ebook proof read april 27

10 Costly Mistakes to 

Avoid as a New Real 

Estate Investor 

LEARN FROM THESE 10 COSTLY MISTAKES 

You’ll Keep Thousands of Dollars in Your Pocket and You Could 

Potentially Make Thousands of Dollars by Not Making These Mistakes.

10 Costly Mistakes to Avoid as a New Real Estate Investor 

Table of Contents 

Copyright....................................................................................................2 

About the Author......................................................................................4 

Introduction...............................................................................................6 

Mistake # 1 – Attending Bait and Switch Seminars...........................8 

Mistake # 2 – Paying Too Much for a Property.................................13 

Mistake # 3 – Little or No Research Before Property Purchase......17 

Mistake # 4 – Partnering Without a Written Agreement.................21 

Mistake # 5 – The Lone Ranger Mindset............................................25 

Mistake # 6 – Get Rich Quick Mentality.............................................29 

Mistake # 7 – Investing Without a Clear Goal...................................33 

Mistake # 8 – Hiring Incompetent Contractors.................................39 

Mistake # 9 – Underestimating Property Expenses..........................48 

Mistake # 10 – Overpricing Properties Once Completed...................51 

Epilogue......................................................................................................53 

2 

10 Costly Mistakes to Avoid as a New Real Estate Investor


Disclaimer: 

All material contained in this book is provided for educational and 

informational purposes only. No responsibility can be taken for any results or 

outcomes resulting from the use of this material. 

All rights reserved. No part of this book may be reproduced, stored in a 

retrieval system, or transmitted in any form or by any means, electronic, 

mechanical, photocopying, recording, scanning, or otherwise, without the 

prior written permission of the publisher. 

While every attempt has been made to provide information that is both 

accurate and effective, the author does not assume any responsibility or the 

accuracy or use/misuse of this information. 

Published in the United States by Damon Jones of Purpose Real Estate 

Company 

eBook Edition I-April 14, 2017 

Copyright © 2017 by Damon Jones 

3 



About The Author: A real estate investment and sales professional for 

more than 19 years, Damon Jones is known for integrity in all of his dealings. 

Damon believes that, “integrity should be the basis of every relationship, 

whether it’s business or personal.” Originally from Compton, California. 

Damon is a U.S. Air Force veteran who proudly served his country as a 

military policeman. 

Damon entered the real estate business in 1997 and practiced real estate at 

Century 21 in Lakewood, California. After two years as a successful real estate 

agent with Century 21, the world’s leading real estate brokerage at the time, 

Damon started his own real estate firm. Damon Jones is the real estate 

broker/owner of Purpose Real Estate Company, a full service residential and 

commercial real estate brokerage and real estate investment firm, located 

in southern California. After achieving tremendous success with 

assisting/educating home buyers and sellers reach their goals, Damon began 

investing in real estate. 

4 



Damon began buying fix and flip properties for profit in Long Beach 

California. Soon after getting involved with the fix and flip properties, Damon 

began to purchase multi-family units to increase his passive income. He most 

definitely has what it takes to guide new and seasoned real estate investors 

through the real estate investment process. Damon specializes in multifamily 

and fix and flip investment properties. 

By keeping his finger on the pulse of the latest trends and movements of the 

California real estate market, Damon is able to offer his clients top-notch 

guidance from start to finish, ensuring the entire real estate investment 

process is seamless, efficient, rewarding, and above all else, profitable for his 

real estate investment clientele. Every transaction, he believes, is always 

about his customer. While he's a strong negotiator and advocate for his 

clients, he’s just as much a compassionate, friendly, humorous partner who 

eases a process that can often be quite stressful. Passionate to his craft, 

Damon continuously seeks to stay ahead of the game when it comes to 

market trends for the benefit of his real estate investment clientele. 

With passion, perseverance, and a desire to always exceed his 

clients’ expectations, Damon continues to lead his company into a bright 

future. Give Damon the opportunity to earn your trust, by allowing him 

to guide you through the real estate investment process. Damon will be 

more than happy to help you avoid the 10 costly mistakes in real investing. 

Whether you’re ready to buy, sell, invest in residential or commercial 

real estate, please don’t hesitate to contact Damon directly for a FREE 

over the phone, no obligation private consultation at 562.688.6279, or via 

email at PurposeReCompany@gmail.com. Visit Damon's website at 

www.PurposeRealEstate.com 

Copyright © 2017 5 



Introduction 

The mistakes listed in this book are being shared by the author (Damon 

Jones) from his own personal experiences and the experiences of his fellow 

investors and clientele. This list of “10 Costly Mistakes to Avoid as a New 

Real Estate Investor” are not the only mistakes to avoid. However, they’re the 

most important mistakes to avoid, which will save you thousands of dollars 

in unnecessary headaches and sleepless nights. 

Several years ago, before the pop of the real estate bubble, quite a few people 

decided to take the plunge and become real estate investors. Most of them 

had no desire to be a landlord and deal with tenants, so most of them chose 

to become property rehabbers/property flippers. You’ve seen this concept on 

popular real estate TV shows. The idea is to buy a house at a discount, fix it 

up and sell it for a profit. That’s exactly what most people did. However, most 

people didn’t realize that it was more to the real estate investment process 

than what was shown on TV. 

Real estate investing is an investment strategy where an investor purchases 

property in order to earn a profit. In most cases, the investor will either rent 

out the property, or improve on it in order to resell it at a higher cost than it 

was purchased for. Real estate investing can be riskier than other 

investments since property cannot usually be sold quickly. 

6 



Owning property can offer the investor a sense of security because the value 

doesn’t tend to fluctuate as much as other assets such as stocks and bonds. 

However, this doesn’t mean that the investor will always break even or earn a 

profit on their investment. Although housing prices don't tend to fluctuate in 

the short term, they may increase or decrease in value in the longer term. 

Therefore, it’s important for the investor to thoroughly research the area 

before making a purchase. Another reason why many investors are attracted 

to investing in real estate is because the property can be utilized by the 

investor. They can either live on the property while they fix it up, or they can 

be a live-in landlord and earn an income stream at the same time by renting 

out the other rooms. 

This information was taken from the personal experiences of the author 

(Damon Jones) and experiences of the author’s fellow investors and clientele. 

