Professional long-term investors do tend to make the occasional mistake, but there are some errors that are bigger than others, and you should learn from your mistakes. You may have never made mistakes so far, but here are the three dumbest mistakes you can make as a buy and hold investor.
First, you’ve got overpaying, which is essentially a big emphasis on this. You flip or wholesale, or are successful, you’ll want to get great deals that make a lot of profit.
But, even if you’re a long term investor, you shouldn’t pay more than you should, since it means paying high mortgage rates, and it can cause serious danger to the cash flow. Do take the time to learn the best ways to buy low, and get the best deals, and by imitating the clever tactics, you’ll find yourself creating some equity on the investment.
Next, one of the biggest mistakes to make is purchasing a rental property with minimal or negative cash flow based on their hopes that the property will appreciate. This is a very risky move, since the market tends to fluctuate quickly, and it’s impossible to predict, so you shouldn’t purchase a property without any profit to it. You should get something below market value to add to the value, and you should get a property that has a positive cash flow since it allows you to improve and bring in income since you can see it grow as well. You should make sure that if you are investing for cash flow you don’t worry about the value of the home, but instead, you should look at the cash flow and see whether the property is selling or not. Real estate investing happens over a long period of time, so you shouldn’t immediately take losses if you notice them.
The final, and biggest one is not treating landlording as a business.
This may seem like a surprise to some, but it is a business, and in order to keep your assets performing at the highest level, you need to maintain the upkeep of the property, the tenant relations, and the finances, so while a majority think that it is totally passive, it’s not. You may think that it’s just handshakes, emotion choices, and loose regulations, you need to remember that this is indeed a business, and you should treat it as such if you want to get some great results from this.
So what this means for you, is that if you don’t want to make mistakes, keep all of these in mind. Now, you’ve got to remember that nobody is perfect. Not a single soul can sit here and say that they are perfect in this, but the thing is, you’re not going to really get anywhere with this if you’re just treating it passive, and instead, you need to be smart with your decisions and make fitting ones that you can utilize and create for a brighter, better future.