Real Estate Investing World

5 Lessons You Can Learn From Failed Real Estate Investments

Whether you are new to the real estate investing world or you have been investing for some time, you should understand that failure can hold a number of valuable lessons. That doesn’t mean that you have to go through the trials of a failed investment to learn those lessons, though. Fortunately for you, many investors have come before you and learned those lessons the hard way so that you can learn from their mistakes and avoid them.

Stick to What You Know

If you are new to real estate investing, it pays to do some research and to familiarize yourself with the markets you’ll be investing in before you dive in. As you do this, you’ll start to find that you’re more interested in and more comfortable with certain types of investments over others. This doesn’t mean that – if your first investment was in medical real estate – that every investment you make in the future has to be in the medical field. However, it does mean that you should understand your strong points and find financial and real estate experts who can help you make informed decisions about your investments in the future.

If It Sounds Too Good to Be True, It Probably Is

You’ll see infomercials, paid seminars, books, and TV shows all promising that they have the key to help you make millions of dollars in no time at all with real estate investing. If their promises were true, you would see a lot more millionaire real estate investors walking around, wouldn’t you?

The fact is there is no single secret to getting rich with real estate investing. However, with the right financial advice and real estate investing opportunities, you can grow your wealth while diversifying and stabilizing your investment portfolio.

Following a Formula Doesn’t Guarantee Success

Some of the books, websites, and television shows you see out there will have some good advice. If you follow this advice and you find a great deal in the right market, you’ll likely see a positive ROI. However, simply following one of these formulas will not guarantee that you get positive returns on an investment. That’s why it’s much more important to have experts in your corner than it is to understand any particular real estate investing “guru’s” formula.

Overpaying for Properties Is Always a Bad Idea

Whether you find yourself in a bidding war at an auction or someone tries to convince you that you should pay an inflated price on shares in an REIT that are “sure to appreciate”, you’re looking at a bad deal. Overpaying for a single-family property will result in losing your profit margin when you sell or rent. And overpaying for equity is just as disastrous, if not more so.

Never Bank on Appreciation – Cash Flow Is Essential

Finally, if you are looking at an investment property based on its potential appreciation rather than its current value in monthly or quarterly cash flow, you should probably walk away. Unless a property can bring you regular cash flow starting immediately or in the very near future, you are looking at an investment that will only tie your funds up and will not show you any significant returns until you can sell it. Even then, market values are never guaranteed, and you may end up taking a loss on the property in the long run.

Take these lessons and learn from real estate investors who’ve come before you. Many people have lost significant amounts of money by making very simple, understandable mistakes like these. Learn from those mistakes and enjoy more returns on your investments now and in the future.