There are a couple of things that real estate investors do that cause them to not succeed. So, why do they fail? Typically, real estate investors fail for any number of reasons. However, many of them can be narrowed down into just a few categories. If you’re just starting out, you’ll want to avoid falling into the following traps. Some of them are mistakes, and others are mental mindsets. Some are a combination of both.
However, once you’re in the “trap,” you’ll find it will be very difficult to get out of it. Below are the reasons why real estate investors fail. It is shocking how easy these things are to avoid, and yet time and time again, investors make them. You can either make a great amount of money on an opportunity, or you can lose it, and end your career. This information is real. These really are the top reasons that real estate investors don’t make it. So, here they are. They fail because:
They quit too soon
If you quit too soon, you won’t be successful. Many investors start out, they seem to be doing well, then just as things are starting to come together, they give up. They assume that they’re supposed to do a little bit of hard work, then immediately find success. This is not the case. If that’s what you think will happen, you’re dead wrong. The only times where an investor gets wealthy within the first few months of real estate is when they hit a string of luck, which we’ll get to later. But basically, most investors quit after the first three months. Now, they probably won’t use the term “I quit” or “I give up.” The explanation will have nothing to do with the fact that they didn’t try hard enough or stick with it. Most people quit real estate way too soon.
If you get actively involved in the market and figure out who your competitors are, you may be surprised to know that within the next few years, you’ll be the only one standing. The hope is that by that time you’ll be successful. But the point is, most people give up within the first months to years of real estate. Not many people stay in it for the long haul. That’s actually one of the biggest ingredients to success in real estate…simply sticking it out! Even if it takes you twenty years, you’ll still be successful if you stick it out. Quitting is by and large the biggest reason that most investors fail.
They ran out of cash
This seems pretty obvious, and it is. Of course, when an investor “runs out of money,” it just means that they can’t get money for that deal. Running out of money is being forced to leave real estate because you truly aren’t able to eat. It means you truly want to stay in real estate, but you don’t have the funds to stick it out. And this doesn’t mean “money is tight,” this one really is for those that have no other option but to do something else to survive.
This one is one of the most common things that happens to investors. This is why if you have a job, you need to stick with it and do real estate on the side. You’ve got to have money coming in. Too many times, an investor simply isn’t making enough money, or they aren’t making enough at all, and are forced to do something else. They quit.
They don’t do good deals
Doing a bad deal(s) is another mistake that investors make. What exactly does this mean? Well, first off, it’s much harder to turn down a deal than it is to turn it down. Especially when you’re first starting out. You’ve got your husband or wife, family or friend, somebody telling you that you’re not making money and should consider doing something else. They remind you that you haven’t gotten any deals (as if you need reminding). When this happens, it’s easy to take a deal that you wouldn’t otherwise have taken out of either desperation, or wanting to prove something to the people around you.
It’s hard to turn a deal down. It’s tempting to go down the path of “I know this might not be the best deal, but what if someone else buys it and it turns out to be a wonderful investment and they get rich. Won’t I regret it?” Doing bad deals is a fast way to get yourself out of real estate. Follow your instincts when it comes to a deal, and never do them to please someone else, or prove yourself.
They get into horrible partnerships
Partnership in real estate investing can be a beautiful thing. It can also turn into an ugly thing. The cases where it can work are deals where both parties are bringing something different to the table. Too often, people jump in on a deal with a friend without even thinking about it. “What could go wrong, they think. We both like it, and want to buy in it. together.” Alrighty. Go for it. But it’s a horrible idea. Too many sweet friendships and relationships have been destroyed over one single deal. It’s heartbreaking.
What is the solution in this area? Never do a partnership unless both parties are bringing something that the other doesn’t have in terms of great value—value can be money, knowledge, or a combination of the two. You’ve got to be very clear about when the partnership is going to be over. Many investors who try to do partnerships aren’t clear about when the partnership will be terminated. They get together for a deal, and don’t really discuss what will happen after. What usually happens after, is that one party expects to do another, and another. A business partnership cannot go on for an infinite amount of time. When they do, things eventually fall apart.
