Twelve Deadly Mistakes Even Experienced Investors Make and How to Avoid Them

Transcription

1 Twelve Deadly Mistakes Even Experienced Investors Make and How to Avoid Them Legal Disclaimer: This information is provided to you for educational and informational purposes only. Any use of these materials in this manual or anything else provided by the author or any associates thereof is by you with that understanding. The author, creator nor any of their associates and/or employees are responsible in any way for use or non use of these materials. The authors and creators nor their associates and/or employees are licensed attorneys, CPA s or any other professional identity and do not offer professional advice in any way. We advise that you consult with a licensed professional before implementing any of the strategies contained within this material. You freely and of your own will risk any and all capital you may choose to spend implementing concepts outlined while using this information. You will do so with skill and common sense. You will not hold the author, creator nor any of their employees and/or affiliates liable or accountable in any way for any failure of the service and/or information to live up to your expectations.

2 Table of Contents Introduction 3 Mistake #1: Gotta Get My First Deal Syndrome 4 Mistake #2: Trying To Retail A Rental 6 Mistake #3: No Reserves for Retails or Rentals 8 Mistake #4: Underestimating Repairs 10 Mistake #5: Not Doing Your Own Due Diligence 12 Mistake #6: Treating Real Estate as A Passive Investment 15 Mistake #7: Trying To Go Solo 17 Mistake #8: Not Verifying Information Given 21 Mistake #9: Overestimating Rent 23 Mistake #10: Relying On Bad Appraisals 25 Mistake #11: Quitting Your Job Too Soon 27 Mistake #12: Don t Let the Analysis of Paralysis Bug Bite You 30 Conclusion 32

3 Introduction It is not easy being in the real estate business. You can be the most seasoned of investors and still have obstacles to go through. There is no guarantee that an investor will make a lot of money. However, there are some ways that you can avoid some deadly mistakes to keep you from making anything. Some of the most experienced investors end up in the same boat by making some of these mistakes talked about in this book. Just because they ve had years of experience doesn t mean that they are immune to failure. If they re not careful, these mistakes can bite them in the behind, causing them to lose out on profits. By knowing what these mistakes are, you too can stay in the real estate investment game and not lose lots of money. To be educated with this information is the best thing for any investor to have.

4 Mistake #1: Gotta Get My First Deal Syndrome Don t Be Hasty So many first-time real estate investors are in a hurry to get that quick buck on that first property that they purchase. They re looking to get their feet wet as soon as possible so that they can get a deal. This means desperation can set in and they ll take whatever they can get. When they do that, the process can backfire on them. They end up getting themselves in a deal that they should have never gotten into. Being hasty to get the first deal is a big mistake when you become a real estate investor. When beginning real estate investors start out with a bang, some of them look to get rich quickly without any sweat and hard work. They start out with enthusiasm and zeal. However, once they realize that it may take a few months before they see any money, they get disappointed. Some of them think because real estate investing is known as a lucrative business, that money will just come instantly. That is far from the truth. Another mistake that beginning investors make is that they look at someone else s instant achievement and they think the same thing will happen to them. The instant success scenario doesn t happen often. Furthermore, the beginning investor doesn t know what this person did to get a good deal so quickly. Just because they see the first piece of property and think it could be for them, doesn t mean anything. If it turns out to be a bad deal, then the beginning investor may not want to go any further.

5 They realized that they ve lost money and now they re ready to throw in the towel. The majority of beginning investors cannot afford to lose money on their initial real estate investment deal. As a beginning investor, if you want your first real estate deal to be a winner, you will have to take your time getting things right. You will have to look at the numbers. Even with a bad setup after the purchasing price, closing costs and home repairs, the investor is still in the deal for at least 70% or less than that after the costs of repairs. If you can t handle this scenario, then the best thing to do is to walk away from it. It s not worth getting yourself into something that you may regret later. You will also have to get figures for the appreciation and depreciation of the real estate property. Of course, this depends on what your plans are for it. Go through the neighborhood; check out rental prices or resale prices nearby. Then calculate what you can reasonably afford to purchase the real estate property for. If it ends up being out of your price range, then let it go and move on to something else. With real estate investing, you have to look for sellers and buyers that are interested in doing business with you. You also have to learn the art of negotiating and analyzing. When you re starting out, make sure you have the money to invest in the property. As a beginning investor, you may want to start out with a fixer-upper with you or a contractor doing the renovations. Then you call sell the house for a reasonable profit. After you ve made your profit, you can purchase another house and continue the cycle.

