1. Waiting Too Long To Start Investing
The real reason that people don’t start investing earlier is fear ... fear of failure, fear of success and fear of the unknown. Read books, listen to tapes and network with people who are already doing what you want to do.

2. Not Having a Plan
You've got to plan your marketing, plan your purchasing, plan your renovation work, plan your resale, plan, plan, plan ... The fastest way to go broke,
the fastest way to lose a lot of money, the fastest way to be forced out of the investing business is not to plan.

After you start planning consistently, you will realize that anytime your business starts getting chaotic, you'll stop and pause and realize that you
have gotten away from your planning. It takes 21 days to create a new habit. Start your planning habit today.

 

3. Not Requiring Repair Bids Every Time
Anytime one of the many investors that I interviewed had a problem with a contractor and/or a contractor's performance; it always went back to the fact that the investor didn't have a written repair bid signed by the contractor.

This is what happens, you reward a job to a contractor and when he gets on site and begins to work, you realize that it is not what you expected. After you talk with the contractor, you realize that it is exactly what he expected. A written repair bid eliminates any confusion because the bid states what
the contractor will do, and what materials he will use.

Always have a contract signed after you award a contractor a bid. Within that contract will be the "Scope of Work" addendum. The "Scope of Work" addendum specifies what work will be performed and what materials will be used. The contract will also specify the total dollar amount of the contract (your contract should also include a Clean Up Clause, Damage Clause, specify who is responsible for getting the permits, Late Performance Penalty Clause, and Payment Disbursement Addendum among other clauses and addendum's).

4. Not Charging Tenants For Damage
If and when a tenant damages your property, and you go over to the property or send someone over to the property to fix the damage, and you do not charge the tenant for the repair, you have just told that tenant that it is O.K. to be negligent in your apartment.

The need to start training your tenants to respect you and your property is immediate. It must begin at the very first interview. Train your tenants from the get go and you will only be called for the serious damage that you want to know about.

5. Not Screening Tenants For Eviction Risk
Always screen your tenants. It's crucial to your survival as a landlord. Sure, there aren't many people out there with great credit but good credit isn't the concern. Your primary concern is whether or not they have been evicted.

Be smart, do an eviction background check on all of
your prospective tenants. It's easy if you use National Tenant Network. A nation wide service that provides background checks for landlords.

6. Paying for Construction Cost Before 100% Completion
You'll make this mistake and wish you hadn't. Paying for a construction job before it is 100% complete gives the contractor no incentive to return to finish the job. Even if he has the best intentions, in his mind he is paid, job is done. There is no pain in him not showing up again, and he is now focused on his next payday.

7. Over-improving a Property To Flip or Rent
How much do you REALLY need to do to a house to get it to sell or rent for the best price? At what point is it too much?

You will want to put out quality product and do your repairs properly. You shouldn’t cut corners or hide defects in a house. You want to do the repairs that will give you the biggest return for the money.

If you’re renovating a house for resale, you want to focus on the kitchen and baths. Spend all of your extra rehab money in these rooms because these are the rooms that will sell your house. They should be bright, clean and shiny.

8. Running Out of Cash
You’ve bought and sold your first house and made a nice profit. You’re in the middle of your second rehab and you’re purchasing your third deal. Your marketing is paying off as the fourth deal that promises even more profits than the first three comes along but now you’ve got a problem.

You’ve run out of cash! You can’t buy that fourth deal or any other good deal that comes down the line until you rehab and sell the second and third houses.

This is called “Cash Crunch,” don’t let this happen to you. You should be putting down as little a down payment as possible when you purchase your investment properties.

How do you do it? Establish a relationship with a hard money lender as soon as possible. Sure the money cost you more but you will factor the costs into the deal when you make your offer so that your profit is still where you want it to be.

9. Missing Out On Special Grants, Loan Programs, and Tax Incentives
Many cities and towns give investors incentives to rehab properties in certain parts of the city. This is usually done through revitalization programs.

There are certain parts of a city that are targeted with federal, state and/or local funds that are free or given out as low interest loans to investors who are willing to rehab these properties. There are also municipal, state and federal loan programs that may offer low interest loans, and/or forgivable debt for investors looking to do work on run down properties in run down parts of a city.

Find out about these programs by calling the office of economic development in the state, city or town that you are interested in.

10. Not Thinking of Tenants as Potential Buyers
Who else is a better candidate to own your property than people who have been living in it and taking care of it already?

Maybe you'll want to institute a lease with the option to purchase. You can take a small amount of the rent and put it towards the down payment. They will take better care of the property and you will be guaranteed to get your rent on time because in your option agreement you will state that if the rent is not paid on time the option is not valid.

11. Forgetting About Asset Protection
Each of your properties should be purchased in a trust or a corporation. Your bank accounts should also be in trusts. Your home, automobile, boats … should all be hidden in asset protection devices. Speak with an asset protection attorney to find out which asset protection vehicles you should be in.

12. Underinsuring a Property
Always properly insure your properties and don’t play games with your insurance. Some investors try to get away with getting an occupied homeowner’s policy while they are rehabbing a property. A homeowner’s policy will only pay a claim if you can prove that someone was living in the property at the time of the claim.

A policy on a vacant dwelling cost a few hundred dollars more than a homeowner’s policy but it is well worth it. Do you want to know how to legally get the most money from your insurance company for your claims? Call your local Public Adjuster (find them in the phone book) and it is his job (if you hire him) to fight on your behalf to get what is rightfully yours from your insurance company.

By Jeff Adams
http://www.freerealestatementoring.com/
Contact:
Real Estate Investments Department
P.O. Box 1718
Upland, CA 91785