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I’ve said it once and I’ll say it again: you have to know your numbers to be successful in this business. Here are the 12 most common mistakes I see investors make when beginning to analyze a deal:
- Taking too long to get to the deal itself; they’re usually too afraid to “pull the trigger”. Learn how to do the numbers quickly so you don’t lose deals to time.
- After talking with the seller, you don’t double-check the numbers they give you for any potential rehab. Most sellers have good intentions, but each part of a deal is subjective to the respecting party. Always check the numbers.
- Don’t do the math using a pencil. If you’re working the numbers and think it’s a good idea to fudge the numbers, it’ll be your own money you flush down the drain. You have to be a straight-shooter every time.
- Never overestimate a property’s rental potential. There are great websites, including RentoMeter.com, where you can check the local rents. Another great option is to call local property managers and ask them what they would set rent at for that particular size of unit in that area.
- Don’t overestimate the “as-is” value of the property. This is the value of the property today in its current condition, and many investors estimate higher than the market actually calls for.
- Don’t get “bogged down” in the process. Look at the property and analyze it quickly so you know exactly what path you’re taking with that deal.
- Why is the seller selling that property? You need to know what they’re going to use the money for and if they’re truly motivated.
- You need to understand what equity is available in the property.
- Underestimating the time it takes to purchase, renovate, and either sell or rent out the property.
- Don’t skip analyzing the deal just to throw cash at it. What’s the point of throwing cash if you don’t understand the deal as a whole?
- Hiding behind the analysis and become afraid of pulling the trigger and taking action.
- You don’t know how to negotiate a good deal or how to communicate effectively with the seller.
Don’t forget to visit us at LarryHarbolt.com for all your real estate investing education needs.
Good Luck and Happy Investing!