The Top 5 Mistakes I Made When Investing In Real Estate

Knowing what to do when engaging in any new entrepreneurial venture is very beneficial, especially as it relates to real estate.

Real estate investing is similar to operating any other successful business. . 

It would help knowing why you are doing it – this is crucial knowledge; however, optimum success is not knowledge-driven but wisdom driven.

It is sheer wisdom to know what not to do. 

When becoming a real estate investor, knowing the mistakes and pitfalls of the business is more crucial than detailed knowledge of necessary tasks. 

Focusing on your vision, setting solid goals, and scripting a detailed business plan, and then knowing what not to do empowers a balanced approach. It’s also the strategy of sober-minded investors who maximize profits on every deal.

Glenn Schworm, a knowledgeable and wise real estate investor, has compiled a “Do Not” list. Let’s look closer at his inverted list of mistakes we avoid. 

Beginning with the least costly to the most expensive, Glenn suggests new investors avoid:

1. Delaying renovation of the property
2. Doing the renovation yourself
3. Forgoing the creation of a Scope of Work
4. Lackadaisical Management of Renovation
5.Paying Too Much for the property

DELAYING RENOVATION IS A COSTLY MISTAKE

Delaying renovation is a mistake many new investors make, and it is a costly one. When you close on the property, renovations should begin as soon as the ink dries.In fact, you should have a plan from A-Z prior to closing.  

Afterward, you must maximize every minute and get that property on the market as quickly as possible.

Delays are costly because you may have holding costs associated with the property. 

Also, the market conditions may change, and what was profitable a month ago will be unprofitable in another 60 days. 

Labor markets shift, too, and the costs of contractors and subcontractors could shrink your profit margin – even worse, these expenses could evaporate your profit altogether. 

So, do not delay. Begin renovations immediately upon signing the deal at closing.

SHOULD YOU DO THE RENOVATIONS YOURSELF?

The answer to the intriguing question of doing your own renovations is sometimes too enticing for new real estate entrepreneurs to escape. Based on Glenn and Amber Schworm’s real estate investment strategy, the answer to this question is unequivocally not.

Do-it-yourselfers look good on television, but you should be mindful that they are paid a salary from the network – you are not. 

As a real estate investor, you are not a contractor, a subcontractor, a plumber, an electrician, or a concrete specialist. You are an investor. Therefore, your time is better spent investing.

Real estate investors work with an extensive network of contractors and sign contracts with these people to do the scope of work outlined. 

On the other hand, real estate investors spend their time hunting for deals.  

GOOD REAL ESTATE INVESTORS ALWAYS OUTLINE THEIR SCOPE OF WORK

As referenced earlier, a scope of work must be prepared and adhered to if you expect to maximize time and profit as a real estate investor. 

Specifically, a scope of work is a detailed plan of the entire renovation. To say it is specific is an understatement. 

It is the roadmap from beginning to end as to what should be done with the home to make it marketable and profitable. Your real estate roadmap should cover everything from A-Z.

Experienced contractors demand a scope of work from real estate investors. There are many who will not take on a job without a detailed scope of work – this eliminates unwanted problems.

Create positive outcomes by outline your scope of work for each property prior to closing. 

 

In addition to creating expectations, the scope of work will also enable contractors to maximize their time, resources, and profit. 

A scope of work tells them what you aim to accomplish. It also explains how the evaluation of the property will no doubt result in a negotiation of the scope of work. 

Sometimes contractors know more about a structure and what is best that will reap you the profit margin you desire. Be flexible.

When deciding if you will purchase a property, complete a general scope of work and ensure your renovation estimate is within an acceptable margin of error.

Following these guidelines when outline your scope of work will equip you with the tools needed to forgo compromising your profit margin.  

LACKADAISICAL MANAGEMENT OF RENOVATION

No matter how great your contractor is, it would be best if you managed your renovation daily. Contractors tend to slow down when no one is watching. 

Lunch breaks tend to extend, and start times get pushed back an hour or more. Do you want to make that profit of $30k, $40k, or more? 

Profit margins are determined by your ability and willingness to manage your renovation like a boss.

Bosses watch every detail. 

They ensure things are progressing according to plan, that is based on the scope of work. 

If you want your property on the market within 30 – 90 days, you better manage the project like a boss. Make sure it gets done.

AVOID PAYING TOO MUCH FOR A HOUSE

Yikes! Paying too much for a property can evolve into the makings of a horror story. Savvy real estate investors will tell you that you make your money at purchase, not the resale. 

These investors are 100% accurate. 

Real estate investors do not deviate much from the secret code – MAO, which is an acronym for Maximum Allowable Offer. 

If you exceed the MAO, you lose, and the loss can be catastrophic. Therefore, negotiate hard but fairly. Do not become emotionally tied to a house. You do not live there, nor will you. 

The house is not for you but for someone else who will benefit from your hard work and negotiation skills. 

Remember, you must do good business, which is profitable. Investing is not an act of charity – it’s about profit margins, gains, and building wealth. 

It’s building our economy and restoring quality communities in city by city. So, do not overpay for the property.

WHAT ABOUT YOU?

Glenn Schworm details these pitfalls simply because he is a savvy real estate investor. Are you doing the same or are there some steps you still need to learn to maximize your profit? 

At what stage are you in the process of real estate investing; are you a novice, knowledgeable, or wise? 

Visit www.HomeFlippingWorkshop.com today, and learn how to avoid making unnecessary mistakes. You will need a strong network of investors and detailed training to succeed as a savvy real estate investor – get connected today.