- Take TOO Long: Good deals don't wait around for indecisive people. Many people "think a deal to death." One way to lower your anxiety level with a deal is to move forward provisionally (i.e. with a subject to clause of some sort.)
- Trust Seller's Numbers: Even if there is only good intentions, most sellers just aren't knowledgeable and all of them are inherently biased a bit.
- Trust "appraisals": An appraisal really isn't meaningful, unless YOU hired the appraiser, and YOU gave them the instructions, and YOU are handing the appraiser the check. I can influence an appraiser to appraise a "$100,000" house for as little as $80,000 and as high as $120,000 (or more). That's a 20% variance! That's a lot to have in a marginal deal. So take any "appraisal" the seller hands you in the spirit that it was intended, as a MARKETING piece!
- Do their math in pencil: The next you catch yourself thinking it's okay to "fudge" your numbers a little to make the deal cashflow or the rehab payoff, BEWARE! Some investors have a tendency to "play" with the number a little to make them show a marginal deal is better than it really is.
- Overestimate market rents: This one happens all the time. The way you know what a house will rent for is to do a market rent survey. The rents listed in the paper may or may not be accurate.
- Overestimate "as is" value: So many investors forget that to turn a house in 60 days or less requires the price to be REAL not pie in the sky. Be careful to be conservative in your estimate of value going into the deal. The worst case then is that you make MORE money!
- Get Bogged down in process… Use "Layered" Approach: I will be talking about this innovative way to analyze a deal FAST on Real Estate Radio. See info below on this.
- Worry about the house on the first layer analysis: On your first pass, you are only concerned about three things: 1. Why the seller is selling (i.e. motivation) 2. Is there any equity? 3. What would be the property cashflow if you held onto it?
- Underestimate time it will take to Flip / Fix / Fill / Sell: I've bought a lot of houses from investors who got stuck with holding costs being too much for them to handle. Be careful here.
- SKIPPING analysis until the deal falls apart on it's own: Wishful thinking isn't pretty.
- BONUS MISTAKE: Hiding behind analysis when they are AFRAID to act!
David Finkel's Real Estate Radio Show Is Thursday nights the show airs at:
To listen in, just go to www.davidradio.com