5 Major Roadblocks in Real Estate Investing
Did you know there are 5 major roadblocks in real estate investing? From buying and holding rentals, to flipping properties, to dividing land, investors face numerous roadblocks that create frustration, and lead to defeat. But fear not! When investors identify these 5 roadblocks, they can ease their frustration, prevent a finance wall, and learn how to create consistent cash flow.
We work with many clients, including those who are just starting out on their real estate investment journey, to those who have become experts. Every day, our company receives numerous calls from people saying, “I wish I would have,” or “I wish I did that too.” Therefore, we’ve created a guide to help others skip bumps in the road that can impact their success. When you’re aware of these 5 roadblocks, do your research before embarking on your real estate journey, and reevaluate quarterly, the sky’s the limit.
So, what are the 5 Major Roadblocks that cause burn out, financial hemorrhaging, and, unfortunately, defeat? Well, here’s what you need to know to make your real estate investments successful.
5 Major Roadblocks:
1. Cash Flow
The first roadblock that can greatly affect your success is not understanding the importance of cash flow. If your property’s expenses outweigh your profits, then that’s going to hurt you and your business. You want to make sure your profits are always greater than your expenses. The best way to avoid this roadblock is to make a plan and know your numbers upfront! Don’t dive into an investment before you know if your property will cash flow.
The second roadblock every investor should understand is escrow. Escrow is a portion of the loan a lending company puts aside for repairs to the property. The only way to access these funds is to submit receipts, photos, and other proof to your lender that the repairs are underway. So, if you want to optimize your profits and avoid missing the market when it’s “hot,” you need to take all repair costs into consideration, make sure you have money to get the repairs started without your lender’s help, and complete repairs quickly and correctly.
3. Too Many Projects
The third roadblock is having too many projects. From multiple property costs to paying contractors, investors can get too big too fast. It is important to “err on the side of caution” to prevent the “finance crunch” that often occurs. So, slow down, be realistic, and limit your losses.
The fourth roadblock is navigating rental cash flow. The deal needs to be a positive investment not a negative one after considering all costs. These costs include rents, taxes, and insurance. In real estate investing, you cannot afford losses or simply break even. The numbers game is intense! It is vital that you are prepared and learn the ropes!
5. Personal Credit Usage
The fifth and final roadblock is the misuse of personal credit cards to cushion purchases or expenses. If you want to avoid spiraling into debt, then quickly set up your business and begin using a business credit card. Business credit cards are easy, fast, and make every investor’s life easier.
At the end of the day, the ultimate goal is keeping personal and business expenses separate. It’s vital to a successful real estate investing.
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