This is the #1 Roadblock in Real Estate Investing
It is incredibly easy to get burnt out as a real estate investor. However, by knowing the roadblocks ahead of time, you can avoid many of the common mistakes. Real estate investing, unlike other businesses, relies heavily on leverage and funding. Almost everything we do from buying and holding rentals, to doing flips, and even dividing land, it is all heavily dependent on funding. Money from banks, private lenders, or even other people’s money, are vital to your success. So what’s the #1 roadblock in real estate investing? The answer is not understanding your cash flow and not knowing the numbers ahead of time.
Rushing to obtain generational wealth
Unfortunately, people go to conferences and get hyped up to make generational wealth in a short period of time. While you need emotions to guide your business, it is important to take a step back and know your numbers before diving in. Generational wealth is difficult to achieve in a three month period, however a three year timeline is feasible. By not rushing into investment opportunities, it allows you to form a game plan for success.
Understanding all of your expenses
This week we had a person contact us who didn’t understand how escrow worked, thus creating further financial strain for the client. Escrow can be very confusing for investors. This is a portion of the loan that a lending company puts aside for repairs to the property. Many people do not fully understand how much money is needed up front in order to start the construction process. In addition, many underestimate how much the interest will be every month for the property. If you have a $400K loan, and you’re at 12%, you will in turn pay $4K a month out of your pocket. Thankfully the title company provides a settlement statement that includes a complete breakdown showing exactly what you are buying, and what you owe to everyone. By fully understanding your budget and planning for expenses, you can avoid spiraling debilitating debt.
Do your research and plan ahead
Investors who do not know their numbers will soon find themselves in a spiral of financial distress. Not only that, but by not having enough money to make payments it will result in pure panic and overwhelming desperation. Many investors attempt to resolve this crisis by using personal credit cards, or a HELOC to get back on track. In doing so, they put their whole life into jeopardy. People can make a lot of money at this, and there is a lot of money to be made. It is imperative that you know your numbers, take emotions out, and do your research before diving in. People tend to overestimate what they can do in a few months, and tend to underestimate what they can do in a few years.
Watch our most recent video to find out more about the #1 Roadblock in Real Estate Investing.
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