These might not be what you think. When most people think about “mistakes” made in multifamily investing, losing money or foreclosure might come to mind. Maybe getting into the market too soon or too late, not having enough money to buy a deal, etc.
While these are certainly valid concerns, I assure you that they are not the biggest issues to avoid in this business. I have been a full-time apartment investor and operator for almost 20 years, and I have been teaching others to invest in apartments for over 10 years.
Between the two, I have composed this list of the five most common mistakes (or things to avoid).
- Boredom
Boredom is the number one killer of success in the multifamily business. You jump into the business expecting a lot of action early on, and when it doesn’t happen, you get bored and wander off.
To avoid this, you need to understand that building a portfolio of cash-flowing assets takes time. Not decades, but maybe a few years to get fully going in the business.
It has been my experience that most people who receive some form of mentoring in the business will close their first deal within 12-18 months. The second and third deals usually come shortly after the first. Don’t quit before success happens.
Markets come and go, so be patient.
2. Not being able to show up
Job growth, population growth, and landlord-friendly laws are some of the most common factors people analyze when choosing a market to buy in. These are good things to know about, but the number one issue is: can you show up?
Good deals don’t stay on the market long, and great deals are often traded through relationships. You will need to spend time in your market of choice to be known, liked, and trusted by sellers and realtors in the area.
Those relationships will not be built strictly over the phone and via email. Go there.
3. Violating the 3 Pillars of Real Estate
The Three Pillars of Real Estate is a concept first introduced in the book “Creative Cash: The Complete Guide to Master Lease Options and Seller Financing for Investing in Real Estate.” The 3 Pillars are:
- Debt
- Exit Strategies
- Market Cycles
To be successful over a long period of time (more than just the good times), you need to fully understand how to bring all three of these concepts together.
First, determine your exit strategy for the asset. Next, decide which part of the market cycle you are in and what cycle you will be in when your exit strategy comes due. Lastly, get a loan that will complement your exit strategy.
4. Letting a lack of money stop you from getting started
Are you new to real estate? Don’t have a ton of money? Don’t have any experience or credibility?
If you answered yes to these questions, then you are exactly like I was 20 years ago when I got started in the business. Don’t let these things stop you.
There is a way, I promise. You are going to have to create value for others to gain access to the capital you don’t have. Why would investors/lenders/partners invest in you?
The two things you can do to get into deals (or get equity) are to get an education in this business and learn to find deals. If you can find a good deal, you have something to trade.
Always have something to trade.
5. Not networking enough
This is one of my personal biggest failures. I lost a $150,000 earnest deposit on a large syndication where I was the head GP. I got arrogant and thought I had a big network, and that raising money for the deal would be easy.
I was wrong. I lost $150,000.
Meet more people.
6. Not knowing what the next step is
This is a big one. Most people who want to get into the business don’t know what the next step is. So here are your first three steps to getting started in the multifamily investing business:
- Choose a market.
- Set up systems for deal flow and learn to analyze those deals.
- Network like crazy.
This may sound overly simplified, but I assure you that it is that simple… it’s just a lot of work.
For more information like this check out my free resources page at www.RealEsateRaw.com.
Best of luck!
Bill Ham