Please educate yourself before investing in real estate and you’ll increase 

your profits, allowing you to reduce your stress level as a new real estate 

investor. 

Copyright © 2017 

7 



Mistake # 1 

Attending Bait and Switch Seminars That Try to Upsell You To 

Their Expensive Real Estate Boot Camps 

According to many reputable investment sources, real estate investment is on 

the rise and so are investment workshop scams. Many bait and switch real 

estate investment seminars will be promoted online, on TV infomercials, or 

as books. You’ll be asked to sign up for an initial course that’s either free or 

very inexpensive. The initial course will turn out to be nothing more 

than mysterious promises and vague advice coated in a heavy sales pitch. 

This is all done to prepare you for the bait and switch upsell tactic. 

They’ll offer you the chance to sign up for advanced courses that cost 

thousands of dollars. These courses either never take place or they’re 

filled with ridiculous information that’s impossible to 

implement. 

8 



This isn’t to say there aren’t legitimate real estate workshops out there. I’m 

providing this information because I’ve seen too many people lose their hardearned 

money to scam artists. In my experience, if you don’t receive useful 

information from the initial seminar/class, then the “$10,000-$20,000” (or 

more) boot camp they’re pressuring you to register for is going to be a 

robbery of your hard-earned money. Many of the investment scams are 

taught as legit business methods, but if the deal being taught seems too good 

to be true, then it probably is too good to be true. 

Even a few famous TV real estate investors have been scamming people by 

using their celebrity status on the house flip programs. Numerous TV 

investors scam their fans out of thousands of dollars by selling worthless 

information about flipping houses, followed with their bait and switch 

seminars. 

9 



Be on the lookout for real estate seminar scams coming to your town. When 

most of the real estate investor seminars run infomercials everyday about 

when they’ll be in your area. The infomercials will run several times a day 

until the seminar begins. A TV investor will usually talk about how they’re 

the #1 real estate investor in the country and they’ll mention the TV show 

episodes and their unverified success stories . The TV investor will claim that 

attendees will learn from them personally how to make money flipping 

houses, then they’ll continue to mention how the seminar is free to attend, 

but to hurry and call the number at the bottom of the screen because there is 

limited seating. The TV investor will sometimes try to lure attendees in with 

offering free worthless items (i.e. cheap laptops, smart phones, etc) , just for 

attending. 

What they fail to mention is that the TV investor will not be present at the 

free event. Seminar attendees should never expect to meet the TV 

personality, they’re usually at home counting all the money from the bait and 

switch seminar Scam! The so called free event is just a smoke screen for the 

bait and switch multiple day seminar that usually costs $10,000-$20,000 or 

more. The reality of the matter is, the attendees will receive a worthless 

property tour on a bus with no real chance of ever investing in real estate 

with that program. 

10 



Don’t allow real estate seminar scam artists to steal your hard-earned money. 

We live in the age of information, so don’t feel pressured into a seminar 

upsell before doing a little bit of internet research. If you ever feel 

intimidated by someone pushing you into a seminar upsell then you need to 

immediately walk away. They don’t have your best interests at heart. They’re 

only focusing on how to line their pockets with your hard earned money. Be 

cautious about these types of real estate seminars and you’ll save yourself a 

ton of heartache and disappointment. 

11 



12 



Mistake # 2 

Paying Too Much for a Property 

It’s not uncommon for new real estate investors to find themselves in a 

bidding war over a property. And while it may appear an innocent move (after 

all, the lucky bidder gets the property!) there can be dangerous downstream 

affects. Don’t be tempted to pay a premium price on a real estate investment, 

it’s good to keep the real estate buying adage in mind, “You don’t make 

money in real estate when you sell, you make money when you buy!” 

When buying a property, it’s very easy to get caught up in the emotion and 

forget about the investment numbers. Especially If you’re buying a property 

you plan to hold onto for the long term – say 15 to 20 years, then overpaying 

can make sense if you’re sure it’s the right property in the right area and for 

the right purpose. 

13 



In regards to fixer upper properties, many new investors end up paying far 

too much. They often have no idea how much the repairs/upgrades will cost 

so when they pay over the asking price and then fork out for the work, they’re 

often left disappointed when the extra cash injection doesn’t lift the 

property’s value by the same proportion. That’s why it’s so important to be 

mindful of the ceiling price on the property when investing in a property. It’s 

always crucial to know the recent sales in the area and work out what’s 

realistic for your investment objectives (whether it’s for a quick fix and flip or 

long term rental investment). 

New investors buying for the fix and flip property should avoid paying more 

than their intended investment price because they may put themselves at 

grave risk of negative equity if property prices fall (unless they plan on 

holding it for the long term). 

Whenever you’re looking to buy a property as an investor (especially a new 

investor), it’s a standard practice to ignore the asking price. You should 

instead look at recent sold prices within the past few months. One of the best 

ways to estimate the value of a property is to find out what similar properties 

in the area recently sold for, known as “comps,” or “comparable sales.” 

Looking at what other properties in the neighborhood are listed for helps as 

well. But you usually get the most accurate picture of local property values by 

looking at the price someone actually paid. “Ideally, you’ll be able to find at 

least three comparable properties that have sold recently in the same 

neighborhood.” 

14 



What can you do if you're compelled to overpay for a property? There are two 

potential antidotes: 1) Know why you're overpaying; and 2) Make sure the 

overpayment factors into your game plan based on how long you'll keep the 

property. If you know you'll have to pay more upfront (due to competing 

investors, etc.), but have a game plan to quickly recoup your losses, 

overpaying for a property could make sense. 

Say you’ve overpaid for a property that has several extra acres that can be 

divided off and sold at a substantial gain. In fact, you believe the acreage sale 

could fund an entire remodel for the property. It’s probably a good case of 

overpaying (provided you’ve gathered the proper planning and zoning 

research information upfront.) Overpaying for a property should not be 

isolated from other facts of the purchase. For example, overpaying for a 

property in a stable, appreciating (value increasing) neighborhood may not be 

as dire as spending too much on a house in a deteriorating subdivision or on 

the edge of a warehouse district. 

