Real estate is basically the buying, selling and rental of land and landed properties in layman’s term.
It is a very lucrative business that provides many opportunities, as investing in the real estate business is a great method for making money and building wealth. It is a relatively easy business to start as anyone can start with no to very little money depending on where you aim to invest at.
It requires both time and proper time management in learning new approaches and implementing them.
Real estate business takes time and perseverance, and its rewards can be very great, it is not a “get rich quick” business, contrary to what many business experts try to promote and this is where most investors actually miss it.
If real estate is as good an investment as it is designed to be, why do so many property investors fail, why do 50% sell up in the first 5-10 years and why do 92% of those who stay in the game never get past having their second property? Wouldn’t it be nice if someone told you the brutal truth about exactly why many real estate investors fail?
According to a survey by Inc.com, it’s been researched and published that about 96% of businesses go out of business within the first 10 years and over half fold up their tent by the end of the first year, why?
Although there are a lot of reasons asides ineffective time management as stated earlier on why so many investors don’t achieve their goals, today we will highlight the most common mistakes which many make and how to best avoid avoided.
1. Poor Investment Education and Inadequate Sustainability Plan:
Most investors which often are inadequately educated about what makes a good investment or what can turn out to be a good one as they frequently chase cash flow rather than capital growth.
What I mean is, they just one day “decide” to become investors and generally operate by speculations, as we say in Nigeria “dem say”. For example, they buy a property in a particular location because they heard that it’s soon going to go boom, mostly it’s because these locations are supposedly on the peak of big things; and the problem is that these “big thing” either never materializes or is only short termed and before they know it they’re left with a property that doesn’t increase in value or worse still, one they can’t get even get a tenant for.
They fail to make research, plan and devise a proper strategy on where, what type of investments to make and when to put in the effort for a good investment.
*An example of a short-termed boom is the new trend of certain developers erecting substandard but good looking residential apartments with low life span as these properties only survive the first few years of their agreement with investors leaving investors with a bad property after such duration. Professional investors recognize that there is a big difference between investment grade properties (ones that will outperform in the long term) and investment stock which has been built by developers to sell to investors and generally underperforms long term because it’s either a bad type of property or just in the wrong location.
2. Not focusing on what’s important:
Confucius once said “One who chases two rabbits catches neither. When real estate investors focus on doing too many things, they end up not doing well; what I mean is that, sometimes their early successes often become the biggest hindrance to their future focus.
For example, an investor having some big early wins would attract lots of people wanted to do business with, the question however is, “are the propositions aligned to the core to the business he had planned?
Don’t get me wrong, venturing or investing in things is a great thing but the idea is sticking with one and building from there till it attains stronger grounds before taking another up another is the goal; but till then focus on your priorities.
3. Learning about Real Estate and not the business itself:
A lot of investors forget that they are actually venturing into a business and think that to be successful, all they need to do is understand things related to real estate. Therefore, instead of concentrating and improving on relevant technique and business skills such as communication, negotiation, marketing etc., they rather focus on the property. One can actually understand what you do, but if you can’t market or sell yourself, you’ll never make money as you hoped to make.
Real estate investors who don’t have the right business skill set are far more likely to lose out than their fellow counterparts who both enrich their product knowledge and learn various technicality for building the business.
4. Area of preferred investment:
From real estate investment seminars to real estate investment adverts seen on social media and TV, one would think that residentials are the only property type available.
Further supporting the first point, due to poor researching, most investors go into the most popular aspect of real estate (Residential) which is almost saturated rather than explore areas with less competition and more opportunities (Commercial).
Most people go for the residential because they don’t understand that residential real estate has just a high demand but is a relatively low yield investment when compared to its commercial counterpart. In layman terms, “has a limited profit potential and heavy time commitment”. Don’t get us wrong again, one can venture into the residential option with a proper plan, building a name and exceeding expectations, but for an amateur investor who just went in based on the news of a high demand may not just suffer bad deals, but give up as a result of the fear for a continued loss.
5. Poor maintenance culture:
There is a relatively common theme in real estate called Set and Forget, which is setting up a property (may be newly constructed or renovated from a particular apartment type to another) and leaving it as time takes its toll on it.
To many investors, this is supposedly being a sound investment strategy as it would grow in value year after year.
This kind of approach is as regards to the popular belief that “Real estate/Land doesn’t depreciate”. Yes, it doesn’t, but that property on it would and when it does, the loss would be great.
This is not a strategy and can be considered a very big mistake as all properties will need some attention over the many years as at some time, you’ll need to upgrade some facilities to help retain value and attract the best tenants. Smart investors regularly review their property portfolio’s performance to understand which ones need attention as neglected properties are not the ones you definitely want in your portfolio.
As it’s said the best investment on earth is earth and real estate is considered not only the safest investment but a highly progressive one at that. Invest today and begin your journey to a sustainable and financially free life, but if on the contrary, you want to invest and don’t know what, where and even how to go about it, or you have a property you want us to manage for you, we are just a call away.