The 6 Barriers Preventing You From Earning Money With Real Estate (and How to Overcome Them)
Opinions expressed by Entrepreneur contributors are their own.
Real estate is one of the top five strategies that investors use to get rich. However, once you start investing, you will realize that the reality is far from the attractive success stories posted on the web. You will surely face different obstacles that will hold you back in your project. To help you prepare for those setbacks, we have identified the six most common barriers experienced by first-time investors and which prevent them from making money with real estate.
1. Lack of knowledge
Investing in real estate requires the acquisition of some prior knowledge. For example, you need to know the different rules that govern the real estate market, the tax systems in force, the metrics that play a role in profitability, the various financing possibilities, etc. Currently, there is a lot of information on this subject that you can find on the web. It is up to you to distinguish the real from the fake by sorting out the information, which is not an easy task for a beginner in the field. The best way to master the mechanics of the real estate business is to get trained. You can also learn from the experiences of successful investors to build your own strategy. But be careful, because just like a lack of knowledge, wanting to know everything about real estate before you start can hold you back. Thus, it is necessary to find the right balance.
Related: 8 Ways Real Estate Is Your Smartest Investment
2. Not expecting the difference between theory and practice
Often, beginner investors think it will be easy for them to earn money with real estate, given all the theories they have learned. However, the further they get into their investment project, the more they realize that the practice is different from the theory. Then, they start to doubt and lose confidence. Some of them even end up giving up. But no one becomes an expert from one day to the next. As a beginner investor, you have to prepare yourself psychologically for the fact that the road ahead will be full of pitfalls. It is possible that you will make some mistakes that may cause you to lose an interesting deal. This does not matter. The important thing is to learn from your mistakes. With the passage of time, you will learn to distinguish a good deal from a bad one at a glance. You will also become better at negotiating. All this can be learned and perfected by practicing, even if you have acquired the theoretical basis.
3. Not having a precise plan of action
As in any business, instinct alone is not enough to be profitable in property investment. If you want to make money in real estate, you need to have a clear plan of action and to always stick to it. During your journey, you will often be confronted with various proposals that seem interesting, but do not correspond to your objectives. In these cases, you will need to sit back and to think things through. You know that if you put your financing or all your cash into this property, you will not be able to continue investing in other properties. Keep in mind that a property that doesn’t suit you will not allow you to achieve the goals you have set beforehand.
Related: The 5 Step Guide to Avoid Making Investment Mistakes
4. Letting your emotions guide you
This is a big mistake that is often made by beginners and one that prevents them from making money with real estate. Emotions should have no place in the choice of a real estate investment. You must be able to control your emotions, so that they do not interfere with your choices. So, in order to distinguish a good deal from a bad one, you need to base your decision on rational data. Nowadays, sellers have understood that the emotions easily come into play when buying a property. That is why they usually focus on the minor details that can create a love affair. If you only look at those superficial elements, you may miss the major repairs that a property may need. So, you need to stay vigilant.
5. Being afraid to take risks
While it is possible to measure your risk, there is no such thing as “zero risk.” As with any investment, property investment involves risk. But you can control your risks by training yourself and by being accompanied by professionals in this field. Being paralyzed in analysis is not good for you, and you will never move forward if you wait for the perfect deal. When most of the lights are green on a property, you should seize the opportunity, especially if your goal is to grow your assets quickly.
6. Lack of patience and determination
Patience and determination are the two qualities that will get you to the top in real estate investment. Finding a good deal can take months of searching. Without patience and determination, you may give up at the first obstacle. So, it is important to keep in mind that a property investment is a long-term investment. Generally, the return on investment is measured in years. Patience plays an essential role throughout your project. It comes into play at every stage — from finding the property to renting it out (if it is a rental investment). This virtue also comes into play during the renovation work if you are investing in an old property or during the sale, if this is your objective.
Related: How to Avoid the Common Pitfalls of Real Estate Investing
Now that you know the six most common barriers that prevent you from earning money in real estate, it will be easier for you to deal with these different obstacles. Since each case is unique, you may encounter other challenges along your way, but the important thing is to face each of them.