6 Mistake #2: Trying to Retail a Rental Checking and Making the Investment There are some investors that make the mistake to buy and sell property as soon as they fix it up. On one hand, it may be a good idea, but on the other hand, the investor needs to check out the house to make sure it can be sold. Many neighborhoods all over can be the perfect setting for rental investments. There are also neighborhoods that would benefit as retail neighborhoods. Some can even have a mixture or rental and retail. Investors have to make sure that the right kind of house is situated in the right area. If an investor was interested in a two bedroom home in a residential neighborhood, more than likely it would sit there. People are looking for more space than two bedrooms can hold. While a two bedroom home is not ideal for a residential neighborhood, it could be ideal for a beach or resort area. In the suburbs, a two-bedroom, one bathroom home would cost around $60,000 - $70,000. With a resale, the price would probably go up to $100,000. You would also have to factor in that the investor would have to compete with other homes that have three bedrooms and two bathrooms. The latter has proven to be a better property investment for more people. You can still make an investment in a two-bedroom home, but it is probably a tougher sell. Investors can look to see if the two-bedroom has the potential for add-ons, such as an additional bedroom. The house would be worth more in value; of course, with this, more land space would be needed. It s also important that the investor have the funds to do the renovations.

7 With high-end homes, they can be difficult to market more so than two bedroom homes. Investors also have to take into account that the percentage will be less of the rent to value that they can get from the home. Even though you can get a lot of the best cash flow deals from the homes that don t cost a lot, investors should not price them too low. Mortgage companies usually set a minimum price that they will agree to shell out for a loan. The usually loan amount is no more than $40,000. If the home has a selling price of $30,000 - $50,000 and includes a down payment, the investor s chances of getting a loan have diminished.

8 Mistake #3: No Reserves for Retails or Rentals Have Reserves Available It is important that investors have reserves available for resale or rental properties that they have bought. This applies to the following: If you are purchasing a property If you intend on purchasing a property fix up the property to buy or sell it If you re just fixing it up Refinancing the property and renting it out Only if the investor has a rehab lender can they skip the above and that s seems to be few and far between. Available Funds It is very important that the investor have some surplus funds in the bank or in an escrow or construction account. If they plan to rent the property, they ll need to use the money for additional items that have to be taken care of after the home has been rehabbed. At one point or another, the home may become vacant again and then the investor will have to use the money for maintenance, such as repainting and changing out the carpet. The investor may have to do additional repairs that are beyond the scope of repainting and carpet replacement. It s better to have the surplus funds available early on than have to take the money from the rents. This is where the investor can lose profits.

9 Investors have to keep in mind how the profits with rental properties work. Most investors seem to think that the entire income from their rental properties belongs to them and is considered straight cash flow. The mortgage companies allow the investor to get 75% of the rental income to put towards their mortgage payment for another investment property. The other 25% is designed for repairs and vacancies. With that, there are additional costs for taxes and insurance that caused the mortgage payment to increase. Setting up a home equity line on their personal property is one thing that investors can do as a reserve option. The money should not be touched. The purpose of having the home equity line is for any future reserve needs. It s better to have this than to wait until you really need it; investors may not qualify for it later on.

10 Mistake #4: Underestimating Repairs Getting the Figures Together As an investor, it s important that you don t underestimate costs for repairs on rental and retail properties. When you re looking at the home, it is impossible to find every little flaw. You will have to make estimates on what you can see and project costs for the worst case scenario. As you purchase more investment properties, you will learn to find more things and see what needs to be repaired. You will become more familiar as to things that are commonly wrong in a vacant house and what you need to do. It s very rare that a real estate investment deal has cost below budget. There will always be something that will add a significant cost. Investors should add additional monies (like several thousand dollars or more) to their estimated budget. This will ensure that you have the additional surplus funds in the event they are needed later. When you re dealing with real estate investment properties, you cannot be too conservative and think that you may not need anything extra. The investor should take into account that the worst-case scenario may not happen, but with the surplus funds they ll be ready if additional repairs are needed. With conservative figures, investors could find themselves in a tight spot if they don t extend their numbers. A percentage for investors to shoot for is 70%; anything under that could lessen their profits. Doing Your Homework Get a contractor to assist you with the repairs of the home. They will do a walkthrough of the home and advise you what needs to be done, along with estimated