15 



For instance, if you know you’re in a seller’s market (little housing supply 

with lots of demand), making an offer that’s below the asking price probably 

won’t get you the property— and it might put you in a bidding war situation. 

Entering into a bidding war can become emotional. If you truly want the 

property, your logical, rational perceptions can get influenced. Know your 

limit, and walk away if the price goes higher than your investment objectives. 

There are always other properties that will come on the market. 

New investor emotions, stiff competition from other real estate investors— 

even feelings of losing out on the property you want, challenge new investors 

to overpay. Maintain a calm mindset, have a buying game plan (and stick to 

it) and make money when you purchase your investment properties (that’s 

where the extra profit is found). 16 

Mistake # 3 

Little or No Research Before Property Purchase 



It pays to do your homework and to tap local resources to determine which 

areas are hot now and, more importantly, which ones will be hot in the 

future. Much of the information is out there and free for the taking. You just 

have to be willing to do the leg work. Before most people buy a car or a 

television set they compare different models, ask a lot of questions and try to 

determine whether what they’re about to purchase is indeed worth the 

money. The due diligence that goes into investing in a property should be 

even more rigorous and detailed. 

Depending on your investment objective, there are also research 

considerations for each type of real estate investor – whether a personal 

homeowner, a future landlord, a flipper or a land developer. Not only must 

the prospective real estate investor ask a lot of questions about the property, 

but he or she should also inquire about the area (neighborhood) in which it is 

located. (After all, what good is a nice property if just around the corner is a 

college frat house known for its all-night keg parties? Unless of course, you’re 

attracting a student renter.) 

The following is a short, but not all inclusive list of questions that 

would-be real estate investors should ask themselves regarding the 

property in question: 

-Is the property built in the vicinity of a commercial site, or will long-term 

construction be occurring in the near future? 

-Does the property reside in a flood zone or in a problematic area, such as 

termite problems? 

-Does the property have foundation or permit “issues” that will need to be 

addressed? 17 



-What did he or she pay for the property and when? 

-What’s the motivation of the property owner selling? 

-If you are investing in an unfamiliar area, are there any problem areas in the 

vicinity? 

Before acquiring an investment property, you will need to do a lot of 

background research to make a wise decision. Here are few steps every new 

real estate investor and expert alike, should take when considering a potential 

investment property: 

Learn the lay of the land. If you don’t know much about the city your 

target property is in, there’s no better place to start than to get in the car and 

take a drive. It sounds obvious, but investors frequently make poor 

investment choices by mistaking the area their investment property is in to 

be just like another community they're familiar with. 

By driving around, you can learn the access routes to the highway and get a 

sense of the traffic. You can also see if there is an adequate town center, 

accessible public transportation, good shopping, or other factors important to 

your potential renter or buyer. Does the area appeal to you and do the nearby 

properties look well maintained? If you don’t like what you’re seeing, chances 

are that a renter or future buyer of the property won’t either. 

18 



Do some on-the-ground research. Driving around is fine, but to 

thoroughly get a feel for the area, you’ve got to explore by foot. Go in local 

stores and restaurants and talk with the managers about what it’s like to do 

business in the community and/or live there. Call your friends or other 

people you know who live or work nearby and get their thoughts on the area. 

You’ll be surprised how much people will tell you. Hit the city hall and find 

out if there’s any development going on in the community. Understanding 

local development plans, and if people and businesses are moving in our out 

of town, can give you a gut check on the current property inventory that 

exists and the future market potential. 

Run a sales comparison. Before you even work with a real estate broker, 

you can find out what properties have recently sold in the area that match up 

with the size and amenities of the property you’re considering buying. A 

simple internet search will allow you to pull up sold properties within a 

particular city. You can also ask your real estate broker to produce a list of 

more specific, comparable properties in the area. Knowing how much an 

investment property is worth will help you gauge its value and determine 

potential growth. 

Learn market rents. If you’re going to rent out a residential property, know 

the true rent potential before you buy it. Your real estate broker can help 

identify this information, as well as provide comparable sales data. For more 

information on determining the financial implications of renting out an 

investment property, research the area rental amount average. 

Check out the local county recorder’s office for the deed and 

mortgage history. Find out the current mortgage and last sale price of your 

target property, and see if there are any liens on the property. These are all 

public records, most of which can be found online. Knowing this information 

will help you understand your negotiation boundaries for buying the 

property, and the price the sellers will be willing to accept. 

19 



Get all of the costs. In addition to the property taxes, ask your real estate 

broker if he/she can obtain data on the current expenses of the property, such 

as utilities and insurance. If it’s a commercial property this should be no 

problem. For a single-family home, this may be tougher, but a seller may 

provide this information if they know there's an eager investor looking for it. 

Evaluate multiple properties. You may feel that a particular property is 

the one, but you should look at multiple properties before making an offer. 

Ask your real estate broker to show you several within your price range, 

including properties you don’t like, so you can assess the different 

neighborhoods and have a better sense of your target property’s value. 

Obtain local statistics. Look at how the city compares with other localities 

in the area. How do the schools stack up? What’s the median income? 

Unemployment rate? What’s the population count, and is the community 

growing? How do the real estate taxes compare to nearby cities? All this will 

help you better understand the attractiveness (or lack thereof) of your target 

town or city over others. Don’t forget to check the official website of the city 

or county where the potential investment property is located; many local 

government websites include demographics, crime statistics, and other data. 

Determine property potential. Understand how the property is zoned. 

Can you expand it? Can you convert it to something else? What are the 

setback regulations from the street and bordering areas of the lot? If you 

have visions of developing the property, you need to know the city’s 

classification of the property and the limitations that come with that. If, for 

example, you want to alter the property’s use by turning a residential 

property into a commercial one, this will likely cost you in attorney fees, but a 

consultation with city managers is imperative in order to find out if that is a 

step you could even successfully take. 

20 



Examine permit data. Cities, counties, and municipalities are increasingly 

making permit data more accessible. You may be able to find your property’s 

physical history online, but a trip to the local government 

administration building can yield results if a web search can’t. Not every 

community will have this on hand, but it’s nice to get it if you can. 

Knowing when a permit was actually pulled for a furnace installation, 

or a new roof, will help you determine the seller’s honesty when 

those matters come up during the negotiation. Discrepancies learned can 

result in actual dollars saved. Conduct your research on any and all of your 

future investments and it’ll save you a ton of heartache in the short and long 

term. 

