The fastest way to lose money in real estate investing

What is the fastest way to lose money in real estate investing? Paying too much for a property? Select bad tenants? Take Adjustable Rate Mortgages? It is none of these. But all this guesswork can result from not knowing the fastest way to lose money on real estate investments.

Let’s examine the steps a typical new real estate investor can take to start a business.

1. The new investor hires a real estate agent to find him a good investment property. There are good agents that can really help a new investor, but not all of them are. The agent in this example offloads a house to the new investor that has been on the market for a long time. The new investor isn’t enamored with the location, it seems like a tough area, but he likes the fact that it’s a fixer-upper area, and buys the house.

2. Since the new investor is not handy with tools, he pays professionals to paint, landscape, and repair the house. It turns out to be expensive, but the house now looks good.

3. The new investor is not a people person and believes that tenants can take advantage of him, so he hires a management company. He assumes the company knows what it’s doing, so he rarely stops by to check on his new rental property. Later, the new investor discovers that he is not making any money on his property. The house is difficult to rent due to the location. And he discovers that the management company has been doing unnecessary repairs.

The new investor gets discouraged and decides to cut his losses by selling his house for less than what he invested in it. He vows never to watch another Carleton Sheets infomercial again.

What went wrong?

The critical mistake was that the new investor trusted “experts” to do everything for him instead of learning how to do things himself.

The key is not to trust so-called real estate professionals. The best thing for you in the long run is to learn to do all of these things yourself, just as you would learn all aspects of any profession or hobby you pursue. It’s harder to do everything yourself, but it’s more financially rewarding, more deeply satisfying, and you’ll learn a wide variety of skills that will serve you for a lifetime.

Embrace a new philosophy that moves you in the direction of becoming independent and self-sufficient.

My philosophy in real estate is that you make money through careful attention to detail, finding homes that need fixing, adding value by fixing them yourself, renting the property, managing tenants, and making repairs when tenants leave.

I believe in holding on to what I have and being self-sufficient. My money is earned in the trenches, doing what many people are unwilling to do, or don’t feel the hard work is worth the rewards.

But let me assure you, it’s worth it.

If you learn:

1) analyze and identify investment properties that have potential,

2) enjoy doing the repairs, and

3) to apply the proven ways of dealing with problem tenants, then you will succeed where many people fail.