Investing in real estate—especially for those who are relatively new to the business—can be exhilarating. It is fun, exciting, nerve-racking, tense, sometimes joyful, and often bitterly disappointing. During a buyers’ market like the current one, this gauntlet of emotions shifts toward the joy and excitement side, and away from the anxiety-producing side of tension and disappointment. Great, right? The problem is—again, especially for rookies—is allowing yourself to be swept away by the fun and excitement of finding good deals everywhere you look, and forgetting why you ever worried in the first place. Too many buyers are too relaxed these days—they see a low price, they walk through the property, and they buy—only to discover later that real estate investing is still a very risky business, in any economy.

The key to reducing risk is enhancing preparation. In real estate investment, that’s easy; all the steps are laid out for you. All you have to do is not skimp or cut corners. Never pass on an opportunity to walk through the property (and never buy without being given that opportunity!), because it will offer invaluable insight as to the condition, livability, and atmosphere of the home that you could never get from a conversation or brochure. A walk through will give you a sense of the previous owner’s maintenance of the property, of what realistically needs to be done, and even what you may want to do that’s not been done before. The walk-through is your chance to meet, greet, and familiarize yourself with the property’s identity—an interview.

If the walk-through is the interview, then the inspection is the cavity search. The walk-through, while essential, is absolutely not a substitute for a proper inspection. Furthermore, a seller’s assurance that the home has been inspected (and even the inspection report itself) is absolutely not a substitute for conducting a proper home inspection (even an additional one!). An inspection, conducted by a licensed professional of your choosing (it’s important for every investor to have inspectors and other professionals that they know and trust), will provide detailed information about the guts of the home. What works, what doesn’t? What could use some repairs or updates, what will require those repairs in the future, and what absolutely needs repairs or updates immediately? Is the property up to codes and standards? Are there any features of the property that make it vulnerable or susceptible? And crucially, what will be the cost of making the repairs, improvements, updates, and modifications called for by both the buyer and the inspector?

Your walk-through will give you a sense (a gut feeling “yes” or “no”), and the inspection will provide the evidence to support or refute your feeling. The former is largely emotional and a function of perception, while the latter is strictly business. How feasible is this project going to be? Will you profit from your transaction? Too many investors, at ease perhaps due to the favorable market conditions for buyers, walk in to a property, love what they see, are floored by the low price, and simply buy it. No inspection. While some of these buyer’s may be thrilled, others may soon discover that they’ve overlooked a costly issue. Failing to properly inspect a home (or walk through it carefully) before investing is a gamble that’s simply not worth taking.

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InvestmentPropertyMadeEasy.com

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Practically anyone can buy a home. It doesn’t take a whole lot more than a little bit of saving, getting a loan, and moving in (very simply put). But staying in a home is a completely different story, and with the levels of defaulted mortgages and foreclosures at their highest levels ever, it is essential for you, the home buyer, to understand the ingredients of successful, sustainable home ownership to avoid the pitfalls suffered by those already facing dire straits.

In its most fundamental form, sustainable home ownership is about preparation, whether you are buying your first home for residence or you are an experienced investor. This means knowing what you have, predicting what you will have, knowing what you spend, knowing what you will spend (this should not just be a prediction), and planning for contingency. That last one—planning for contingency—is where the vast majority of the home buying population goes wrong.

Contingency planning means having enough of a cushion in your cash reserves to get you through the toughest times. Even if you lose your income, come into unforeseen bills or expenses, etc., you should not be so strapped for cash that you are forced to the curb. You should always be able to live on your reserves for a year. When you are budgeting, this cushion will account for a pretty hefty proportion of the required overall value for purchasing the home. But don’t skimp on the contingency fund—failing to have enough reserves is the number one reason people fail to sustain home ownership. Like I said, it’s relatively easy to buy a home; and it is especially easy to do when everything is going well. But when you fall on the toughest times (and we all do at one point or another), it is essential that you have provided enough of a cushion of cash reserves to break that fall.

The moral of the story is to save before you buy. Save up, develop good credit, and get pre-approved for a loan before you even begin the process of searching for a new home or investment. This will make both the process of finding what you want and closing on it much easier, and you will be effectively prepared for the inevitable unexpected hardships inherent to home ownership.

What do you think?

SuperiorPrivateMoneyReturns.com

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Everybody makes mistakes. Business or personal, minor or catastrophic—they happen all the time. What separates successful investors from the hoards who never make it beyond a second, third, or fourth deal, is not how they get their good deals, but rather how they handle it when they make a mistake. Successful investors are not exempt from the law that everyone makes mistakes; in fact, they make more mistakes than failed investors. What makes a failed investor fail is that he never bounces back from his first mistake (if you can show me someone who has gotten through five deals without making any mistake, I will be very impressed). Successful investors, on the other hand, make their first mistake, learn their lesson, and continue investing until they make their next mistake, whereupon they learn from that one, and they continue investing until they retire happy and rich on a beach at 50.

Learning from a mistake requires four simple-sounding steps (they are not so simple to enact consistently, which is why not everyone is a millionaire real estate investor): 1) identify the mistake, 2) take responsibility, 3) let it go, and 4) use what you learned. If you can get in the habit of taking care of each of these steps when a mistake is made in your business, you will find that the mistakes are rarely ever repeated, and you will slowly eliminate all of the major hurdles that stand in the way of inexperienced investors, leaving a clear path toward smart decisions and successful deals.

The first step is to identify the mistake. Sometimes this is easy, like when you get that “Ah, I’m such an idiot!” reaction to something you realize you’ve done. Most of the time, however, things simply go sour and you can never pinpoint exactly what went wrong. The key is to be systematic and detailed throughout the process, so that you can always refer to notes and records to learn exactly what happened, or be confident about what didn’t happen. But the key to development is to know what went wrong.

Next, you must own up to your mistake. This means not hiding from those who may have lost money because of your actions or decisions, but rather confronting them and making every effort not to burn any bridges (which in the real estate industry can be a death sentence). When you’ve taken responsibility for something, you can move on from it guilt-free. Part of that is the process of forgiving yourself for the error, and letting it go so that you can maintain the confidence that is required to make big investment decisions (which are often something akin to strategic decisions).

Once you’ve forgiven yourself, you need to jump right back on the horse. While the sting is still fresh, get back in the game and use what you’ve learned from examining your bad experience to ensure it never happens again. Obviously, new problems will inevitably arise, and you need to be prepared to go through this examining and rebuilding process quite a few times to clear away the common investing errors. The definition of insanity is repeating the same action again and again, expecting a different result. In real estate, you’d really have to be insane to repeat your mistakes over and over, losing more and more money, but you would be shocked at how many investors fail simply because they continue to fall into the same traps again and again. Learn, and rise to the top.

Tell us what you think.

SuperiorPrivateMoneyReturns.com

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