Mistake # 4 

Partnering Without a Written Agreement 

21 



If you enter a real estate partnership, put everything in writing no matter who 

you work with. The money, the responsibilities, the exit strategies; everything 

has to be in writing. When you enter into a partnership, you also have to plan 

for everything. What if one person sells out? What if one person starts 

slacking on their responsibilities? What if one person stops investing the 

money they promised they would. All of these issues cause partnerships to 

turn bad. They turn families against each other and make friends enemies. If 

possible, avoid a partnership, but if you have to, make sure everything’s in 

writing! 

Assume two individuals have decided to collaborate on an investment. One of 

them, Jack, is a general contractor who found a great deal—an existing 

apartment building with ‘‘upside potential/profit increase’’ if certain 

improvements can be made—but lacks the necessary capital and expertise to 

acquire and operate the investment. The other, Rich, is a seasoned, successful 

real estate investor with deep pockets. This is a typical scenario and provides 

the backdrop for this discussion. 

It is surprising how often partners to go into deals without agreement— 

written or oral—as to the essential issues that invariably arise throughout the 

property ownership cycle. These partners are frequently long-time friends 

who believe that their past friendship will carry them through all future 

potential disagreements. Or, perhaps Rich is an ‘‘old school’’ investor who 

believes ‘‘my word is my bond’’ and intimidates novice Jack into trusting him 

enough to go forward without a written agreement. 

Big mistake. An agreement is defined as a ‘‘meeting of the minds.’’ Given the 

number and complexity of issues confronting property owners—from the date 

they write the offer to the date they close escrow on the sale—and the owners’ 

differing backgrounds, circumstances and objectives, it is naive and 

imprudent to think that any two people could have a meeting of the minds on 

all these issues if they don't discuss them, reach an agreement and put that 

agreement in writing at the beginning of the deal. Proceeding without such an 

agreement is the wrong place to save money when investing in real estate. 22 



As basic as it may seem, it all too often happens, that partners go into a deal 

without considering what happens if their best-laid plans fall short: what 

happens if more money is needed? Who decides how much is needed? If 

additional cash calls will be made, how long will the partners have to come up 

with the money before they are in ‘‘default’’? What happens if one partner 

has the money, but one doesn't? Should the cash-rich partner make a loan? If 

so, should that loan be to the entity (corporation, LLC, etc.) or to the cashshort 

partner? On what terms? Should the partner not carrying his weight 

have his/her interest diluted? After how many cash calls should the partners 

just call it quits? Many of these never get asked, let alone answered. 

One of the most important discussions partners can have going into a deal is 

to figure out how they're going to get out of the deal. Like lawsuits, it's much 

easier to start a partnership than to end one. Say, for example, something 

happens to Rich or Jack that prevents them from continuing their active 

involvement in the deal. The surviving partner now is left to deal with a 

stranger: the other partner’s heir or trustee. This deprives the surviving 

partner of whatever control and certainty resulted from dealing with his 

former partner. 

23 



No partner should have to be thrust into involuntary partnership with a 

stranger. The solution: a buy-sell agreement. The buy-sell agreement is not a 

separate document. Rather, it is simply a provision in the main operating 

agreement between the partners. It typically identifies certain ‘‘triggering 

events,’’ the most common of which are death, disability, withdrawal, 

expulsion and bankruptcy. It then details what will happen in each of those 

instances. Usually, the partners agree to give the surviving partner a right of 

first refusal to buy out the other partner’s interest. The agreement also 

should set forth the procedures and formulas that will apply to this purchase 

including timing, valuation, and dispute resolution. The benefits of such an 

agreement are many: the partners can keep ‘‘outsiders’’ out, ensure the 

continued existence of the entity, ensure continuity of management, reduce 

involvement of co-owners not meeting their obligations and avoid valuation 

disputes. All of these benefits go straight to the economic bottom line. 

It’s wise to obtain estate planning advice upfront. People who are acquiring 

assets will most likely have someone they want to provide for when they’re 

deceased. If an investor has an estate plan already in place, he or she should 

get an estate planning lawyer’s input before taking title to a new investment 

to make sure the acquisition is consistent with that plan. The estate planner 

may, for example, have concerns regarding how ownership is vested (e.g., in a 

trust?), or strategies to enhance the overall estate plan (e.g., taking title in a 

family limited partnership to take advantage of certain valuation discounts). 

Failure to be aware of these strategies and integrate appropriate action into 

the investor’s plan may undermine the investor’s estate plan and have severe 

economic consequences to the investor’s heirs. If an investor doesn't have an 

estate plan, he or she should definitely get one—if not before taking title, 

then as soon thereafter as possible. These are just a few of the many reasons 

why all real estate investment agreements should be in writing. Protect 

yourself by handling your real estate investment ventures as the business it 

should be. 

24 



Mistake # 5 

The Lone Ranger Mindset 

The lone ranger mindset has derailed so many new investors before they even 

begin. A key to real estate investor success is building the right team of 

professionals. At the very least, you need good relationships with at least one 

real estate broker, an appraiser, a home inspector, an escrow officer and a 

lender, both for your own deals and to assist with financing for prospective 

buyers. Most new real estate investors don’t understand the concept of a real 

estate investment team at first, so most people have a difficult time with real 

estate investing. Some new real estate investors have a “lone wolf” trying to 

do too much myself mindset. Eventually, most new real estate investors 

usually learn that they need a real estate team they can trust and rely upon. 

25 



Like it or not, real estate investing takes a team. It's not a one-person sport. It 

doesn’t matter if you’re doing one deal or 20 deals, you must build a team to 

be successful. Finding, purchasing, and managing an investment property 

takes many different professionals. These individuals are all part of your 

investment team. Finding great people to work with will make your life 

easier. 

When you invest in real estate, there are many questions you have to 

answer. Questions such as: where will I find opportunities? How will I get 

them financed? Do I need to have this in the contract? 

The good news is that you don’t have to have all the answers. You just have to 

know where to go to find the answers. A quality team will help you answer 

those questions. They'll also help you answer the questions you didn’t even 

know to ask. They can help you be more successful and avoid mistakes. 