11 costs. When they present a price to you, get them to stick to that price as far as repairs are concerned. Investors should make time to visit home builder stores. It s in their best interest to get a gauge of what materials will cost. They will be able to find pricing for things like plywood, drywall, material for roofing, flooring, carpeting, etc. Investors should consult with the contractor to find out what the timeframe will be to complete the repairs. The timeframe and the repair cost should be in writing. Having the information in writing can prevent possible disputes. Also, the contractor will not be allowed to start another project without finishing your project. They also will not be allowed to change the price of the initial work after the original quote has been established. Make sure you keep a log book of everything that is discussed between you and the contractor. As you continue to get figures, write them in the log book. Investors may want to include a clause in the contract with their contractor. If there are subcontractors involved, investors would want to include them also. The clause would state that the contractors would specify so many weeks to complete the job. In the clause, allow the contractors an extra week to finish in the event there are last-minute obstacles. After the extra week, if they re still not done, they will be charged a daily rate. The home should be ready to rent out; in fact you may have people waiting to move in. If the home is not quite livable, the clause should also state that the contractor should pay for any lost profits.

12 Mistake #5: Not Doing Your Own Due Diligence As a real estate investor, it s important to shop around and look at different properties when repairs and inspections are involved. You must get different prices and estimates if you are enlisting the services of a contractor. Other people, such as a mortgage company inspector or a real estate agency contractor may offer their own estimates. However, in order for you to make a wise choice, you should weigh all of your options. Getting different estimates is the best way to determine what your costs will be. If you don t shop around, you might be out of more money than you want to be. You must do your homework when it comes to getting a real estate investment deal. Even if you re discussing it with someone, you need to do some detective work. You may want to seek out other real estate professionals that have nothing to do with the property in question. This way, they won t be biased against you and can help you to make a wise decision. If you conduct your due diligence the correct way, the risks on the deal will be less. You can also look for a greater return on your investment property. Taking Action When you have found a property of interest, get a map and look at the radius around the home within five to ten miles. See if there is anything of interest in the area such as shopping, parks, schools, etc. Drive around the neighborhood to see how it s kept up. Also look to see if you see any signs of criminal activity, no matter how small it is. You want to get an investment property that is going to appreciate in value instead of depreciate.

13 If you re online, you can look at sites like Google and find maps that can give you a view of the proposed investment property. You will also be able to look at a satellite view that gives you a closer look of the neighborhood. Look for access to the highways and interstates, parks and other amenities. These things are key in order for you to market your investment property. As you look through the property and find things that need to be repaired or replaced, such as new carpet, painting and other things, they should be included in the deal negotiations. However, if you know some professional that could fix up the home without massive costs, then you can go that route. You might be able to save money, but keep in mind the work has to be that of a professional and not an amateur. Otherwise, you d be better off getting a general contractor. When the investor gets the purchase contract, it should be created to include correct valuation and property inspection. After the reports have been completed, get someone to assist you with each report. Preferably it should be someone that is more seasoned than you. Sometimes, even seasoned investors need assistance with their reports. It all depends on the neighborhood that you re interested in. Investors need to analyze the property to determine if they can cash flow it or not. Property investments are no different as far as market changes are concerned. You will have to be able to handle negative cash flow when there are market changes. Sometimes, it may be long-term; if you don t think you can do that, then you may want to wait. As an investor, it s important that you have as much information as possible to work with. You can get creative and find different ways to add to your cash flow.

14 You may be able to create more value by replacing old appliances with new ones. Think about it on the side of the tenant and what you would want if you were moving to a rental property.

