Big Reasons Why Property Investors Fail

A man in despair

Property investments are a great way to build wealth, that’s why some of the wealthiest people you’ve heard of made their money in real estate.

The perception is that it’s easy to make money renting properties. Maybe…but if that’s true, why do so many investors go bust? Why is it that most real estate investors only own one property and find it so hard to grow?

Too many real estate investors get into investment properties for the wrong reasons or don’t follow their own rules causing them to fail. Like other investment strategies, to succeed, investors need to crunch the numbers and make decisions based on them. It’s hard not to get emotionally vested, but being methodical is only one part of becoming successful.

Follow Your Playbook

Blindly jumping into a deal will burn you just about every time. Buying a property without having a plan or strategy or having a bad strategy from the outset is no way to success. Research your market. If you can’t see the difference between a good buy and a bad one, you need to study up.

It can’t be stressed enough, buying the right property, at the right time, and in the right neighborhood for the right price is crucial. When these factors come together, you’re setting yourself up for success. You need to ask yourself, “Why am I buying this property?” and “Will it help me reach my goal? “and “What is my exit strategy?” Knowing how and when you’re going to sell the property is one thing many investors forget.

I Want That One, Oh And That One

Easy there, tiger. Forcing growth can jeopardize your whole portfolio. Buying up as many properties as you can not make you a real estate mogul. Indeed, buying one house will not make you rich, but following the strategies of the tycoon you saw on a late-night infomercial will only lead to disappointment. Taking on too much risk by spreading yourself too thin can produce serious cash flow problems. Leveraging your investments is a good idea. Not having enough money to make mortgage payments, property taxes or maintain the properties you already own is a disaster waiting to happen. Will you be able to keep up with your finances if you get a vacancy or two?

I’m A Natural

Stumbling into a success by getting lucky on your first deal is one of the worst things that can happen to you. It can give you false expectations about how “easy this real estate stuff” is. Keep in mind, when the real estate market is good, everyone is making money. The true test of a successful investor is surviving the market when it heads south. If your first deal was successful, great, enjoy it. But understand that you have been in the right place at the right time when the planets aligned themselves for you. Being cocky can lead to reckless decision making.

Don’t Quit Your Day Job

New investors expect to see grand results too quickly. Without a lot of patience and a tolerance for frustration, too many investors give up get out too early. It takes time to build a sustainable real estate business. Getting discouraged can force you to make bad decisions and bankrupting your new venture. Owning one or two single-family houses as a DIY landlord is not going to change your world all that much, but it’s a start.

What’s My Exit Strategy?

There will come a time when you want to liquidate your assets. Having an idea of how long you plan on holding your property is just as important as buying right. Do you have a 5yr, 10yr, or 20yr strategy? This is where knowing your market and its growth potential is vital. Purchasing a house in a developed, growing neighborhood is different, then buying an old farmhouse on five acres, or setting your sights on inner-city properties. Having a defined exit strategy will also help you to stay focused on the long-term when the inevitable short-term challenges happen.

The moral here is to go slow and steadily build your business. Set goals for yourself and put a plan in place that will allow you to reach it. As you acquire more properties, things will get easier as you understand the market and your own capabilities. Understand that the more properties you purchase, the harder it will get to manage things like a DIY landlord. To maximize your potential, eventually, you’ll want to consider hiring a management company so you can focus on growth instead of day-to-day operations.

Posted in: 1. Property Owner Blog Posts, Investing Strategy

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Comments:

  1. Well covered points for property investors. These reasons are really matter. Thank you for sharing.

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