There are 6 key teams you need to have to be a successful real estate 

investor. They are: 

Property Acquisition: The first group of professionals you need to have is 

an acquisition team. These are the people who help you locate and identify 

potential opportunities. Without opportunities flowing your way, you cannot 

make it as a new or seasoned real estate investor. This group will consist of 

brokers, banks, deal scouts, inspectors, appraisers, and marketers who will 

help you find quality opportunities. They'll also help you get maximum value 

when you decide to sell. 

26 



Legal: The next team you’re going to need is legal . Quality legal work is 

extremely important when purchasing and owning real estate. Attorneys can 

help protect you as you buy, own, and sell real estate. They can handle 

contracts, set up the appropriate legal structure, and make sure you have 

legal leases. They are essential for avoiding costly mistakes. The attorneys 

you use in a transaction can consist of real estate, transaction or contract 

attorneys, and securities and exchange attorneys if you are going to be raising 

money from outside investors. I always recommend the use of a qualified real 

estate attorney for your transactions. 

Equity – Equity is the money needed to buy a property. If you’re financing a 

portion of your purchase, equity is the amount you need outside of the 

financing. This can come from an individual or from a group of investors. If 

you use a group, you need to make sure you follow rules for pooling 

investors. You can check with your local, state, and federal authorities to find 

out the specifics in your area. A qualified securities and exchange attorney 

can also be very helpful. 

Financing – If you do not plan on paying all cash for your next investment, 

you'll need to have others to help you get financing. This team consists of 

lending institutions, private individuals, and mortgage brokers. These are 

individuals or institutions that will provide a significant portion of the money 

needed to purchase your next investment property. 

Property Management – Once you've purchased an investment property, 

one of the most critical teams is your property management group. This 

team will operate your property on a daily basis. They'll take care of repairs 

and maintenance. They'll also collect your rent and lease your property. In my 

experience, this is the team that can make or break your investment . If you 

plan on using a third-party property management company instead of 

managing the property yourself, make sure you pick a company that's 

experienced in the area, type, and size of your property. 

27 



Accounting – Here's where a lot of investors tend to skimp, but that's a big 

mistake. Having accurate and up to date accounting is essential to operating 

your real estate investment business. Even if you hire outside management, 

you need to know what's happening financially on your property. Having 

good accounting will help you determine if you are making money, when to 

sell, and where the problems exist. An investment property with poor records 

is an investment property with problems. Be very wary of buying properties 

where they cannot provide accurate and up to date financials. 

Having a quality team is essential to your real estate investing 

success. Knowing where to go when questions arise will make your life easier 

and help you make more money. They will also help you avoid costly 

mistakes. Many flippers and rental property owners want to do work 

themselves to save money. The problem is, unless you're a contractor, it may 

cost you more money to do the work yourself. It takes longer, the work isn't 

done well and it's stressful learning and working on houses in your spare 

time. Now, start building your expert real estate investment team. Investing 

in real estate is a whole lot less stressful and more profitable with a good 

team. Resist the long ranger mindset at all costs, it’ll increase your bank 

account balance in the end. 

28 



Mistake # 6 

Get Rich Quick Mentality 

The get rich quick mentality perpetuated by the gurus have led to a lot of 

frustration from seminar participants. I would venture to say that a large 

number of the people who take a seminar quit after six months or so. Real 

estate investment, like any other business takes a lot of time, months and 

years to cultivate customers, in order to develop a life of its own. It takes 

months and years to build a sustainable infrastructure to support your 

business and nurture it to grow. 

Many people choose real estate because a number of late night television 

gurus promises quick riches to enable you take expensive vacations to the 

Caribbean and buy other expensive toys. The truth of the matter is that like 

any other business it takes time for a business to develop a life of its own 

(system), get to define your niche and even acquire the necessary capital to 

complete deals. On average, a good system would take about two to five years 

to develop. 29 



Quite a few gurus perpetuate the myth that real estate investing is some kind 

of easy way to make big money. This is the furthest from the truth. To know 

real estate as a business you have to go through the different business cycles 

and experience all the challenges that investors (new and seasoned) have to 

deal with. You might be lucky and flip a couple of deals and make some 

money, but does that make you a real estate investor? 

Now the “flavor of the month” as far as real estate investment is concerned, is 

flipping. Everybody's talking about flipping properties. Don’t get me wrong, 

flipping is an excellent strategy, but is that all there is to real estate 

investment? 

Most of us have encountered the get rich quick scam at one point or another. 

The hucksters may change (or simply change their names), but the 

underlying scheme is always the same. They pretend to have the knowledge 

necessary to make you rich beyond your wildest dreams. Unfortunately, the 

brutal truth is that most of these people are just generic 

salesmen/saleswomen who, if they weren’t selling real estate courses, would 

be selling cookware or home electronics with the same unethical tactics. To 

save you the hardship of being deceived yourself, here’s some additional real 

estate scam warning signs. 

Real estate scam artists make their fortunes selling dreams, not realities. 

They understand that most of the people who wind up on their website aren't 

ardent students of real estate, but adults intoxicated on fantasies of wealth 

and self-employment, who are sick of working their 9-5 job and dream of the 

day when they can walk away from their job forever. The charlatans of the 

Internet know that the best way to sell to these people is to talk about the 

huge sums of money you can make, and all the awesome things they’ll be 

able to buy with it. 

30 



These con men and women are the easiest to spot. They’re the ones who take 

pictures of themselves standing around expensive cars, private jets, huge 

houses, and tropical resorts, making promises like “you can have all this too, 

it’s easy!” In reality, real estate investment is full of hard work, extremely 

long hours, and possible financial losses. Though the top 1% in the industry 

may have achieved great financial success, it's by no means an easy-breezy 

riches parade, and anyone promising to put you in a Ferrari by next year is 

seriously stretching the truth. 

Many so-called “gurus” not only attach ridiculous hype to their reputation, 

but also to the product they're trying to sell. Calling a training course, a 

“millionaire-maker,” or promising an absurdly early pay-off is nothing more 

than a scheme designed to rope in starry-eyed prospects. Sometimes the hype 

is subtler, and seeks to make the information seem secret and exclusive so it 

appears more desirable. 

