Real Estate Flipping 101: Why Investors Fail

Having worked with hundreds of investors and speaking with thousands of them, we have seen many reasons why investors fail. In fact, these are the same reasons that businesses in general fail, period.

Make no mistake: you’re running a business, not a hobby: if you treat this as a hobby, then stop reading now because dabbling in real estate can be hazardous to your financial health: you have to commit to treating real estate investing as a business or you will fail.

You can invest part-time, but you must treat it as a business.

Here are the key reasons why investors fail and what you must to you avoid these common mistakes:

• Take on something that has too steep a learning curve
• Trying to do everything themselves
• Buying properties without having a clear exit strategy
• Not enough buyer and seller leads
• Excessive holding costs
• Runaway rehab costs
• Lack of systems
• Taking on deals that take too long to get paid

All of this leads to a lack of cash flow, the #1 reason why all businesses ultimately fail!

So what should you do if you’re planning on investing in real estate? For the remainder of this article we’ll cover how to avoid these common mistakes.

Too steep of a learning curve

Keep it simple! That needs’ to be your first rule of thumb. Complicated deals may make you feel clever – but they won’t help you earn any money and in fact will probably end up costing you. It’s basically a simple process – why make it difficult?

Trying to do everything yourself

Many young investors feel they will save lots of money if they do everything themselves. While this may mean less out of pocket expense, are you really the most qualified person to do all of the tasks necessary? Probably not – it is almost always best to focus on what you do best and outsource the rest.

Buying properties without having a clear exit strategy

You are buying the property for the purpose of making a profit – period! Don’t “fall in love” with the property after the fact then waffle on what you’re going to do with it. Make a plan and stick to it.

Not enough Buyer and Seller Leads

This is where systems come into play. You need to have a steady flow of fresh leads of both buyers and sellers. Leveraging the internet is a great way to do this.

Excessive Holding Costs

You can’t put yourself in a position where you are going to be responsible for holding costs if the property doesn’t sell immediately. All of your deals need to be structured in such a way that if you are unable to sell the property in a reasonable amount of time, you can simply walk away.

Runaway rehab costs

The TV shows make this look so simple. You buy a property, do some demolition, then put in a new bathroom and kitchen and sell the property for a big profit. In reality this is one of the riskiest investment paths in real estate. Avoid any property that needs to be refurbished, unless you really know what you are doing.

Lack of Systems

Systems take the guess work out of things. With good systems for everything from buying properties to selling them (and everything in between) you can turn your business into a scalable operation that can grow as big as you want it to. Without systems, you’ll always be stuck trying to figure out what you next move should be.

Taking on deals that take too long to get paid

You want to get in and out as quickly as possible, time is money after all. Don’t even consider a property where you know going in that you’ll have to carry it for months. Who needs that kind of stress?

By avoiding the common mistakes above you are giving your business a much better chance of succeeding. Remember, you are looking for a long term sustainable income. Treat your real estate flipping business as such.