Most real estate companies have had their fair share of deal mistakes. Some of these are avoidable, while others creep up on you when you least expect it.
Jacob Blackett, the founder of SyndicationPro, has made one of those costly ones in the course of running his company. His team bought a C Class property and wanted to reposition it to C+. The house was built in the early 70s, and the owner had been in possession of it for about thirty years.
It was meant to be the classic deal, fix up the units and sell. However, the biggest mistake they made was that the budget was only for the improvements they planned without considering that the first 18 months would contain higher repairs and maintenance.
The previous owner had put band-aids on everything for years, leaving the plumbing and everything else in a sorry state. Eventually, things did turn out okay, and they were about to sell for some profits. But not without several months of hindered cash flow and a lot of avoidable stress.
Jacob may have been lucky with this deal, but your real estate mistakes may end up being more severe. So, to avoid being on the wrong side of the market, here are some real estate deal mistakes you should never make.
No Due Diligence
Do you take time out to run the numbers for each deal, or you’re in too much of a hurry to do this diligently? If you’re not the type to carry out due diligence on any deal, then you’re courting a disaster.
For example, if you were to handle a fix and flip deal, here are important questions for your ideal due diligence process:
- What type of buyer do you want, and how much will they pay?
- How much would your target buyer want as a discount to the market value?
- Can you calculate the investment potential on a rental property and what the rental buyer wants for cash flow?
- What is your estimate for the rehabilitation job?
By answering these questions correctly, you have gone a long way in carrying out due diligence on the property. Feel free to monitor other aspects. It’s best to have all the answers ready than be the victim of unpleasant surprises.
No Adequate Understanding of Your Target Market
All it takes is one wrong purchase, and you could find yourself stuck with a home that no one is interested in. To avoid making this terrible mistake, you need to pay more attention to the neighborhood and the type of house you’re buying.
It’s entirely possible that you would have more rental property investors as your buyers. Therefore, you should take the time out to conduct the right level of research. This will help you determine what works for them and the rental market.
Not Focusing on Consistent Communication with Potential Buyers
After working hard to build a strong database of buyers, one big mistake you would make is not staying in touch as often as possible. With a steady buyer list, you can be sure that there will always be someone interested in any deal you have available.
However, when you wait for several months, maybe after a long time of successful deals, to get in touch with a frequent buyer, you may discover that they have moved on. They may no longer be interested in that sort of price range or area. Update your information regularly by staying in contact with your buyers.
Not Understanding Your Buyers
Apart from understanding what type of property you’re working with and the neighborhoods that should be on your radar, some real estate agents don’t understand their buyers. Investors have different tastes and expectations. You should know the type of homes and styles that they would prefer.
The best way to get this information is to cultivate a stable relationship with them, enough to get in on this conversation freely. Find out the kind of neighborhoods they prefer, what they look out for in a rental home, and have a reliable database with this information.
These are only a few of the common real estate mistakes that agents make. So, keep these in mind and avoid them to attain consistent success and growth.