31 



Most people are intimidated by the seemingly high cost of buying investment 

real estate. Few have tens of thousands of dollars to splurge on a portfolio of 

properties, and the gurus know that if they don’t address this objection, it will 

cost them a ton of sales. To overcome the fear, bogus gurus tend to focus 

their sales pitches around “no money down” techniques – a real estate 

strategy that allows investors to flip properties before any money has to leave 

their pockets. 

Every salesman in every industry focuses on the positive aspects of their 

product, but it’s the ones who make no mention of any downside that you 

need to look out for. Real estate investing is often a dicey game of battling 

banks and government offices in court to acquire and sell properties. Every 

investor takes some loses, and the headache of constantly responding to legal 

threats against your assets can drive some people out of the industry entirely. 

However, a true shyster’s sales letter will never warn the novice investor 

about such unpleasant times. Instead, all you'll ever read about are the 

fortunes to be had and the easy life of working from your home office 

without a boss to answer to. As mentioned above, the con man or woman’s 

game is one of selling dreams, not realities, and when the reality is anything 

less than desirable they'll completely omit it. 

A common game that real estate conmen and women use is the continuous 

up-sell. At first, they use the hype tactics discussed combined with an 

extremely low training course price to make you feel like you’re getting a 

steal. However, when the course comes, it contains nothing but basic 

information and an attempt to sell you the “advanced” course for a much 

higher price. Disappointed, you conclude that the advanced course is what 

you really need and send away for it, only to find that it too tries to sell you 

supporting DVDs and workshops that explain “the real secrets you need to 

know.” 

32 



At this point, it isn’t about helping you succeed, in fact it never was. It’s about 

squeezing your dream for all its worth and selling you as many seminars, 

booklets, training DVDs, memberships, and everything else under the sun 

until you eventually catch on and leave for good. By then however, it’s too 

late – all you have for your time and money are empty promises, an even 

emptier wallet, and table full of useless study material. Beware of the get rich 

quick mentality. Stay focused on your goals and you’ll come out just fine. 

Mistake # 7 

Investing Without a Clear Goal 

Sometimes real estate investing for beginners can seem a bit intimidating and 

it’s easy to get lost in the lights and sounds of all the blogs, books, and 

television gurus with their slick hair. To help cut through the nonsense that’s 

out there I wanted to create a short list of tips you can use as you embark on 

your journey to find reach your goals through real estate. 

33 



Success in real estate cannot be achieved without proper goal setting and 

planning. Goals aim to provide a clear understanding of what you’re striving 

to achieve. In real estate, investors need to not only comprehend their 

objectives before getting started, but also determine the steps — including 

their real estate goals — to achieve them. That said, there are several things to 

keep in mind before putting your real estate goals on paper. 

For investors, the importance of establishing real estate goals is second to 

none. Without goals, investors will lack focus and direction. Rather than 

wasting time and energy working aimlessly, creating real estate goals will 

help you zero in on your target while simultaneously carving out the optimal 

path to achieve it. 

Although there are many paths to curating goals, one proven technique is 

known as S.M.A.R.T. (Specific, Measurable, Attainable, Realistic, Timed). This 

methodology, which is attributed to Peter Drucker’s Management by 

Objectives concept, is commonly used by businesses to identify and define 

goals, as well as understand the why for each of them. 

The following breaks down the S.M.A.R.T. framework and how it 

works: 

Specific: What do you want to accomplish? Goals that are vague and 

unrealistic are simply useless. Instead, jot down what your goal is in very 

specific terms. 

Measurable: How will you measure your success? Set exact amounts and 

dates to hold yourself accountable, as well as provide a way to measure your 

success. 

34 



Attainable: 

How achievable are your goals? There is nothing wrong with shooting for the 

stars, but when setting goals, it’s critical to make them attainable. Outlandish 

goals will accomplish nothing, so it’s important to stay grounded and aim for 

goals you can reach. 

Realistic: 

Given your available resources, what results can you realistically accomplish? 

This includes clarifying the output needed to achieve the results, as well as 

defining the effort needed to deliver the output. 

Timed: When do you intend to achieve your goals? Assigning deadlines for 

your goals, including specifying when results can be achieved, will better 

assist investors in developing a tentative plan for everything they do. 

From an investor’s standpoint, the appeal of S.M.A.R.T. is easy to see: It not 

only clarifies your ideas and focuses your efforts, but leverages your 

resources and time more productively to achieve what it is you want. 

Although there are a number of variations, S.M.A.R.T. can be used by real 

estate investors to curate a more comprehensive definition of your goals. 

7 Things to Consider Before Making Real Estate Goals 

The hallmark of a successful real estate investor is their ability to not only 

accurately plan and set goals, but rather accomplish them. However, those 

goals can only be achieved with proper goal setting and planning. Here are 

seven factors to consider before curating your real estate goals: 

35 



Market Analysis: The first component to developing real estate goals is a 

comprehension of your market, which implies doing your homework 

beforehand. It’s important that you conduct a market analysis, as to first 

identify a need in the market, as well as trends and changes that are 

occurring. As an investor, you will need to seek out everything you can about 

a real estate market, including the median home price, appreciation rates, 

gains in total home equity, home affordability, the health of the local 

economy, as well as new housing construction. This will provide a snapshot 

of where the market stands, and how you can add value as an investor. 

Additionally, this information will better assist in not only forming your 

goals, but detailing where you should invest and how. 

Your Niche: The next aspect to consider when setting real estate goals is 

determining your niche. Because there are endless investment avenues with 

real estate, it’s critical that investors identify a starting point. Identifying your 

real estate niche will not only help to refine your approach moving forward, 

but assist in distinguishing yourself from the competition. In addition, a real 

estate niche will be aligned with strategy to achieve a vision or goal — 

whether to prepare for retirement investments or establish a steady flow of 

passive income. Tips for discovering your real estate niche include: Defining 

your purpose, identifying what you’re good at and what you enjoy most, 

understanding how you can add value, and uncovering if there’s an actual 

need for you. 

How Realistic Are Your Goals? There are unnecessary costs of overshooting 

real estate goals, including your time, money and reputation. 

