Buy & hold real estate is one of the most attractive types of passive income investment. Once made it right, it can offer an amazing opportunity to get a good income that can help you succeed in life. On the other hand, mistakes can happen especially if just starting out.
I am here to share with you the top 5 mistakes that buy & hold real estate investors make from my personal viewpoint. Let’s get into the content:
1. Over Appreciating
Firstly, one of the common mistakes that I see buy & hold investor make is over appreciating. You can find this mostly in higher price markets such as California, Arizona or anything in the East coast market like New York where people are going in and buying these properties at negative cash flow and hope that in 2-3 years they can make money on actually selling it because the property has gone up in value.
Yes, that does work, but what if you have a downturn and not able to sale wherein you constantly have to still pay that mortgage.
2. Not Treating Land lording as a Business
Yes, it is a business, and it can make or break your investment or deal. Without effective property management, you can turn a good investment into a bad investment. Correct management is important in any buy and hold property you have. Treating it as a business will give you a better focus from purchasing to managing it.
3. Underestimating Rehab
This is a very crucial one which I make a mistake even to this day since there are tons of moving parts.
As an example, last year, I bought an 80 unit apartment, my original assumptions on the rehab were a little bit light once I under contract and walk through units with a contractor, and it was determined that it needed more work than anticipated.
Having a contractor with you to make sure that everything is good to go before submitting an offer is always a good idea unless you have extensive experience with estimated costs.
4. Trying to Do it All on Your Own
Most investors think that they can do everything from property management, underwriting and acquisitions, and other tasks. Believe me, wanting to do everything will surely wear you out and can affect the way you focus on doing higher-value activities. It would be best to outsource or people on your team to allow you not into so much on the daily activities.
This is something I learned, and it is a mistake not to look for people who can help you. For example, I have a chief operating officer that oversees my property management company, so when I need something or complete a certain undertaking, I just reach out to her.
5. Over Paying
This is what I see as a very common mistake right now especially deals that hit or that on the open market such as land, single-family, mobile home park or apartment complex. What seems to happen is there’s a bidding war due to the demand in most markets.
The solution to these issues is always stuck to your numbers plus criteria and be willing to walk away.
Finally, making mistakes is part of the journey as a buy & hold property investor, but most importantly for me, these errors had helped me a lot to learn a lot. I used them as a learning lesson that had allowed me to improve myself and created a process that worked.
P.S.
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