4 Pitfalls of New Investors (And how to overcome them)
Regardless of how many units you have, one or one thousand, there is one quality all multifamily investors have in common. There was a point when we had no deals and knew nothing. If we all start at this same point, what separates the unsuccessful investors from those who go on to make millions? Well, there are a few common mistakes made by investors that you should avoid. If you apply these principles you will find out success does not happen by chance but instead through intentional and consistent actions.
Trying to do it all
Multi-tasking is a skill many people pride themselves on and others feel they develop out of necessity. You may be an active investor or choose real estate investing because you want to stay in control. This may be a challenging mindset to shift. Out of ambition, you are the marketer, the fundraiser, the book keeper, the maintenance person, the lawyer, the web designer, the general contractor and the list can go on. This is a recipe for sleepless nights and burnout.
In Gary Keller’s book, The One Thing, he discourages multi-tasking and advises that when you say Yes to something you also say No to something. By focusing on and developing one skill you will reach proficiency faster and be more efficient.
The reason multifamily syndications are able to succeed is the sharing of resources and responsibilities. Syndications are the epitome of team work. They bring together like-minded investors to share resources (knowledge, capital) to make a mutually profitable investment. When you say yes to multifamily syndication you will have to say no to trying to do it all by yourself.
”Multifamily investing brings people together"
Solution: Multi-family brings people together. Hire employees or find joint venture partners by joining REIAs, networking groups, investment clubs , online forums, real estate investing conferences and by letting your friends and family know what you are working on/ your goals. Have an abundant mindset and realize that taking a smaller part of a deal upfront and relinquishing some control will lead to a larger number of deals in the long run
Thinking it will be easy
The Agave ocahui “Century Plant” is a succulent plant that can grow for over 2 decades before it first blooms, flowering up to 30 feet tall with yellow blossoms. This is not an overnight get rich quick business. Real estate investing is simple in theory but it takes time to learn and to build a portfolio especially if you want to retire with RE. It may not take you 2 decades to reach your 30-foot goal but you have to be ready to dig in when things seem to be progressing slowly or become more challenging than initially anticipated.
Raising capital, finding deals, managing multifamily, it all takes time and effort. Some people are lucky and succeed right off the bat. But even these people encounter Murphy’s Law as sooner or later something goes wrong. Residents may not pay, property managers may not perform, or mother nature may get in the way.
Solution: It wont be easy. Keep your self motivated by listening to motivational content daily, talk with other experienced investors not only for motivation but to also learn from their mistakes, find out the stories of successful investors through podcasts, books or videos. Reframe every challenging situation by asking What lesson did I learn so that I can do better next time?
Getting emotionally attached
Your motive to invest may be altruistic or have strong emotional value such as creating a better future for your family or community. The actual act of investing however has to remain objective. Emotional decisions are not always rational and may defy sound investment principles.
You may walk into a property and based on appearance, location or some other quality, you become emotionally attached. FOMO may set in and you throw all of your criteria or analyses out the window. This may be one of the *worst investing mistakes* you could make.
Solution: Create criteria your investment should meet and stick to them. If you feel a deal is too good for you to walk away or you say you “need” it, have a fresh set of eyes review the numbers as you may be emotionally attached. Have an abundance mindset, real estate investing is here to stay and people will continue to profit and do deals for the foreseeable future, if you miss one deal another will come along.
Waiting too long
Many investors fall victim to the myth of the perfect deal. Let’s break this down. A truly perfect deal is fool proof, with success guaranteed independent of the investor. The reality is that the best deals are the ones that are created. Experience gives you an eye for analyzing and finding opportunity and solutions that have been hiding in plain sight. The catch 22 is you have to do the deal to get the experience. You can only learn so much by reading, listening to podcasts or watching videos. You have to get hands-on experience and the sooner, the better.
Have you ever negotiated with your alarm clock? It’s time to wake up but you say these famous last words “Just 5 more minutes.” How many times has that caused you to be late or miss out on an important opportunity? Many investors are great negotiators, so great they can convince themselves of all the reasons to sit on the sidelines. Either the market is no good, they’re waiting for the elusive perfect deal or they feel they don’t know enough. If you have been waiting take this as your wake-up call. Get up. Don’t negotiate.
Solution: Have an experienced set of eyes review your deals, a great way to do this is in an investment club, a mentor or close friend, who will keep you accountable. Fast track your success by partnering up with other investors or joining a coaching program.
So now you know some of the common mistakes made by investors. To better your chances of becoming a better multi-family investor here are the common real estate investment blunders to avoid:
Trying to do it all
Thinking it will be easy
Getting emotionally attached
Waiting too long
Implement the solutions mentioned above and you will be in a better position to overcome these pitfalls or even avoid them all together as you begin your real estate investment journey!
Interested in learning more about investing in multifamily apartments? Give us a call or check out some of the other free resources we have available at Investupmultifamily.com.