Following the S.M.A.R.T. framework, it’s imperative for investors to examine 

their goals and determine whether or not they're realistically attainable. In 

most cases, setting unreasonable aspirations can have profound impacts on a 

real estate investor and their business. It can ultimately create a culture of 

failure; one where failure is not only excusable and accepted, but rather 

expected. 36 



Part-Time Or Full-Time? Another important factor to think about when 

setting real estate goals is time. How much of your time do you want to 

dedicate to investing in real estate? Better yet, how much time do you 

actually have available to focus on real estate? Identifying the amount of time 

you have to spend will help investors to align their efforts with the right real 

estate investment option to achieve it. For instance, rehabbing a home will 

encompass a significant amount of time for investors (whether new or 

seasoned), which will eventually limit their time. Another investment outlet, 

such as wholesaling, may better suit their time limits, while also achieving 

their primary goal. Real estate wholesaling is similar to flipping except that 

the time frame is much shorter and no repairs are made to the home before 

the wholesaler sells it. A real estate wholesaler contracts with a home seller, 

markets the home to his potential buyers (usually fellow investors), and then 

assigns the contract to the buyer (usually a fellow investor) 

Profitability: Profitability is the name of the game as a real estate investor. 

However, every investment avenue will differ, including the average potential 

profits it will produce. In return, it’s critical for investors to examine the exact 

dollar amount they’re seeking to obtain with their investment business. 

Similar to determining the amount of time you’ll dedicate to real estate, it’s 

essential you calculate the profitability you’ll want to make from real estate 

investment deals. The best advantage real estate has to offer is the freedom of 

choice. From rental properties to house flipping, the type of income you wish 

to earn will relate to your investment vehicle. If you’re looking to earn 

residual income, your approach to investing will differ from those seeking to 

obtain one large sum. 

37 



Marketing Efforts: Investors will also want to consider marketing 

efforts when developing their real estate goals. This is important for a variety 

of reasons, but mainly because it encompasses a combination of time, money 

and approach to transforming your small business from ideas to action. 

Building your business from the ground up, including generating leads and 

capturing deals, will entail developing strategies to achieve your primary 

objective. 

Financial Backing: Lastly, you’ll want to examine your financial situation 

before setting real estate goals. This will ultimately dictate your approach 

moving forward, including whether or not the assistance of additional 

financial backing is needed. If what you’re seeking to obtain from real estate 

is unattainable with your current financial situation, the need to locate a 

partner or develop a joint venture (including building a successful real estate 

team) may be necessary. Even the use of a self-directed IRA or 401k may be 

required. However, no matter what, the collaboration of resources and talents 

will be beneficial for investors, especially those lacking the monetary means 

to get started on their own. 

Whether you’re a real estate investor, entrepreneur, business owner or 

someone looking to achieve a dream, the importance of setting goals is 

undeniable. However, the action of putting goals to work is equally as 

important. As famed psychologist and author Carl Jung once said, “You are 

what you do, not what you say you’ll do.” Remember, success as an investor 

(new or seasoned) isn’t found in real estate goals alone, but rather the 

habitual effort to achieve them. 

38 



Mistake # 8 

Hiring Incompetent Contractors 

Of course, your contractor seemed civilized and competent when you first 

met with them. That’s why you hired him/her. But sometimes a person can 

seem like Jekyll initially and then promptly start acting more like Hyde. 

It’s best you spot this Hyde-like behavior early on, when you haven’t: a) 

shelled out a ton of money for incomplete or shoddy work; b) gotten far 

enough down the line with the contractor to make it difficult to get out; or, c) 

driven yourself nearly insane with frustration and/or rage. 

First and obviously, your contractor shouldn’t ask for an unreasonable sum 

of money up front. Yes, he or she needs money to get the project started, but 

asking for more than 15 percent raises a red flag, and most states allow 

contractors to ask for a maximum of 33 percent of the total cost up front. 

Your contractor should have enough credit to pay the rest of the up-front 

costs. 

39 



After the up-front costs, additional monies should be tied to major 

milestones — for example, the end of excavation and foundation work, 

framing, plumbing, electricity, siding, roofing, and finish work. Similarly, a 

contractor who tries to tie money to dates rather than construction 

milestones is going to do you wrong. 

A low bid should also raise warning flags. Beware the common scam in which 

the contractor assures the homeowner that the home will be used as an 

example for advertising purposes and that’s why their able to bid so much 

lower than the competition. In fact, it’s almost never worth it to lowball a bid 

for the payoff of a portfolio piece. Instead, a low bid almost always equals 

poor work. 

Many new real estate investors rely on a dependable team of professionals to 

facilitate timely and profitable transactions. Each phase of a project will most 

likely call for someone that has been specifically trained in a respective field. 

Real Estate Brokers locate properties, investors secure deals and accountants 

manage funds. Everyone has his or her place amidst the frenzy of a rehab. 

More often than not, every position needs to be addressed prior to initiating a 

deal. However, some roles are more important than others. It goes without 

saying, but real estate investors are the catalyst and, therefore, the most 

important position in any rehab deal. Without an ambitious real estate 

investor, a deal may never even happen. 

Beyond investors, the importance of subsequent roles can be debated. 

However, one can argue that the contractor is the second most important 

person in any deal. Just like an investor, the profitability of any rehab is 

directly correlated to the contractor. Therefore, hiring a dependable 

contractor is not only critical, but also essential to the success of a rehab. 

40 



Locating and hiring the right contractor for your rehab may be less daunting 

than originally anticipated. Accordingly, with the right system, hiring a good 

contractor is rather easy. The following will serve as a guide in your pursuit of 

the right contractor: 

Finding Contractors 

Rehabs consist of a variety of variables that can potentially make or break the 

entire deal. While it is almost impossible to account for each, there are 

certain constants that are all but inevitable. The success of a rehab is 

generally dependent upon two factors: having a proven system in place and 

finding a good contractor that's comfortable working within the confines of 

said system. For the sake of this ebook, I'll assume you already have a system 

in place. Therefore, we'll focus on finding contractors that compliment a good 

system. 

In order to hire the right contractor for your rehab, you need to do your due 

diligence. It's not something that happens overnight, or within the walls of 

your own home for that matter. You'll need to enter their world and see them 

for what they really are, as this is the only way to perform a true evaluation of 

their skills. 

