How to Overcome the 21 Deadly Sins of Real Estate Investing: Part I
© 2016 by M. Mitch Freeland
When I first began writing about this topic, I tried to narrow it down to the top seven sins of real estate investing; similar to the seven mortal sins in the Bible; but the more I thought about it the harder it was to limit it to just seven. I thought of mistakes I’ve made and mistakes other investors have made that I’ve seen throughout the years. After serious thought, I had to increase the list. And so, here we have a list of twenty-one sins and two bonus sins, making it a total of twenty-three sins that real estate investors should stay clear of. Practicing any one of these sins can ruin your business and cause you more harm and stress than you’d think possible. Many have caused some investors to give up altogether.
I cover the first ten sins in Part I:
1. Lust. We all know what this means—well, most of us do. Don’t lust over any property. A property is a commodity in your trade, nothing more. When a property comes up for sale and it appears to be a fantastic buy, do not get caught up in a bidding frenzy. Look at it objectively. It is a commodity to be bought, fixed and sold. Don’t lust over it. Don’t ever have the attitude, “you just have to have that one.”
2. Gluttony. Don’t buy or invest in more property than you can handle. Even when great deals appear one after the other, you can’t buy them all. Pick and choose the best of the best and the ones that make the most sense at the right time. Always think about your current and future cash flow and the manpower needed to produce the results you want on a speedy basis. Don’t over invest. Don’t become a glutton. Keep on a steady pace.
3. Greed. Greed is the forbearance of gluttony. Wanting more and more and more is not the right way to invest. Wanting an unrealistic price for your property usually leads you to long holding periods and a price below what you could have sold it for at an earlier time. Every greedy investor I’ve known has always taken a bath—with dirty bath water. Greed doesn’t pay. Greed in my book equals ignorance and laziness and unwillingness to come to terms with true value and market prices.
4. Sloth. You’ve got to hustle; you’ve got to be a “go-getter.” When you invest in real estate, you cannot be lazy. Slothful living produces nothing but anxiety. Slothful work habits produce poverty. The slothful perish silently.
5. Wrath (Anger). I’ve seen many investors and landlords repeat mistake after mistake because they were unable or unwilling to curb their anger. Anger has a way of turning some people into imbeciles, buffoons. Have you ever seen a grown man get angry—verbally, physically and look like a nut? It’s okay to be discontented about a particular incident or situation, but drop the anger and think of a solution to overcome your current problem—or, overcome your challenges, or situations as some would say. Curb your anger—it leads to unclear thought and rash decisions which typically results in wrong decisions.
6. Envy. Every property is unique. Every investment or project is different. Do not envy the competition. Envy will lead you to do things that may not be right for your investment. It’s okay to admire, but it is not okay to envy. Envy is a destructive emotion that has no room in your investment life. Do your work and do it to the best of your ability and let others envy you—that is to say, let them envy your work habits and your creative genius.
7. Pride. Taking pride in your work is good, but don’t over do it by becoming arrogant. Never be too proud to do the really hard or menial tasks when called upon. Not only will it very possibly save you some time and money, but is also proves to the world that you are a person of flexibility and that you are grounded, committed and believe in your project.
8. Fear. Fear in the single greatest emotion that holds people back from greatness. Fear has a way of crippling you into inaction. There is no room for fear in your life if you truly want to succeed in real estate investing. Many investors confuse fear with caution. Learn to distinguish the difference between the two. If you do your homework and study your market, there will be no room for fear in your investing life. Fear mostly puts a halt to your growth. Fear of action causes more failures and poor decision making than any other emotion encompassing the investing process. Again, do your work, build your confidence and drop the fear and focus on moving in the right direction. There is a saying that the fear of loss is a stronger emotion that the desire for gain. Reverse this, and make the desire for gain a stronger emotion than that of fear and you will realize the success you deserve.
9. Impatience. We all have to be aggressive in planning and working towards the things we want, but it doesn’t mean we practice impatience. Impatience moves us into areas we are not quite ready for—we haven’t done the right research, study or proper investigative work needed to ensure the right degree of profitability.
It takes time to succeed; it takes patience. Do your best work every day and let the laws of nature, the law of cause and effect, take its course. When you become impatient you miss opportunities, you make rash, ill-thought decisions that almost never work in your favor in the long-run. Many novice investors lose time and again because of their impatience. Understand this and do not become impatient.
10. Over Leverage. Leverage is great for building wealth and it can be part of a necessary plan for a real estate investor. But over leverage can cause great stress over the long-term, and can lead many investors to their demise. A flipper can absorb high leverage if the intent is very short-term—the property is fixed and put up for sale quickly and sold. Over the long-term leverage will not work well if there is a lack of adequate cash flow. Leverage over the long-term can only work if there is enough cash flow to support it; otherwise, you’re in trouble.
If you are interested in learning about the lucrative world of landlording and rental property investing, get a copy of High Engagement Landlording. There are many concepts in this book that are not covered in mainstream real estate books. You might also want to get a copy of How to Rent Your House, Duplex, Triplex and Other Multi-Family Properties. Both of these books are available on Amazon.