5 Mistakes Successful REIs Don't Make

Real estate investing has always been a go-to vehicle for generating and maintaining cash flow. However, you can make mistakes that cost you time and money, so keep reading. We’ve all experienced or heard of terrible deals in the real estate market. Did the investor drop the ball along the way or were these deals terrible to begin with? Join me, Jose DelGado as I uncover "5 Mistakes Successful Real Estate Investors Don't Make."

The reality is, the most successful real estate investors I've had the honor of learning from and working with, are NOT waiting for their next great deal to come to them. Instead, they actively seek a deal worthy of their time and money while learning from these 5 mistakes. Let's get straight to it.

Mistake #1: Working Alone

It’s been said that your network is your net worth, I agree. Working alone isolates you from other investors and the strategies they are utilizing to maximize their success. In a world of people and networking it’s nonplus to be a loner. The most successful real estate investors aren’t succeeding alone. They will tell you that it’s simply not scalable and to build teams to execute and delegate responsibilities. For example: one team sources and secures deals and another team handles property management and development. They will also tell you if you value your time, you’ll need to build relationships that get you where you want to go faster. Are you eating at the "REI restaurant" alone or with seasoned colleagues? Don’t be silly.

Mistake #2: Self-Sabatoge

Straight cut, if you have to underestimate repair costs, overvalue the retail price, or downplay the negative qualities of a property, it's a bad deal. A disciplined investor knows where to put his money and will never consciously allow him or herself to make a poor investment.

Mistake #3: Failure To Learn From Superiors

Amateurs and experts alike can always learn from investors who are absolutely crushing it. Learn from the giants in REI, they have a better vantage point and can demonstrate your true potential. Take courage and learn new skills, only the strong will thrive. Allow yourself to make at least 10 times more in the next 10 years than you did in the past 5 years. Your vision determines whether you have a small portfolio of multi-families or you are managing millions of dollars in a real estate syndicate. Why kick rocks when you can flip blocks? Come on guys.

Mistake #4: Thinking Small & Acting Big

Akin to Mistake #3, instead of exhausting yourself on a small project, work efficiently and channel your energy into a big project with others. If you haven't already, consider this your permission to set ambitious goals that are executed with precision and sustainability. Investors who think big and act economically excel year after year no matter how tough the market is, here’s why.

Contrary to the opinions of many, smaller projects are not as efficient as bigger projects. Here is a typical analysis of both: With three-duplex properties, it only takes two vacancies to lose a third of cash inflow. With one twenty-four-unit apartment building, two vacancies cost you less than a tenth of cash inflow. If your cash flow is in jeopardy so easily your portfolio is as well. Additionally, the cost to maintain and manage fewer units that are scattered throughout town is proportionately more expensive than maintaining and managing an economy of units in a single location. Nevertheless, smaller operations limit room for other investors while diminishing the margin of error and procuring a lower NOI than a high-yielding operation.

I much rather own a third of a twenty-four-unit apartment building than three duplexes, wouldn’t you? I am currently constructing my first apartment building acquisition having put fear aside and getting out of my (own) way.

Mistake #5: Neglecting the Legal Component

Last but not least, do not neglect the legal component of REI. This doesn’t mean enrolling at Harvard Law School however, it does mean you should have a basic understanding so you can ask the right questions to your legal counsel. This comes in handy especially when entering or exiting investments and creating or maintaining corporate entities.

It's straightforward, are you the investor who repeats the same mistakes over and over again while blaming other people and circumstances for your failures? Or are you the investor who takes responsibility, unlocking your full potential in REI? Let's be honest, mistakes happen and are at best learning experiences that lead to our success. Instead of avoiding mistakes entirely, our goal is to learn from them so we can prevent or mitigate the damage. I trust that this article has awakened the confidence in you to take your portfolio to the next level!

Where do you see your portfolio in 2030?

Which mistakes have you experienced along your journey in REI?

What are some other mistakes that I didn't address that we can learn from?

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