Avoiding the common pitfalls of real estate investing can help you reach your wealth building goals faster. This can include avoiding costly tactical mistakes or blocking the wrong type of thinking that can sabotage investor success. See the following article from JasonHartman.com for more on this.
Investors themselves often block the path to success with self-defeating attitudes, actions, and especially inaction, failing to “get out of their own way.” While intelligent investing is obviously a better strategy than ignorance, succumbing to “the paralysis of analysis” thwarts any chance of success. Steering a balanced course between the two poles of over- and under-thinking is the key.
Focusing on Negative Experiences
Investors who focus on negative experiences and ignore successes suffer from a kind of tunnel vision that prevents them from seeing and understanding the big picture. Maintain perspective rather than allowing a single setback to inform your whole investment strategy.
Investing in Wrong Kind of Instruction
Investing time, energy and resources on the wrong kind of instruction is a common and costly mistake. Instead, pursue an education that teaches how to find success where others have failed, creating avenues for opportunity.
Excessive Greed
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Excessive greed can be an expensive attitude for investors. Wanting to maximize profits is only natural, but the price of stubbornly trying to squeeze every dollar out of a rental property could be a costly vacancy.
Failing to Listen to Property Managers
Failing to take the advice of property managers can be as big a mistake as heeding only their counsel. Ideally, investment counselors draw on a wealth of information to provide impartial advice. But investors ultimately must rely on their own judgment. Enlisting the services of a qualified property investment adviser to help you manage your portfolio and keeping the lines of communication open is essential.
Panic Buying or Selling
Panic buying is deadly for investors, but panic selling is even more perilous and prevalent. While it’s never wise to blindly rush into a deal, it’s just as dangerous to react to a random setback with a knee-jerk decision to sell. Likewise, investors whose stock answer is “No” block access to opportunity, while “Yes” is the key that opens doors.
Becoming Over-Extended with Debt
Failing to respect the powerful investment tool of leverage by becoming over-extended is an all-too common pitfall. Maintaining adequate reserves is the best way to counteract being derailed by debt. 4% is the recommended minimum, and this reserve must be separate from funds for other expenses. Failing to adequately plan for contingencies is another mistake that violates the principles of prudent investing.
Making Investments During Major Life Changes
Making major career or life changes while pursuing investments disrupts the secure foundation crucial to success as an investor. Change itself is an inevitable part of life, but be sure to regain your solid footing before plunging into an investment.
Letting Your Personal Circle Influence Decisions
Letting your personal circle or “sphere of influence” affect your investment decisions can be dangerous. Be careful where you get your advice and consider the source. Failing to stay in control of your investments endangers your financial future. The way to avoid paying hefty fees, often for bad or even fraudulent advice, is by being a direct investor.
Knowing yourself will help launch you in the right direction as an investor, and steer clear of the self-sabotaging behaviors that derail even the best-intended plans.
This article is based on Episode 141 of Jason Hartman’s Creating Wealth Show. You can listen to the full podcast at JasonHartman.com, a real estate investment and wealth creation site.
