Real Estate Investor Pitfalls - 4 Major Mistakes to Avoid
This content is provided in partnership with Zhen Liang from Prime Properties TO.
The most common pitfalls I see all investors getting into, stay tuned so you don't make those mistakes, I promise you I'll be worth it.
This article is transcribed from the video below.
Good day Toronto, welcome to another episode of Prime Property. So glad you could join us here. This is episode 2 of our mini-series of how to invest in real estate. Now last week, I went over the three ways you can get paid with a little bonus one. So, if you missed that make sure you go check it out. But in today's episode, I'm going to talk about common beginner pitfalls.
You must stop, it's going to just be General pitfalls because I see a lot of so-called Pros also make the same mistakes. So make sure you stay tuned to this episode and do not make these mistakes. All right, let's get started. With the number one most common investor Pitfall I see all the time is;
Common Investor Pitfall One: Trying To Time The Market
Oh boy. Do I say this in all different ways and forms like going from saying how the market is going to crash, I'm going to hang on a little bit or saying, you know, I'm the wait into the winter months when the prices are a little bit cheaper seasonally and I'll buy something or my favourite yet is; You know what, the bubble is going to burst. I'll just buy when the bubble burst. Look historically speaking nobody can predict the lowest of the lows and the highest of the highs.
The idea that you need to get behind real estate is not about how to Time the market it's about just getting in the market. How you make money in real estate is by the time that you own property in the market. So this is why we call it's the amount of time you're in the market as opposed to trying to time the market. You're not going to make money trying to time it, okay.
There are many studies out there that talk about people trying to time the real estate market, or the stock market, where if they try to buy the lowest time in the high spot. They make less money than the person which is bought something set it forget it put in a tenant, leave it alone, and then the time in the market is how they make money. You have to remember as we said in the first episode of how to invest in real estate, you're missing out on cash flow, mortgage pay down and potential appreciation.
If you are just trying to time it, the time it being the market. So as long as you just are in the market you get the cash flow and the mortgage pay now. Whether the property goes up and down it's going to happen. The market is cyclical just buy it and forget it and just leave it alone.
Common Investor Pitfall Two: Analysis Paralysis
Number two the second most common pitfall I see all the time is what we call analysis paralysis and trust me, I've been there before but look there are so many ways., You can calculate cash flow calculate returns. There are tons of calculators out there.
There are times of strategy and there are so many analytical ways you can look at a property. From cap rates the cashflow, everything, but here's my thing and trust me on this stop making all these calculations and just get in the market because the more time you spend calculating things the less time you're in the market like we're saying with number one.
What I find the analysis process stems from one or two things. Okay. It's either the fear of getting to your first property which I understand, it's a lot of money but look, there's never going to be a time where it's right or there's never been a time where you're not scared because it's such a big investment.
Just get in the market and you're going to thank yourself in the next few years. The other side I think is probably perfectionism, the people who love to over-analyze things there's tons of calculator spreadsheet and to look at that perfect property that perfect round glossy red apple.
Look you may find it eventually down the road, but could be a very long time. It can be a very short time. But the idea is you want to find something that's good enough and it's going to do enough good for you and creating wealth for you in the future. They just go buy and set it and forget like I've been talking about. Don't try to over-analyze everything as finding that perfect property is so difficult. It's so much easier to just find a property that works, buy it and forget it.
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Common Investor Pitfall Three: Your Team
This is from your realtor your mortgage broker your contractor or your property manager. If you don't have the correct people around you and you need advice, you're not going to get the correct advice and you're going to make a mistake that could be costly, especially if it's a realtor. So, I've always talked about this the people that you're working with make sure you ask them.
Do you own investment property? Where do you own investment property? How many properties do you have? You want to ask those questions to make sure that you're taking advice from someone who's already been there as opposed to someone who's not. This is especially true for realtors. You want to find the correct realtor because you want one that specializes in investment.
Trust me if you want to find investment property it's not the same realtor as the person which is regular does buy and trade. It's different and you can talk to some of my clients if you want that say there's a major difference from finding a person who understands how to invest versus the Realtor that will just say buy that property, it looks like a good investment. Trust me, some Realtors do that, so don't do that.
Common Investor Pitfall Four: Setting Expectations
Look I've had to talk a lot of clients down from expectations and don't get me wrong. It's great to have lofty goals and ideas, but I find a lot of people that right now they're coming to me because they think real estate is the end-all-be-all for how to make passive income. After all, that's popular.
Yes, you can make a lot of passive income but not to the point where you thinking that you can get rich quick and then be retired over what was just one property. Yes, you may be able to do that with like really high yielding things but there's a lot more risk, but what you want to do in real estate is not get rich quick. It's get rich slow.
It's slow and steady wins the race just like the turtle and the hare you want to be the turtle and win as opposed to being the hare starts fast and then end off somewhere and not finish the race.
Because this happens all the time people from trying to flip everything which I've tried to talk them down to, to trying to buy too many properties all at once and then going into chaos with all the mortgage payments. Trust me just do it one at a time very slowly and follow the path of finding something that cash flows and then just put in a tenant, set it and forget it.
That's how you win in Real Estate, nice and slow.
So those are the four most common pitfalls. I see in real estate. Make sure you do not make those. If you're wanting to learn more about how you can build a real estate investment portfolio, starting with the realtor make sure you contact me my contacts be right here until next time happy listening now.
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