15 Mistake #6: Treating Real Estate as a Passive Investment What s Involved When investors consider their real estate property as a passive investment, they are literally loaning funds to someone else. This is fine as long as the person is trustworthy and knows what they re doing. Even with that, the investor still plays a part because they must know that their real estate investment is secure and that your equity is in place prior to the sealing of the deal. Some investors can be dismayed by the real estate business due to the time it takes to invest in properties and other tasks associated with real estate investing. In fact, some of them look for people that can help them remove some of the burden of real estate investing from their schedule. An investor can create a limited partnership. This will allow the investor to prevent having a liability over the investment amount. They will also be able to get appreciated values and tax deductions for their properties. The management and other duties would be the responsibility of the general partner. The general partner would also be responsible for executing the operating decisions on a daily basis. They would also be responsible for property management duties and decisions. The limited partner would be put in place if the general partner becomes incompetent in their duties of the partnership. It is possible to find someone that is experienced in carrying out the responsibility of maintaining and managing real estate properties. This also includes acquiring additional investment deals, taking care of the properties themselves and of course, splitting the profit with the investor.

16 Even with that, the investor should still be involved in making sure that the designated person is competent in what they re doing. They way things are handled can eventually help or hurt the investor s deals. They will still need to know that the funds are going to closing costs, repairs and other related items. In a sense, since money is being spent on another person along with the other things, an investor really can t consider property investment as a passive investment.

17 Mistake #7: Trying To Go Solo Who to Have On Your Team As a beginning real estate investor, one of the worst things you can do is to attempt this venture alone. If you are just starting out, then you are just getting your feet wet in the real estate investment business. You need to surround yourself with successful, like-minded people. Being around people that are already successful and established will help you to get where they are. When they see that you re interest in genuine, they ll be more than willing to help you get started. Watch and learn how they execute their real estate deals. A successful investor doesn t mind sharing their tips and strategies with those that are just getting started. You should also form a team of people that you will need to help execute your real estate investment deals. The team of people would include: Mortgage Broker Attorney Insurance Agent Certified Public Accountant Title or Escrow Company (one that deals more so with real estate investors) Contractor Mentor (can be mortgage broker, experienced real estate investor, etc.)

18 Make sure your team is knowledgeable in the dealings of real estate investing. It will help you a great deal and take you a long way. Real Estate Investment Clubs Another thing beginning investors should take advantage of is to join a real estate association or club. These groups get together and have meetings that pertain to real estate in general and investing. This is way that you can network with other people in the real estate investment industry. These groups are starting to become more popular. Take your time about getting to know other people in the group and make sure your motives are genuine. This is one place where you can find a mentor. However, some mentors charge for their services nowadays. That s because they kept getting burned when they did it for free. People will appreciate things more if they pay for them than they would as a freebie. If you do find a mentor through the group that is willing to help you move forward, be mindful of their time. Their time is very valuable and they could be out doing something constructive instead of meeting with you. Because to them, time is money. That s the way you should be thinking. Some clubs have speakers come in to do presentations. Most of the time, they are usually selling something. Some people in the club don t care for that, but it would be difficult for the speaker to spill their guts out about their business within a limited time frame. Besides, if you purchase the product, you ll be able to go over the information as many times as you want to. As a beginning investor, you have to be willing to spend money in order to educate yourself. If you always look to get things for free, more than likely you won t retain the knowledge.

19 Don t beat around the bush about your motives. Let the group know what you want and need. Out of all of the members from the group, there is someone that would be willing to help you. If not, they probably can refer you to people that can help you. You have to be able to network and market yourself if you re going to survive in the real estate investment world. There are no two ways around it. You can get creative and make a name tag that briefly describes yourself. Before you know it, you may have people coming up to you asking you what your name tag represents. That s an interesting way to strike up a conversation. The sooner you join a group or club, the better. You will be able to have access to some of the best and brightest minds in real estate investing. You might find someone who will want to do business with you. They ll trust you faster than they will someone from the outside. When you go to the meetings, don t go for the sake of what you can get from it. Be willing and ready to contribute whatever you have to offer. When the other members of the group see that, they know that you re not all about self. They ll be more willing to help you with what you need. Offer some of your services to the group. You can t think of it as a take-all thing. You have to be willing to give of yourself and not be selfish. When you do attend meetings at the club, there are things that you must keep into perspective: Make an attempt to be there at least five to ten minutes early. It s not appropriate to start a conversation when the speaker has the floor, so don t start talking.

