But of course, that isn't going to make you rich! How many deals does it take to kill a Real Estate Investor? Just one.
One mistake can wipe you out of this business.
I've identified not one, but seven of the deadliest mistakes a real estate investor can make.
Any one of these mistakes can seriously kill your success as a Real Estate Investor.
The first mistake is..
The "Gotta Get My First Deal Syndrome" It's that pressure gnawing at you to get that first deal! It makes you buy a property that doesn't meet your business goals and ends up sucking money from your pockets! You've got a good bit of information under your belt.
Maybe you've gone to a seminar or two, watched some webinars or read some books.
You feel you're ready.
You're looking and looking for that home run deal but can't find it.
You've got leads coming in that you're not sure what to do with so you pass them by.
Finally, after months of not doing a deal, your spouse and friends asking you how many houses you've bought, you pull the trigger on a nice single-family home! Whew - you've got one! Now what? What's your exit strategy? Are you wholesaling it? Rehabbing? Holding and renting? Lease option? How are you going to cover the "monthly nut" - those expenses that are there every month? Will it cashflow if you decide to hold and rent? How much will repairs cost? How long will they take? So many questions to answer..
before you pull the trigger on a deal.
To avoid the "Gotta Get My First Deal Syndrome", you need to start with the end in mind.
I know it's a cliché, but its true.
You have to run the numbers to determine what your exit strategy will be.
Figure out the After Repair Value (ARV), the repair costs (over estimate those numbers!!!) and then determine your Maximum Allowable Offer (MAO).
This will give you the possible exit strategies.
If you're wholesaling, don't forget to include your investor's profit as well as your commission.
You'll also need to keep your MAO no higher than 65% of the ARV.
If you're holding and renting, what are the local rental rates? How long will it take to find a tenant? What are the holding costs? Add these numbers to help determine in this is a possibility.
If you're planning on lease optioning the property you need to determine the minimum amount of backend profit that works for your business.
Don't forget about the terms.
While they're negotiable, you need them to work for your business.
The best way to avoid the deadly mistake of "Gotta Get My First Deal Syndrome", you need to start with the end in mind.
Determine your exit strategy and your maximum allowable offer.
This will tell you whether or not the deal is a good one! If it is, pull the trigger and follow your plan.
If not, move on..
there's plenty more deals out there! There are six more deadly mistakes I've identified, but those are for a different day! Stay tuned and happy investing!