1 12 Top Reasons Real Estate Investors Fail Created by: Max Wilson at Max Business Group Investment Strategies Division MaxBusinessGroup.com / There are many reasons investors fail at real estate. I have compiled this report to list of some of the most critical issues that I believe cause investors to fail and fail hard and fast- and many times never recover from their mistakes. I use the term fail here as a situation where someone puts money, time, or effort (or all three) into a property and receives a substantial reduction in estimated profits, no profits, goes negative (in the red), or in the worst of cases the good investment becomes the specific cause for filing bankruptcy. This list has been compiled from: a. literature reviews (form books, tapes, on-line websites, etc) b. research (conducted within and outside our firm) c. interviews (investors, lenders, real estate lawyers, etc.) but most of all from d. our own experiences and those I have had with hundreds and hundreds of other investors. Our unique position of being investors ourselves, real estate strategists, and our long term successes as business owners and consultants has allowed us to create and develop a true systems approach to real estate investing and our research provides us the knowledge to help investors be more successful. Below, I have identified 12 reasons that typically cause real estate investors to fail. Instead of just listing the reasons and leave you scratching your head asking yourself So what? and How can I use this? I have flipped the negative activities (or lack of) into positive activities to better help you take action on our work. Taking action on this list makes it valuable to you and will save you time, help you make more money, and reduce your legal liability now and into the future- our ultimate goal for you. How to use the list: Read over the list and check all those activities you have or do engage in all the time. If you only conduct the activity once in a while, fill in the box only half full or circle it instead. Please be honest with yourself and check only those that apply. The boxes you do fill in are helping you be successful now. They are the things you do naturally. The boxes that you don t check are the GOLD! They represent major opportunities for you to greatly improve the success of your investment business. For some activities, it may be most helpful to find someone to coach, mentor, or guide you to overcome those things that are keeping you from even more successful- those activities you just can t seem to do yourself or don t know how to do. Another way to use the list: If you have a partner that works with you in your investment activities, have them also fill out one for you (as behaviors are observable) and check it against your own list. I guarantee you will both be surprised with the differences. 1.
2 I have taken the time to set the foundation for my business I fully understand my purpose for investing and the goals I need to reach I have taken the time to identify those things I value and have created a business model based on those values and my purpose for investing I have a clear vision for reaching my goal I have a clear plan, or mission, on how I m going to reach my vision I have clearly defined what success is to me and what metrics I will use to measure it I have created and follow a simple, flexible, and easy to execute business plan I make decisions based on sound financial and business principals, strategies, and tactics I am always wearing my business hat and open to all opportunities to build wealth I am committed to being successful at real estate investing in it the long haul I have identified and efficiently use a team of high quality experts I have identified a team of high quality experts and they are on board to help me reach my goals I only use experts that I personally like and I believe like me I take the time to listen and learn from those experts I take action based on what I lean from the experts I do not let nor do I ask the experts to make my decisions for me (What do you think I should do?) I only use licensed contractors that I have seen their work and those that come highly recommended I have taken the time to create specific investment criteria I created and use specific investment criteria to help guarantee my success I used the knowledge of many high quality experts to help me develop my investment criteria I place greater weight on some criteria than others when dealing with unusual projects I hold to the criteria I have set and do not reduce their values I create different criteria for different projects and different areas I modify my criteria only for changing market conditions (economic, social, governmental, etc) I continuously look for opportunities that meet or exceed my investment criteria I do not feel pressured to buy any property because I know another property will be along soon I look for opportunities that can help me maximize my returns with the fewest number of deals I look at the financial analysis first. If the numbers work, only then do I look at the property I buy strategically and do not get emotionally involved in any real estate transaction I create an exit strategies for every project before I decide to buy 2.