20 Just as if you were in school, raise your hand if you have a question. It s better if the question is asked after the presentation. The speaker will usually signal when they are accepting questions. If you have to go out, please make your exit as quiet as possible. Get prior approval before you pass out flyers. While you re there, keep your cell phone off. This new trend in real estate investment is growing. Getting information and meeting other like-minded investors can help with your success in real estate investing.

21 Mistake #8: Not Verifying Information Given Why it s in Your Best Interest to Verify When it comes to selling a home, you can take the information someone gives you. However, it s in your best interest as an investor to check things out for yourself. You don t want to be duped or left out of the cold when it comes time to seal the deal. Even if the seller has their own appraiser, you should still hire your own appraiser to get more than one opinion for the estimate price of the home. Let the seller know that you will be doing just that. Even if someone tells you that the average rental for homes in the neighborhood is so much monthly, nothing beats you going out there and checking the rental prices yourself. You must be diligent in doing this because you could be set up for fraud. This type of fraud can occur when the investor is purchasing a property that they think is a certain price. In reality the property turns out to be less than what they thought. When this happens, the investor ends up paying additional money that could have been used for something else. This is done with a false appraisal that tacks on more money than what the property is actually worth. After the investor has closed the deal and signed the paperwork, they have gotten themselves into a financial hole. They will end up owing too much money for the property, thus losing their cash flow and profits. It can get worse and the property could end up in a financial mess, leaving the investor to go bankrupt or allow the home to foreclose.

22 This type of fraud thrives on one of three things: An appraised value that is usually over-inflated Misleading information from the market Incorrect information from the market This is why it in your best interest to pay a few hundred dollars to have an independent appraiser conduct the appraisal on the property. It will be money well spent and it can prevent you from being duped and avoiding fraud altogether. A lot of new investors will take the information at face value and run with it. The promise of lucrative profits gets them thinking that they should take the first thing that comes. They don t question the validity of the information given to them. The new investors feel if they don t sign on the dotted line then that they ve missed out on a potential deal. Their emotions come first before their wisdom to think clearly. It s important to take the time to examine the initial appraisal from the seller. It can be devastating to accept an initial appraisal at face value without doing your homework. You would rather pay a few hundred now than many thousands later. If you don t verify the information given to you, you re setting yourself up for failure in the real estate world. That s something you cannot afford to do. You can t allow other people to make money at your expense. Everyone that you meet in the real estate world is not honest and will use investors to make a quick buck. Take the time to verify and check thoroughly the appraisals for your properties. It will be worth the time and money.

23 Mistake #9: Overestimating Rent For real estate investors, overestimating rent can be a serious problem. They think that they will be getting a certain part of the monthly mortgage. When looking at the homes in the neighborhood, not all of them are eligible to produce positive cash flow. In fact, some of the rental property values are subject to change. This could happen at any given time. There are several factors that figure into the equation of estimating monthly rent for investment properties. One of the factors to take into consideration is the number of bedrooms in the home. The price per bedroom can help investors determine how much rent to charge. Of course, if it is a four-bedroom home, an investor can charge more money as opposed to a three or two bedroom home. Another way that you can get rent estimates is to look in the local newspaper or check online. You definitely have to factor in the number of bedrooms because it plays a great part. In addition to that, multiple units such as duplexes and triplexes easily provide more cash flow. On the other hand, single family homes are easier to deal with because you usually have better tenants. As far as getting a mortgage is concerned, if you have good credit and not a lot of debt, you have a favorable outcome for getting a loan. When you want purchase rental property, lenders prefer that the investors have a sizeable down payment. Investors will also have to deal with increased interest rates and available funds with rental properties. It s known that more people will not honor their loans with rental properties as opposed to personal properties (homes).

