7 BIGGEST Real Estate MISTAKES Every Beginner Makes!

All right, in today's episode, we're diving into the nightmares of real estate investments. From unexpected expenses to deals gone wrong. Get ready to hear the horror stories that could have been avoided with a little more knowledge. Lack of research. This is number one. And because this is where you start, y. You know when you get an address, yeah, you can drive by the address, but it's all about the research. It's about the comps, it's about the location, it's about the condition. Those are the three biggest mistakes. I don't want to go too far into these three things, but you can miss just one little thing in the comps that'll just completely make the deal go wrong. Yeah, you can miss one little thing about the location. Like, everybody knows what's going on at this location, but when you drive by at noon, you don't know it. And then the condition of the property, there could be things behind the walls. There could be lots of things, but these are the three big, biggest mistakes. And this is. This all has to do with mistake number one of lack of research. One of the. I do want to give an example. We did have a package of properties and they were all lined up right next to each other. And when you're looking on the map, if you don't actually go to this property, if you look at it on the map, it looks like there's a property, there's a street and there's a neighborhood right across the street. And the properties are all fairly close to the age, same age. But when you actually go to the property, you, the subject property is actually up elevated on this hill and the other properties across the street are way further down, like down in this little valley. And the properties aren't even remotely comparable. But when you look at it on a two dimensional map, they're like, oh, look, these properties are right across the street. Let's use these as comps.

Yep. Stake number two is ignoring due diligence. So the significance of due diligence on a property is really a lot of what just Flip just said. Because if you make a bad buy, that could negate all the other deals that you did a really great job on. Right. Because we've seen such significant losses that let's just say that your Target profit is $20,000 per property and you lose $60,000 on a property, suddenly these other properties that you actually did, well, it doesn't even matter because the one big catastrophic mistake that just wiped out everything else out. So I think that that's really, really important. That you tie in the research with the due diligence. So it's really important that you have somebody go and see the property in person. And it's even better if that person has experience in real estate and knows the things that you're going to look for. If they don't, then giving them a checklist of things. And this is one of the things to write down on your list. Right. And then so that checklist, if you're going to see a property in person and you don't have a checklist, another idea would be to bring an inspect you bring a realtor with you, bring some contractors with you.

Mistake number three, overlooking hidden costs. Now this is very important. These are more like forgotten costs. You know, utilities, taxes, general maintenance, like lawn and snow removal. Talk about other side of the country. I heard of a guy, he was actually in Phoenix and he was wholesaling a deal and it was in Wisconsin and he put into place snow removal. Well, I think anyone knowing it's Wisconsin would put snow removal. It's just the level of snow removal that he didn't put in and it wiped him out. So these are things that can really kill you.

Alright, mistake number four is emotional decision making. So this is when you make an emotional decision. This is really the example of the house is pretty versus do the numbers work. And I know that females get the bad rap here most of the time to go, oh, that house is pretty. I really want that. But men do it too. So I'm speaking to everybody here.

I would think probably with real estate, men do it more than women. I'm just saying.

But you don't want to go for the pretty houses. You know, sometimes, you know, the ugliest house out there could be the one that it's actually going to be the home run. So you really want to make sure that you're taking into consideration everything that Flip has talked about when it comes to evaluating deals and doing the right research. The location, the comps, the condition of the property, making sure you really know your numbers, because your numbers is what matters.

Mistake number five, poor financing choices. So number one, you want to factor into the cost. Private money, loan, utility, taxes, permits, general maintenance. You need to think about everything else, you know, that goes into the property. Anything possible that you could possibly be spending money on this property, you need to have it and you know, in your numbers.

Yeah.

To make sure that you're still. Because your cash flow could be negative very quickly.

Quickly, yes.

If you don't like, oh crap, I forgot that number well, there it goes. There. There goes my cash flow.

All right, Mistake number six is timing the market. Gosh, just don't do this. None of us have a crystal ball. It doesn't matter how experienced you are in real estate. None of us have a crystal ball. We do not know what's going to happen. So here we are in 2024, and I was reading some articles and just seeing what everybody's saying about the market and what's going on. What's going on with inflation? What's going on with interest rates? What's the forecast for 2024 and 2025? Where do they think the interest rates are going to go? Is there going to be a market housing crash? And it's just hilarious to read all the different opinions. You got the doomsday people who are just like, the market's going to crash. You've got the people who are just really studying kind of what's going on on a macro level. And then you got people a little bit, maybe more like us, who are just like, you know, I'm going to take in all this information, but I don't have a crystal ball. And I'm going to make sure that I'm just really smart in that I'm analyzing every single deal, not being emotional about it, making sure that the numbers work, doing my proper due diligence up front, and, you know, getting the right loan. Like, you're taking all of these mistakes and you're applying those lessons learned.

All right, Mistake number seven, inadequate exit strategies. This is again, very important. Now, what this is not saying is to have one exit strategy going into a house, you should have multiple. And don't even try to pinpoint one on it. Just make sure, okay, I can do one of five things on this property when it's done. That's all you need. You don't need to say, oh, I'm going to this. I'm going to do this on this property. And force, I believe that's called forcing the square peg in their own hole. So, but making sure, you know, clear multiple exit strategies, it's critical. You cannot predict the time of the markets. You know, you have no idea. You know, you need to be able to pivot. Even in real estate, you know, you need to be able to pivot from one direction to the other direction as quick as possible. Because again, this is all about, you're going to run out of money if you can't.

Yes.

You know, you're going to be sitting there going, nope, I'm going to do this whether you like it or not, you know, well, guess what, you're going to run out of money. So just, just letting you know, heard from somebody else. So make sure you do that. One example, though, and this is true, we actually, you know, this is something that we've not done. Airbnb or short term rentals. Yeah, we've not done that. All right. I have nothing against them. There's people that are just wildly successful at doing it and more power to them. That's right. Have at it. But, you know, there could be, we know of one time that somebody had bought a property, they were going to do an Airbnb on the property. And as they were doing it, the city regulations changed and they were, because they didn't get in at a certain time or whatever, there was a certain reason behind it. But the property that they had was no longer able to be an Airbnb. They couldn't do a short term rental with the property. And so they had to do long term rentals or normal rentals. And the property didn't ride out. You know, it didn't, it didn't work anymore. They were expecting to get 3, $400 a night on this property as an Airbnb. Now they couldn't even get, you know, double that for a month or whatever it was for cash flow. And so it was just, there's got to know. You got to, got to be able to pivot. You got to be able to figure things out and be able to know how to solve that problem if this happens. Oh, no worries. I can do X. You need to be able to pivot and be able to act fast and not, it's, again, not emotional. No, I really wanted this property to be a rental property. No, you don't, don't, don't even, don't be emotional about it. Just do it. It's all about the numbers.

Yeah, absolutely. We hope that these seven mistakes were helpful to you. If you do have questions or if you just like to learn more about real estate investing in general, or if you'd like to learn about who we are, just book a call with us at chatwithfreedom.com you can scroll down and be able to get on jump on the calendar of anybody on our investor relations team. It's not a call that sells you anything. That first call is a get to know you call. It's a no obligation. Hey, who are you? What would you like to do? How can we help you? And it's really an information gathering and exchange phone call. Where you can learn more about us and we can learn more about you.

Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions and information on the show are not guaranteed. All investment strategies have the potential for profit or loss.