you can make a substantial profit from are in the nice neighborhoods. The smart investor first builds a buyers list of potential buyers for the properties they find in all areas of town. Pretty houses are not the only way to make money in today’s real estate market.
2. They Don’t Know How to Thoroughly Analyze Every Deal
Most investors today wouldn’t recognize a good deal if they saw one. Most waste their time chasing unprofitable deals. Most investors today wouldn’t know a good deal if it hit them in the face.
Most use the “PFA” (Plucked from Air) or “SWAG” (Scientific Wild Ass Guess) method to determine how much they should pay for each property. These methods of determining the price you should pay for a property is unacceptable.
3. They Don’t Know How to Effectively Negotiate Each Deal
Most investors today don’t understand “It’s All About the Numbers” of each deal. Always calculate the numbers of each deal before making an offer to buy any property.
They haven’t figured out that they can’t borrow money from banks anymore. Banks aren’t lending to real estate investors today.
They believe paying “ALL CASH” is the only way to buy real estate. This too is a fallacy that simply isn’t true. Not every seller wants all cash, some want monthly income or don’t want to be hit hard by taxes when they sell.
They don’t know how to Cold Read the people they are negotiating with. If you can’t instantly build rapport with the sellers you stand little chance of creating a profitable deal.
4. They Don’t Know How to Make Profitable and Sensible Offers
Most investors today are afraid to make an offer. All too many investors who aren’t able to borrow money today are reluctant to write offers to buy houses because they don’t know where to get the money they need to buy the property.
They don’t understand how financing works. They have never learned about how to structure deals with or without interest. All most investors have ever heard about is paying All Cash.
They don’t have the correct, easy to use paperwork. Having the paperwork that doesn’t scare the sellers will be critical to writing an offer a seller may accept that is somewhat creative.
5. They Think They Must Always Make the Maximum Profit They Can From Each Deal
Most real estate investors today don’t realize they can create multiple paydays from almost every deal. It is always good to create paydays that continually provide you with money to be able to pay for your life style.
Most investors today only think about receiving “ALL CASH” when they sell and never think about “Long Term Monthly Income” also. Getting all cash when you sell a property is good if you need to pay for an immediate issue you may have but if you will be faced with huge tax consequences if you get all cash there are alternative ways to receive the profits from your deals where you can get much better taxing treatment.
These are what I believe to be the most common reasons investors fail today. Join me at the Tampa REIA on Thursday, September 13th and then again for an all day workshop September 15th and I will teach you even more about how to avoid making other mistakes many investors make. I will also show you how to start making more money faster and easier.