24 Why the Market Is Important Investors must keep in mind that the rental market changes with the market value of homes, interest rates and whatever the job market is currently. The rental market is subject to change at any time. For example, if the investor started out in a good market, it may not stay the same in a few years. This is another reason why it s not advantageous to overestimate rent for investment properties. If it does come up where you overpaid in rental estimates, you won t be able to recoup that money and will have lost profits from the rental property. Investors really don t know from year to year how the market is going to play out, so they have to keep their eyes and ears open. Investors should provide space between mortgage payments, insurance payments and rental payments each month. It s important that the investor have a surplus of funds available after purchasing the investment property. Investors should be able live comfortably for retirement and other interests. Keeping in mind that property values increase and decrease, the ones who prepared financially will be in better shape than those that didn t. When there is a downturn in the economy and the real estate market, they will be the ones that will be able to weather the storm.

25 Mistake #10: Relying On Bad Appraisals Things With appraisals, You Need the investor To Know needs to know what a lender wants. There are some things that an investor needs to know that are very important to getting the investment property deal. Even though an appraisal can be considered an opinion, it is an educated opinion that counts as far as investment deals are concerned. An investor needs to know how many days that a property has been on the market. They also need to know about similar properties within that same area. They need to know how long is the average time that they stay on the market. The way to gauge this is to find a home that has been available 30 days or more, but less than 90 days. Some appraisers will make adjustments when it comes to comparing properties. When an investor is looking at this, it s important to look for the following: lots of negative or positive adjustments. If there are two homes and one has a bathroom and the other does not, of course the former would get a positive adjustment and the latter would get a negative adjustment for not having a bathroom. When a home is being checked out and appraised, there should not be a lot of adjustments on either side. Investors should make sure that the appraisal is bracketed. When this happens, there is a comparison with the property in question and one that is either larger or smaller than that one. With this bracket appraisal, the homes should be within a three-mile or fewer radiuses of each other. They should also be in the same neighborhood. When doing this, none of the homes should be the worst one that is included in the comparison.

26 If that happens, the value of the home in question could experience a dramatic decrease in value. This would also affect the investor s purchase and could foul up the deal. Investors should check an appraisal very carefully. They may have to go over it several times to make sure everything is in place. This should be done before it goes to the mortgage lender. Anything that is not easily understandable should be in writing and explained. The mortgage lender should be able to understand everything that is written in the appraisal. If they don t, there could be questions and subsequently the deal would be held up. Investors should also consult with the appraiser in regard to any similar properties. They should also be used in the appraisal. If they are not or cannot be used, the appraiser needs to provide a sufficient explanation to avoid any red flags that the mortgage lender may perceive when they look at the appraisal. If the home had an appraisal done at least a year ago, another one should be conducted. Since the market value of real estate properties fluctuates at any given time, it s important to have the current appraisal for that market. A home that had an appraisal of a mid six-figure one year may have a lower mid six-figure appraisal a year later because of the market conditions. The value also depends on the other homes in the area. If the other homes have a high value, then the home in question will probably have a high value as well. Comparing a new area that is not far from an old one, if the older homes are not selling well, it may hurt the other market. It is so imperative that investors know what the current home s value is in order to make a profitable deal.

27 Mistake #11: Quitting Your Job Too Soon Why You Shouldn t Quit Too Soon Some beginning real estate investors are so eager to let go of their full time employment as soon as they have some sales under their belt. They think at six months they can turn in their resignation. Unless they have lots of money saved up, it s not advisable to terminate your place of employment just yet. When you terminate your employment prematurely, you can run into problems. One is that the bank wants to see that you can pay back a loan. If they notice that you re no longer employed at your job, which may raise a red flag for them. They are looking for stability. Also, if you have quit your job and you have not been doing investing for a minimum of two years, it will be difficult to get written verification from a CPA saying that you have been self-employed for that long. If an investor were to get a loan, it would be noted as no income and no asset. The ratio for the loan to values would be lower and the interest rate on the loan would be higher. Even for those investors who have been doing this for some time can run into some rough patches. Sometimes they find themselves struggling to pay bills and create wealth for themselves. As an investor, you must be able to have enough funds saved away. Just as with anything else, the real estate investment market has its highs and lows. There are certain markets in the industry that are not always constant. Acquiring Deals So you may find a deal here and there. Beginning investors don t need to immediately spend every penny that they earn. They need to be able to manage their money wisely.

