I've been trying to put this together for a little while from my own experience, from others I've talked to, and from the One-on-One students I've worked with. They're in no particular order; I just put them down as I came across them. Remember, these are my own opinion, so take them as such. 1) Not knowing your market, and how to market to it. How you effectively market to your area depends on the type of market you're in, including how seasonal your market is.
For instance, in working with students from fast-selling markets like California, we've found that bandit signs are effective. In slower markets like Denver, direct mail works very well also. Additionally, think about your season. In colder climates, direct mail works well in the wintertime when houses sell slowly, and bandit signs are more effective in the summer months. However, in Arizona, summer is the slow time, and in the winter houses sell faster.
2) Not knowing if your marketing is effective, i.e. not tracking your marketing. This is critical, and plays closely into number 1 above. If you have no idea how well or how badly a marketing campaign is working, how do you know where to spend most of your money? No matter how you do it, track your marketing.
Keep weekly statistics, and keep them over time. 3) Not writing out your marketing plan Many students I talk to have a shotgun approach to marketing. They mail out 100 postcards to out of town owners this week, a couple hundred letters to foreclosures next week, and then put up a few bandit signs. Then they get busy, and forget about the marketing they'd planned.
If you fail to plan, you plan to fail. Okay, old tired cliche, but it really does hold true. Write down your marketing plan, post it somewhere you can see it, and look at it daily so you know what you're supposed to do that day.
4) Allowing a tenant/buyer to move in without an option deposit. Oh man, I've NEVER done this, and had the tenant immediately stop paying rent, while renting out one of the rooms to a friend while collecting money from them which they never paid to me, and I had to evict them, and had a house vacant for two months and lost lots of money! @#($&Y% Okay, this was one of my bigger blunders, and I definitely learned my lesson. Always, always, always get an option deposit on a lease/option, or a security deposit on a rental.
Then if the tenant defaults at least you have something to cover the vacancy. 5) Being "nice" to tenant/buyers. The reason I let the person above move in without an option deposit was she was a single mom, who had been through the mill, abusive marriage, just getting back on her feet, "I promise your kindness won't go unrewarded Mr. Landlord", etc. I bought the sob story, and paid for it.
Sometimes I work with tenants if they have a good track record, but only for a short while. In this business, we have to sometimes be more harsh than we want, but if you bend too much, it'll only make your life more difficult. Itinerant tenants will suck all your money and time. 6) Being scared. This one's pretty understandable.
This is new territory for most people. I've talked to people who were high powered folks in their field, and are nervous talking to sellers or meeting with sellers for the first time. There's one way, and only one way, to overcome this.
Just get out there and do it. 7) Not signing up deals because you're not sure how you're going to fill them, or they don't fit your strategy. I talk to many students that because they don't know what to do with a property, or how to sign it up, just pass it by. My advice is just sign it up. If you do it wrong, there are lots of outs in the agreements, and you can always renegotiate with the sellers.
If it doesn't fit your perfect strategy, flip it to someone who wants it. 8) Being inconsistent. Marketing hard one week, then doing nothing for two or three weeks is one example. Making one tenant pay on the 1st, and another on the 6th is another (and a possible legal liability). Real Estate investing is a very new thing for most people, and working for yourself is also pretty new.
So it's pretty difficult to have a routine to follow. My advice is systematize your business as soon as possible so that you can hand over the mundane chores to someone else, and you can concentrate on what's important. Watch what you do each week, and try to consistently do those things which make you money. 9) Procrastinating. Many students spend lots and lots of time analyzing their market, setting up their office just so, writing articles about mistakes they've made, etc.
Another word for procrastination is - FEAR. Like I said earlier, the only way around fear is to just get out there and do it. 10) Not setting aside reserves for unexpected expenses I coach students to set aside enough cash to pay for two month's rent on every property. However, after you've saved about 5 properties worth, you're probably okay. But you have to be the judge of how much you want to have in reserve. Either way, you need to have something in the bank because unexpected expenses definitely do happen - and if they don't, you've saved for that trip to Thailand! 11) Not setting up third party notification for water & HOA bills Boy, have I learned my lesson here.
The problem with water & HOA is the governing body can slap a lien on your house if the tenant isn't paying the bill. I used to let tenants pay their own HOA bills, and I didn't have any kind of notification set up that let me know when there were problems. Suddenly, I'd get notification from the HOA's lawyers that there was a lien on the house. Same thing with the water bill. I now pay the HOA bills myself, and the tenants reimburse me.
I still get the same rent, but add the HOA on top of it. My thought is, they're the owners (or future owners) of the house, they get all the benefits of the HOA, so that should be separate from the rent, and paid by them. Also remember if you don't use my rental agreement that you make sure the HOA fees can be added to the rent, and they can be evicted for non-payment. If you're using my forms, it's already in there. Same thing with water, but I have the tenants pay. The nice thing about water is, if it doesn't get paid, it gets shut off.
So the tenants generally have incentive to pay. But I still want to know if the bill isn't being paid. If a tenant gets behind on this bill, make sure you keep checking with the water company, and make them pay it. Set up third-party notification for the water bill, and monitor it.
This certainly isn't all the mistakes I've heard or made, but it's a good start. One last one - Here's the biggest mistake of ANY I've ever heard: Not pursuing your dreams! Whether it's through real estate, or MLM, Day Trading stocks, or that franchise, don't let fear stop you. Do whatever you have to live life in the juiciest, best way you possibly can. Financial freedom is one of the first steps to the life you really want to live.
Scott Taylor is a successful Real Estate Investor, trainer and Web Entrepreneur. He has taught hundreds of students to become wealthy through Real Estate. Mr. Taylor also runs successful website businesses, and reviews Internet businesses. www.Mentor4RE.com www.HonestyReviews.com