10 Ways to Fail When Building a Property Portfolio

When you tell friends, family, or coworkers that you are an aspiring or beginner property investor in real estate, many may try to discourage you. They might remind you of the thousands of investors who lost money during the last recession. Some will go as far as to share details of how their Uncle Bob lost everything after his property deals went bust.

But you know what? Those friends, family members, and coworkers are partially right. There are a lot of risks involved in real estate investing. For every single investor who finds success, there are thousands who did not make it. Thousands of people start as freshly minted real estate investors every year, but less than one year later, most will be folding up their investments and dreams.

What happened to them? Most took a wrong turn in the road. And what happened to them could easily happen to you. All it takes is to take the same wrong steps and follow them with doggedness. Just in case you are wondering about the steps that will help you achieve quick failure as a real estate investor, we have got you covered.

Below we list 10 sure-fire ways to become frustrated and disillusioned with real estate investing. Read on if you would like to lose your capital, investments, and confidence in a short space of time, just by following the advice in this article!

10 ways to fail when building your real estate portfolio

1.    Treating property investing as a hobby, not as a business

Having romantic notions about what it means to be a real estate investor and assuming it is about attending auctions and open houses is nice, but buying real estate just because you love shopping, or simply ignoring the business side of being a property investor is a sure-fire way to fail. It will not benefit you to lack an understanding of the importance of business planning, cash flow management, a definition of your goals, property financing, how to find a good property manager, and more.

2.    Not creating a real estate investment business plan

What is the point of going through creating a real estate business plan and all that trouble just to buy and renovate a house? Ignoring suggestions that you need to define your investment goals will lead you directly to failure, as well as lacking a system for measuring your progress. Completely overlooking the need to assess the risk of any investment before you commit to it is a huge “DON’T”.

3.    Having no strategy, or a wrong and inconsistent strategy

Just buying any kind of property as long as it promises quick and easy returns may seem fun and easy to do. Not focusing on a single location or concentrating your efforts on a specific type of real estate can lead to trouble. Abandoning your chosen strategy as soon as you encounter a little trouble can derail your plans.

4.    Ignoring the power of locations

Location is the first thing serious property investors look at when investing. Ignoring all the indicators of a bad location, such as high crime rate, high unemployment, low rents, and poor infrastructure can lead you to failure. If a property is cheap, go ahead and buy it and ignore the location if you don’t want to succeed.

5.    Not buying investment-grade properties

Asking yourself if you can live in a rental property you’re about to buy is an easy test to avoid failure. Ignoring special or unique qualities that make the property more valuable will cause you to lose out in the long run. Failing to think about the potential for value appreciation in the coming years, and not considering if your bank will be willing to put money into the home are not good strategies.

6.    Being in a hurry to make money

You’ve heard those stories of overnight successes, right? Just base your projections on them and don’t give any thought to the fact that most investors take up to 30 years to build a real estate cash machine for their retirement years if you want to fail. Simply forget that there is education, saving up, and asset accumulation phases in every investor’s journey.

7.    Ignoring potential cash flow from a property

Savvy investors look for income-generating properties with a steady flow of cash for the operational expenses of the property. But investors who are trying to fail don’t bother about whether the rental income will be sufficient to pay the expenses. They invest without looking at the numbers.

8.    Being irrationally over-confident

Even if you have never bought or renovated property, acting overly confident about your ability to succeed is not the best idea. If you get it right with your first investment, becoming arrogant will set you on the wrong path. If you assume it has everything to do with your own brilliance and nothing to do with the hard work, then you might not learn as much from your experience. Don’t let your ego be your sole reference when making decisions.

9.    Waiting until it is late before you buy

By not following the example of experienced investors, you risk let a fresh opportunity slip by. Allowing your mind be swayed by mass hysteria and the opinions of media naysayers will only land you in a bad spot. If you don’t want to get scalped with the rest of the crowds, don’t wait until an opportunity goes mainstream and the media changes its tune. Not doing research ahead of time to find good deals will only cost you money.

10. Not building a team

Ignoring the fact that you need professionals of several kinds on your team will get you nowhere. Not recognizing your need for a realtor, attorney, accountant, mortgage broker, professional handyman, or general contractor is counterproductive. Getting stuck with half-baked experts to whom you don’t have to pay the standard fees might not be the best choice.