28 If you are an investor and you are looking to quit your full time job to do real estate investing on a full-time basis, wait at least a year before you take that leap. By this time, your income from real estate investing should be more than what you make on your day job on a regular and consistent basis. You don t have to grab up every house that you see in the market. That would be too much for you to handle. You want to do this at a gradual pace. Otherwise, you ll have an enormous burden on your shoulders. As you first start out, you would have to be a jack of all trades. You will have to do the accounting, payroll, office supplies, bills, etc. You have to keep yourself going and motivated. When you start making money, you ll probably want to expand your business. This would include having to get office space, paying for full-time employees including agents and managers who would maintain the homes. You would also have to account for overhead costs. Why You Should First Start Out Part-Time For beginning investors, it s better to start out part-time. That way, you can still work for your full-time employer and still have money coming in on a regular basis. Investing part-time would be a better solution until enough money is coming in that you can quit your full time job. Once you get into real estate investing full-time, you will spend hours combing different neighborhoods for that right investment deal. It may take a few months before you land one. You must be diligent about doing this because your time is money and it s very limited when it comes to having your own business.

29 Don t be hasty in trying to leave your regular full-time job. Make sure that everything is in place before you make that move. Don t quit your because some big shot said so. If you do, you will be the one left holding the bag and the big shot will be nowhere around to help you. When you finally do go full-time, you must treat real estate investing like you did your former full-time job. You ll have to treat it just like any other business.

30 Mistake #12: Don t Let the Analysis of Paralysis Bug Bite You Analysis paralysis can be a big hindrance of successful real estate investing. This is just as bad as trying to find a get-rich quick investment deal. Instead of taking advantage of a good investment deal, the beginning investor will drag their feet and analyze deals excessively before they decide to go for it. There can be some apprehensions in real estate investing if you re new to the business. As a new investor, you want to make sure that your money is safe with this deal. However, that should be the least of your concerns. Just make sure that you get together with successful people that have been where you re trying to go. Get guidance and counsel from seasoned investors that know the ropes. They can tell you what you need to do. It s easy to think about whether the investment deal was good or not, or if the property would return a profit for you. After you got the deal, what s next? Those are questions that could pop up in your mind. Getting Rid of Analysis Paralysis There are things that you can do to get rid of analysis paralysis. Make sure to get plenty of information and that your real estate investment deal is solid and legitimate. Some of the things you need to consider are: What is the current investment property value worth? You have to work it and find the good deals. If you need to find out the value of a home, get an appraiser. Later on, you ll need other parties to help you, such as attorneys and management professionals. Compare the property with others that are similar in price. Find out what the market is in that area. If you can, try to get the information in writing. Keep all of the information together for future use.

31 Find out what kind of repairs will need to be done. The seller should be able to advise you of what needs to be done, but that s not always the case. You should still conduct your due diligence, even with that. See how much you can purchase the property for. Remember to stay within your price range. If you are able to negotiate a deal, then by all means go for it, as long as it s favorable. The favorable deal may bring you more profits. If you choose to leave it as is, you could be missing out on addition money in your pocket. For investors, another way to determine market value is to place an ad in the newspaper. The offer must be attractive enough for people to take interest. Your ad should include important details regarding the property. The details should be enough where as if an interested party saw and read the ad, they would be compelled to call you to get additional information. You can also do a for rent test. Put a For Rent ad in the newspaper. If there is some interest, you may have a chance. If not, you ll know that market is dead. After you have a reasonable price with a contract and contingency clause, you can conduct your analysis. If you re a beginning investor, you shouldn t take weeks to do your analysis. The interested party will have lost interest because you took so long to analyze and check things out. Then you ve lost a potential suitor for your property, along with potential monthly profits. Investors should conduct a quick survey to see if the deal is good or not. Write down all pertinent information regarding the property. With that include a contingency with your offer. After that, you should conduct your entire analysis. Analysis paralysis is not something that you want to get into. If you get tied up in that, you will forfeit plenty of real estate investment deals.

32 Conclusion After you have read this book, you should be knowledgeable about the things you shouldn t do that could be costly to your investment properties. It s important to note that the information in this book is to help you avoid some of the same mistakes that other investors have made over the years. Some of them have lost lots of money because either they didn t know or they wanted to do it their way. Heeding these warnings can make you a more savvy and educated investor for years to come.