4 Common Pitfalls Investors Need to Avoid in Order to Succeed in Real Estate – Part 1
If you’re ready to become a real estate investor, and recognize that the market is “ripe” for the pickings, then you’re probably an astute individual and that kind of thinking will help breed investment success. You’re nearly halfway there…but regardless of the success stories you see on late night TV, there’s a considerable amount of many more early-stage entrepreneurs who were eager to become a real estate investor, only to have failed in the process.
Which is why understanding some of the most commonplace reasons as to why a real estate investor fails to succeed, is as important – if not MORE important – than learning from other investing success stories. That makes sense because you’ll never find these horror stories of trial and failure on late night infomercials…nor will you find it on any weekly house flipping or renovation program.
The fact is, that individuals starting out to become a real estate investor will encounter tough competition, are subject to market conditions that can shift in a period of months (not years), and have a plethora of real estate investor club options and real estate books and real estate mentoring programs to choose from.
“Quite simply, finding the right direction and figuring out how to become a real estate investor is overwhelming.”
Knowing the common pitfalls of mistakes that can be made by first-timer’s, and learning how to avoid them is an absolutely essential part of growing your investment business. Consider these four coming reasons why real estate entrepreneurs fail to thrive, and make sure that you avoid them:
1) Problems paying the mortgage.
According to The Wall Street Journal Real Estate Journal, a recent survey conducted by the Mortgage Bankers Association found an alarming new trend.
Essentially, the survey indicated that mortgages on properties which are not lived in by the owner account for a large number of defaults. That same survey also found that investment homes account for 21% to 32% of all mortgage defaults in Florida, Arizona, California, and Nevada. Both prime and subprime loans were considered in the survey. What makes this survey unsettling is that these four states were among the most rapidly growing states and quite the darlings of investors and speculators during the housing boom. Many real estate entrepreneurs rushed to these states wanting to flip them and manufacture a healthy profit.
However, now that home prices have fallen, investors are not able to realize a profit and many are simply defaulting on their mortgages.
Given today’s statistics, it is expected that over the next year or two, these types of foreclosures will greatly increase throughout these states. The current problem reflects a very common trend: real estate entrepreneurs enter the market before they are ready. If you seriously cannot think that you can pay off the mortgage and don’t have a backup plan, you probably shouldn’t be investing, or you should be waiting for an opportunity that arises that is more certain.
Bottom line – Speculating on real estate hoping that it will increase is not an effective strategy.
You need to make sure that your investment business has generated profits in its bank account before you start a “buy-hold-flip” investing strategy, so that when it comes time to progress to this level, you have sufficient funds to pay the mortgage and other costs…and the best way to do this is to research your opportunities carefully and select only those deals that have a very good chance of making a profit.
About the Author
Brad Wozny is a real estate investing expert. Let Brad show you how to connect with eager real estate investor buyers & sellers of investment properties. Access private money & creative lending resources. Claim your FREE Strategic Investment Manifesto and Download your 2 FREE real estate investing mp3 case studies.
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