They’re always looking for “bigger and better” investment deals
Sometimes what happens is an investor will start to make a lot of money. They’ll start to get big eyes, and try to do bigger deals that they don’t have experience with yet. They’ll switch from one side of investing to the other without knowing anything about it. Ultimately, they lose.
Don’t start taking for granted what you’re good at and what you’ve got right now. All too many investors start to get bored, and want to move onto “bigger and better” deals. Stick to the type of real estate that you know. It’s like trying to be a Jack of all trades if you don’t. You’ll end up really kicking yourself. Hopefully you’ll have enough money left to get back in the game when it ends poorly, but usually this move completely kills an investor. They end up losing everything they earned. You quit, ran out of money, you do bad deals, bad partnership. Oh but there’s more. I call it bigger and better things. I’ll say bigger and better deals.
They got lucky on their first deal
Some investors just get lucky. This can be a curse. What often happens to a “lucky” investor is that they really kill it with their first big deal. They think they know all about the real estate game, and how to play it, when really they just hit a pot of good luck. They start to get a big head. The fact is that getting lucky is one of the largest reasons that investors fail. They start to think that they know exactly what they are doing, when really they know nothing. A year or so later when everything goes South that they realize in the rearview mirror that maybe they weren’t such a know-it-all.
They literally have no idea what they are doing
This is very common. Some investors just have absolutely no idea what they are doing. They tried to bypass having a mentor, or learning in general. There are two core reasons that this happens. The first is that the person has just come into real estate, and hasn’t had to use their brain in a while. This isn’t meant in a derogatory way. It simply means that they haven’t had to seriously utilize the creative side of their brain in a while. Their brain ends up on “auto-pilot” in a way. The brain has to be exercised. It’s not that the person is stupid, it’s that they haven’t been exercising their brain. Once you start to, it works back up again the way it did, but you’ve got to use it. Actually utilizing your brain is important when it comes to taking in intelligent information, and your ability to use that information.
Problem #1: You may even have access to great information. If that’s the case, but you aren’t soaking it in, or neat people to repeat things to you several times, it likely just means that you haven’t been exercising your brain. You’ve just got to train it again! That’s all. It doesn’t mean you’re stupid, and don’t “get” real estate. You’ve just got to get used to using your brain again. You must learn to absorb intelligence.
Problem #2: You can’t differentiate the truth from the chatter. If you watch or listen to a lot of real estate “chatter,” you aren’t going to do well. You’ll end up in situations that are detrimental to your future investing career. Why? Because real estate “chatter” is simply that. It’s not useful. People who spout off this nonsense usually have an angle, and it’s to get you to buy something. This is where using your brain comes in. Maybe you’ve been attending all of those free seminars. Maybe you’re buying online seminars, or watching crappy YouTube videos. Not sure.
Some of the investors that you’re listening to chattering are really genuine about teaching, and may even be successful, but they’re still not really “right” regarding what they are saying.
Find a mentor!
There is so much information available on real estate that it’s easy to get confused. You don’t know what’s garbage, and what’s not. To succeed, you’ve got to find the right channel that knows what they are talking about, and then you’ve also be able to absorb that information.
Absolutely get a mentor. They are invaluable. Of course, there’s a whole different article based around the fact that you’ve got to get the right one. Otherwise, you could do more damage to your future investing career than good. There are some really smart people out there that can really help you succeed. Know that the best knowledge is going to come from experience, whether you are successful at the deal or not. Sometimes the best thing is when you aren’t successful, which drives you to find a mentor.
Some lessons in real estate have to be learned the hard way. Even when you have a great mentor, there will be times where you question his judgment. Fight the urge to think you know everything. Generally, people starting out in real estate are older. Therefore, your mentor is probably going to be someone your age. It can be tough to take advice or direction from someone your same age, because you don’t want to be talked down to by someone your age. Realize that you don’t know everything. In fact, if you’re just starting out, you know nothing.
Don’t be prideful. So many potentially great real estate investors quit too soon based on pride. They don’t like to be told what to do or how to do it. The truth of the matter is that you’ve got to learn from a mentor when you first start out. If you’re unable to take advice and direction you’re going to have problems in your life whether or not you stay in real estate investing. Learning to take criticism is a big part of being successful in life. It’s a good idea to learn that now as opposed to later.