Here are some:
Number One: Most people don’t have a plan. Make a self-analysis. To be specific make a “SWOT Analysis”.
Strengths
Weaknesses
Opportunities
Threats
Number Two: Paralysis of Analysis.
Take action! It is the most powerful and important thing that you can do.
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HI! It’s Lou Brown. One of the things people often ask me is what are the 10 mistakes that real estate investors make? And, you know, after being in this business for over 40 years and being a trainer since 1987, I have learned a lot about, what people do wrong and what people do right? And one of the main things to begin with, and I’m going to give you 10 of these.
The main thing is, to do an analysis of yourself. Most people have not done a self analysis and do not have a plan. So my advice is have a plan and start with a self analysis. I call it a SWOT analysis, strengths, weaknesses, opportunities, and threats, that you have that would take you out of the game. So it’s important to look at yourself first, before you look at what’s missing and being able to fill what’s missing.
Having a plan is all related to, what do you want to accomplish as part of this business? Do you want to just have something that gives you a hunk of money right now, or maybe an ongoing hunks of money, sometimes chunks of money? But the problem is, that there’s not a residual income to that. So, I recommend, having a residual income business, one that pays you not only today, but pays you forever. Ultimately, what you might have on your plan is a retirement plan. And that means a business that produces an income for you so that you can be in a position to retire. A lot of people don’t think that way, they think I’m going to make this money, and then I’m going to make that money. I’m going to make that money and that’s not good enough. So, that is my advice for you on, one of the biggest mistakes that people make is not having a plan.
Number two is paralysis of analysis. So of course, all of us have fear when we’re first getting into something and we’re concerned that we’re going to make a mistake and that might, that mistake could take us out of the game. And that would be a big mistake, right? But it’s important that you take action. Action is one of the most powerful and important things you can do. For example, when you put a property under contract, you can have an escape clause in there. You can have an inspection period, but if you don’t put it under contract in the first place, guess what? Another enterprising entrepreneur is going to come along and take that deal. And you’re going to say, gee, I missed that deal. Why did you miss that deal? Because you didn’t it under contract, action is the key.
My third one is, getting bogged down. What do I mean? That means that some people say, listen, I’m going to buy this property and I’m going to do this massive renovation. I’m going to do this all myself. And then, I’m going to sell that property. And then, I’m going to go look for another property. And then, I’m going to do that all over again. Well, what you just did is stymie your growth. You held yourself back from where you absolutely could be. Here’s why, building a machine is my advice. When you have a machine, that means that you have a consistent flow of leads coming in, that consistent flow of leads can be worked. In some cases, if the lead is not for you, you can sell it to a real estate agent. You can sell it to another investor. Lead generation is the key to your business. It’s the key to your success. Don’t get bogged down, on a single project.
Number four is not having a good team. A team is everything. Those are folks that can take things off your shoulders, that you can rely on, to do a professional job and make sure that things get done. Your job should be to inspect what you expect. Other people are doing the work, you are managing that process. You’re looking at what they’re doing. You’re making sure that it’s being done correctly. However, you are not doing the work, you see, that’s the key to having and creating for yourself. A multimillion dollar business. It’s simply having the right management and managing a right team.
Number five is, not having the right paperwork. Listen, paperwork is critical in this business. This is a detailed business. There’s a lot of money involved and mistakes can be made. Having good paperwork is critical. That means your purchase agreement. That means your sale agreement, which could be two different agreements. That means having a great standard rental agreement loaded with profit centers and protection. That means having a good independent contractor services agreement, that ties down your relationship with your contractor and mistakes that can be made as a result of not having a good contract with them. There’s many different aspects of this business that can be solved and resolved simply by having good papers.
Number six is, do your homework. Meaning a lot of investors, mistakes are simply that they didn’t do their homework, before they go to see the property. And it’s so interesting that people say I’m going to look at a house, why are you going to look at a house? Well, I’m going to go see the house. Why are you going to see the house? Have you done your homework, Is my question. So that means that you’re going to delve into the value of that property. You’re going to know, what the value of that property is, as is as well as fixed up. You’re going to know the history of sales in that area, over the last month, six months, year. You’re going to know if that property in that area is trending up or is it trending down? You want to know about the jobs in that area, are jobs on the upswing, are shopping centers being built, are businesses being built, or are they being torn down and going into disrepair, you need to be aware of the area you’re investing in. Do your homework.
Number seven is, not having a customer. Doesn’t it make sense that if you already had a customer, you could custom buy a property for that customer? Otherwise, know who you are. You are a speculator, you are speculating on, what might happen? In other words, you’re buying that property in that neighborhood. And you’re hoping to find a customer somewhere down the road. I flipped the script and say, let’s find a customer. Then go buy a property. We know exactly what we’re looking for. Number of bedrooms, number of bathrooms, location, and we’ve already got a customer with a nice fat down payment. They can move into that property. Have a customer, is the advice.
Number eight is not being connected to the community. You know, many people come into a community. They begin investing in that community, but yet they don’t really know who the shakers and the movers. They don’t know who the leaders are in that community. And therefore, they could get push back. They could get challenges, simply because they don’t have relationships. It’s a very good thing to be a certified affordable housing provider. And to have relationships within that community, people that know who you are, know what you do, know how you are impacting the community, how you’re changing lives there, that your program. For example, we have a program called The Path to Home Ownership, where we help deserving families, regardless of credit or financial background. To end up with home ownership. That’s a powerful statement in a community because they know that you’re helping the community. You’re not there to hurt the community.
Number nine would be, not finding the seller’s pain. That means that seller is selling for some reason, they may be selling because they’ve got a bad tenant. They may be selling because they need the money for a child going to college. They need maybe selling because they need the money to move into another property. They have motivations on making a decision to sell, it’s your job to discover what those motivations are. Why? Because with your offer, you can identify and show them that with your offer, you are helping to solve their problem, with the sale to you. They are solving the problem that they expose to you. So I have a questionnaire, for example, on our seller questionnaire that discovers exactly what’s going on in those people’s lives, asking the right questions to discover the pain is exactly what you need to do.
Number 10 would be, not having multiple exit strategies. One thing I’ve learned in being in this business for over 40 years is, that market’s change and market’s change, overnight. For example, an employer, a large employer could announce that they are going bankrupt. They’re closing, or they’re moving to another city. All of a sudden, hundreds, thousands of jobs could be lost. An industry changes and is no longer needed. And all of a sudden, many jobs are lost. What are your exit strategies? If something like that were to happen? If they were to cut out the lights, if they were, you are the, on the musical chairs and they pull the chair away and you’re left standing, what are your multiple exit strategies on a single property?
So my friends, these are 10 of the biggest mistakes that I see real estate investors make. And I can assure you, there are many more, the idea is really to have a good coach, a good mentor, somebody that’s going to help you step you through the way. Now, the coach that you want to hire should be somebody that has done millions of dollars of business, not somebody that did a deal. And now they’ve become a coach. No, and that does exist out there in the world. Believe it or not. Now you want a good coach, a good mentor. Somebody that’s been there, done that, knows exactly what to do in that situation and someone they can steer you away from mistakes that can be made. I would love to apply for the job. That’s one of the things I love to do is work with real estate investors and help them to build multimillion dollar businesses, essentially to duplicate the business that we have and our business is an up and running business. And we have folks that, not only rent from us, but rent to own, owner finance, cash sale, we have something called The Path to Home Ownership. I’d love to expose that to you, love for you to come to my next workshop that I’ve got coming up. Lot of information that I give. A lot of great advice. So, I’m looking forward to seeing you there soon. Yeah, baby!
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