#1 Mistake to Avoid in Real Estate Investing
Updated: Feb 26
Most people would love to #MakeMoneyAtHome through #PassiveIncome, right? But would you also prefer to #AvoidMakingMistakes along the way? That's why I'm here to help! I am a #StayAtHomeMom who is making $500-$1,000 per month and spending less than 5 hours per week managing our properties. I'm starting this blog series by sharing with you how to avoid the #BiggestMistake people make in #RealEstateInvesting. I believe real estate is the #BestInvestment that you can make to earn money passively (meaning you make money without going to a job, making a sale or typing a blog). Passive income means you can earn money while you are on vacation, watching TV or taking a walk around the block. Which is pretty amazing! By the way, we didn't put money down out of our own pockets to buy our properties and I'll talk more about that in another post and our upcoming eBook.
When my husband and I were first married (almost 20 years ago) we read an excellent book by Robert Kiyosaki called Rich Dad Poor Dad. In his series of books and other educational materials, Mr. Kiyosaki teaches you the lessons that his friend's father, who was rich, taught him. The basic idea is that rich people don't work for money and they invest in things that will pay them passive income. You can check out Kiyosaki's book and other investing books through the links to Amazon below. Clicking these links costs you nothing extra but if you purchase a book it might give us a commission to help us keep bringing you great investment blogs. Thanks! Also, sometimes on a mobile device the links won't be clickable but you can find the same items on our shopping page instead. We also have recommendations for 10 Essential Items for Family Road Trips on the shopping page: https://www.destinationfamilies.com/shop
I want to tell you about the biggest mistake I see many real estate investors making. My husband and I are #PartTimeInvestors and we do it as a way to add money to our #RetirementIncome so we're not concerned with what will earn the biggest profit right away. Although money right away is always nice, right? We are investing in the future so we're looking at what properties will earn money in the long-run. However, our properties have all cash flowed (earned money) right away because that would be silly to buy something that didn't earn anything. When we buy a property we look for investments that are self-sufficient and allow us to be mostly hands-off. I'm considering writing a blog about how to be a #PartTimeInvestor and still earn money. Please let me know in the comments if that topic would be valuable to you. My husband and I know that finding new renters when people move out, maintenance issues, and renters who don't pay are all #TimeWasters and #MoneyDrainers and we try to avoid all of those things. So what's the number one mistake that most people make that leads to higher turnover rates, more maintenance issues, and irresponsible renters?
The #1 mistake that many investors make is buying junk
So my best advice as an investor would be to not buy junk! The old saying about you get what you pay for can be applied here. You might have to spend a little more to get a nicer property but you will reap the benefits of it and I don't think you will regret it. It's very simple to avoid junk properties if you remember this: you should never buy something you would not consider living in yourself. Our first criteria when we look for a property to purchase is that if we wouldn't feel comfortable living there we won't buy it. We have purchased rental properties that are too small for our family of six so we wouldn't want to live in them because of the size. But all of our properties are nice enough that we would be willing to live in them when our kids move away. We would also feel comfortable having our children live in these properties when they are old enough. We don't buy run-down apartment buildings, we don't buy fixer-uppers and we don't buy places we would not live in. You can make money on a fixer-upper but wouldn't it be better to start earning money right away instead of an investment costing money upfront? I think not buying junk is pretty simple advice and it makes sense but I am always surprised at how most investors don't think about it and get themselves into big trouble with junk properties. I think lots of investors get too caught up in the ROI number crunching and it clouds their thinking.
What's the ROI thinking trap?
If you read most Real Estate investment books you will see a lot of talk about ROI. This stands for return on investment and it's a way to measure the efficiency of investing. The formula for ROI is (Gain of Investment - Cost of Investment)/Cost of Investment. Evaluating ROI is a great idea and you should totally do it. I'm just suggesting that you don't buy only based on ROI. Because the problem with only purchasing investments by the ROI numbers is that the unseen costs are the things that get you. What is the cost of maintenance on a trashy piece of property? What is the cost for your time spent interviewing new tenants when the property turns over 3 times in one year because renters didn't pay? How much time will you waste when a renter goes to jail or skips town and you have to move all of their stuff out, clean the place, replace the carpet and patch hundreds of holes in the walls? I'm being totally serious here, I know a property owner who had a tenant go to jail. Once again, my advice is don't buy junk!
Don't Buy Junk! Now what else do you need to know?
This is an excellent question! I have several other real estate investment blogs in mind. "A Great Way to Find Great Renters", "Taking the Plunge and Acquiring Your First Property" and "How to be a Part-time Investor and Still Make Money" are among my blog ideas. What would you like to know next? Leave a comment below or send me a message by going to the About Us page where you can find our email address. If I use your idea I may give you a shout out (with your permission) in my next post. You can sign up for my email list by putting in your info below and you'll be notified when I publish another blog. You can also click below to hear the story about how I got started in real estate investing as a stay-at-home mom. While you are here at Destination Families you should also check out our travel blogs for #TravelInspiration and lots of #TravelTips for planning your #BestVacationsEver with your family. Do you have a question? You can leave a comment or question below or go to our discussions tab and post a question in the real estate section. We look forward to hearing from you!
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Let me know your thoughts on what you would like to learn in my upcoming eBook. Just leave a comment below. What are the things holding you back from investing in real estate? Perhaps you want to know how to qualify for an investment loan or maybe you are interested in how to pre-qualify your tenants and what to include in your lease agreement.
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