3 I am in a continuous learning mode I spend my money buying property not just learning and talking about it I go to every free real estate investment program I can in my area I never let the pressure to sign up today or special price influence my decision to commit I spend time learning from other experts and successful investors as part of my education I take action on things I learn that are highly productive and align with my vision, mission and goals. I am an active member in the largest real estate investment clubs in my area I spend time and enjoy learning but know I don t need to know it all- the reason for experts I continuously strive to understand the market places in which I buy I understand the impact of buyers and sellers markets on maximizing my return on investments I use high quality experts to help me understand the changing market place and its effect on my returns (What is the impact of trying to quickly flip a property in a market with no buyers? What if ) I research rental activity before I buy rental properties in any area I understand the impact of subsidized programs on maximizing my returns I contact the local zoning officer before I place an offer and check zoning and use codes I contact the local tax collector before I place an offer and check current and future tax base I look for opportunities that are on the leading versus lagging stage of an areas market cycle I buy and sell investment properties based on maximizing returns I check with my real estate accountant as to tax laws and tax benefits of a project before I buy I never flip a property to quickly (time to sell set by exit strategy) I buy properties based on my goals, not on zoning or type of property I concentrate on the return I get from the project rather than on tools or techniques I use my time wisely and don t engage in techniques that has me chasing properties I buy For Sale-By-Owner properties only when they can help get me to my goal I buy properties based on the four pillars of building wealth giving greater weight to some pillars over others- based on the property, my required return for that property, and exit strategy of the project I sell properties any time I can maximize my returns by doing so 3.
4 I finance my investments in a way I can control productive return on my investment I am cautious when using other peoples money, especially from hard money lenders I now realize that no money down is very different than no money out of your pocket I only get cash back on properties using recognized legal methods and never enter in contracts that may open the possibility of me being charged with committing state and federal lending or bank fraud (sometimes knowing it to get a better interest rate- I m going to live in the house, and sometimes notgetting cash back money at or after closing not reported on the HUD1 sheet!). I use owner financing only when it is the best lending strategy for the project I contribute to the purchase of every project in a way I can maximize my equity in the property I use hard money when necessary but have a plan to repay in shortest time possible I take on one project at a time I never, never every, lie to myself about the reality of any potential project (flippers read this again!) I have my experts use conservative figures when conducting a financial analysis on a property I use drum buffer rope management to manage quick cash projects I buy for positive cash flow on only those projects where positive cash flow is my goal I realize that there are may investment pathways to building my net worth I am confident that by using high quality experts and research and analysis I minimized my risk I use my active income to generate even more passive income. Will not quit my job because I have been successful in one or two projects. I never over extend myself financially for any one project I use experts to help me find properties with the highest ROI potential based on my buying criteria I review financial analysis on many properties at one time and select those with the most potential I look at the financial analysis of every property before I look at it I have additional analysis run after viewing the property I have additional analysis to help structure the buying strategy I receive daily updates in real time on new properties that have hit the marketplace I review (from the analysis), and balance, ALL four wealth building functions for every property I factor in my time and energy into the cost of the project I factor in my experts fees into the cost of the project I confirm all aspects of every project or rely on hard proof from my experts before moving forward 4.
5 I engage with all tenants in a successful and deliberate way I eliminate troublesome tenants as soon and as respectfully as possible I reward all my tenants in a way they know I value their selection to rent from me I keep my promises to my tenants and deliver earlier than presented on those promises I only use contracts that meet state law requirements (not guru or out of state organization contracts) I only use contract that clearly state what will happen if. and get additional initials on the most important sections showing tenant acceptance of those terms I encourage tenants to call the appropriate person with any problem at the appropriate agreed to time I conduct preventative maintenance on all my properties every six months and use that time to inspect and respond to the tenant if necessary I engage the tenants to make some decisions and selections when updating their property I engage in and manage my real estate portfolio for maximum net worth I manage my real estate portfolio always looking to maximize my returns in the shortest period of time I focus on generating ever increasing passive income versus increasing active income (make more money by working more hours at a second job). I constantly compare my current holdings with other investment opportunities and take action I integrate my real estate investment portfolio into my comprehensive financial portfolio I work with my high quality experts to review my real estate portfolio every six months Please don t hesitate to contact Max at or by to with any questions or need for clarity you might have about any of the activities I presented here. 5.