Consider the following locations when looking for the right 

contractor: 

Websites 

Local Building Department 

Job Sites 

Real Estate Investment Associations 

Contractor Referrals 41 



In initiating your search, you will want to focus on a quality contractor. 

Essentially, a quality contractor is a person who's professional, competent, 

licensed, and insured. They'll have also demonstrated that they have the skills 

and inclination to work within a given system to do the best and most 

efficient job possible. Again, a quality contractor in a good system can result 

in a profitable transaction. The second you stray from this criterion, you’re 

subjecting yourself to the possibility of lost profits and a slew of headaches. 

Pre-Screening and Meeting with Potential Contractors 

In the event you find yourself enamored with a contractor, it's time to 

conduct a pre-screening interview. As its name suggests, the pre-screening 

interview will merely confirm whether or not the contractor is the right fit for 

your subject property. It will also serve to support or deny your initial 

impression of the contractor. It's during this interview that you want to build 

a confidence that the contractor will respect you and the job. 

42 



However, it's important to understand that this process is a two-way street. 

The contractor will simultaneously be interviewing you as well. You'll need to 

gain his trust and sell him/her on the fact that he/she will want to work for 

you. Emphasize the importance of a good working rapport and the benefits of 

a long-term partnership with a real estate investor. 

During your pre-screening interview, there are certain questions that need to 

be accounted for. In fact, most contractors will not only be willing to answer 

questions, but also be expecting them. Knowing the answers to the 

following questions will make your decision much easier: 

*How many years of experience do they have? 

*Do they own the proper tools and equipment? 

*Are they licensed and permitted? 

*How many workers are on their team and how many jobs do they currently 

have under contract? 

*Do they enlist the help of subcontractors? 

*Have they ever declared bankruptcy? 

*Are they willing to provide referrals from previous clients and jobs? 

*Do they have liability insurance and provide workers compensation 

insurance? 

The answers to these questions will determine whether or not the contractor 

is suited to work on your rehab. However, how will you know how to 

differentiate between a good contractor and a bad contractor based solely on 

these questions? The answer is simple. 

43 



A good contractor will answer the previous questions with 

something resembling the following: 

Experience: You want to look for at least three to five years of experience. 

Equipment: The contractor you hire should already have their own 

equipment (don’t depend on rentals). 

Employees: A good contractor will have enough crew members to support 

each job they have lined up. 

License: Only hire a licensed contractor. 

Insurance: Liability insurance and worker’s compensation are required for 

consideration. 

Use of Subcontractors: The use of subcontractors needs to be disclosed 

upfront. 

Financial Stability: Previous bankruptcies are a red flag. 

Referrals: They should willingly provide at least three referrals. 

Developing A Pitch 

While a contractor’s answers should align with your particular strategy and 

criteria, it is important to remember that they have a decision of their own to 

make. You need to equally portray yourself as a viable business partner. You 

need to address items that motivate the contractor and provide them with a 

reason to choose you over anyone else who may desire their services. 

Make it apparent that their cooperation will result in a mutually beneficial 

partnership. They need to know that value they are providing you will be 

reciprocated. Remember, they're in the business to make money. The sooner 

you realize this, the sooner you can move forward with this process. 44 



In order to get their attention, you will require an engaging pitch that 

generates interest in your property. Develop and practice a simple oneminute 

introductory pitch that covers the following points: 

Emphasize your position as a real estate investor. You're not a retail client. 

This informs them that you will not waste their time and that a potential 

partnership could prove lucrative for all parties involved. 

Inform them that you work with a network of investors that could serve as 

additional streams of income. 

Disclose your system and approach. Contractors will appreciate the benefits 

of working in your system. 

Remind contractors that money is not distributed until the work is complete. 

However, let them know that you love to pay for a job well done. 

Leave the contractor with an enrolling question. Let them know that working 

with you in the future will be mutually beneficial to each of you. 

Assuming you have managed to compile several viable contractor options, 

you will need to choose one. Again, this process is as much of you choosing 

them as they are choosing you. 

To facilitate the process of hiring a contractor, make what is known as a bid 

packet. At the very least, this packet should include your scope of work, a 

quote itemization form and bidding instructions. Leave several copies of this 

packet at the project site and inform contractors where to get them. Once in 

the contractor’s hand, they'll know how to get a hold of you and exactly what 

to do. As its name suggests, the bid packet will essentially instruct them how 

to go about making a bid for your project. 45 



You'll quickly learn that evaluating potential bids is as important as receiving 

them. In a perfect world, the contractors you pre-screened would provide you 

with a perfect bid. However, I know that won't be the case. 

Evaluating Submitted Contractor Bids 

46 



You’ll receive bids that aren't even worth your time, but it's up to you to 

determine. Therefore, when it comes to evaluating the bids you receive, it's 

helpful to have a system in place. That way, you'll know what you're looking 

for and how to spot it. 

Make a list of everything that is absolutely essential for a bid to receive 

consideration. This may include anything from the amount of money they'll 

work for, to the referrals they have. Whatever it is that you require, put it on 

the list. This will help eliminate bids that don't meet your criteria. 

At the very least, you want to make sure the individual contractors followed 

your bidding instructions, matched your estimates reasonably well, 

understood the itemization form, disclosed up to date license and insurance 

information, and provided professional references. Use this information to 

narrow the bids down to two. If there is a clear-cut winner and you're 

comfortable with your choice, feel free to enlist the services of the winner. 

However, sometimes there is no clear winner. When you're unable to 

differentiate between two qualified contractors, use the referrals as a 

tiebreaker. Once you have verified the references, make your decision and 

notify all bidders of their status. 

Once you've decided on a contractor for your rehab, the next step is to meet 

them at the job site for a final walkthrough. This'll be your first formal 

walkthrough with the contractor that'll actually be working on your project. 

Subsequently, review the six critical documents that you'll have them fill out. 

Enlisting the help of a qualified contractor isn't an easy task, but having a 

system to do so alleviates a lot of headaches. Furthermore, if done correctly, 

you can establish a lasting partnership that will benefit everyone involved for 

years to come. 

47 



Mistake # 9 

Underestimating Property Expenses 

48 



A huge mistake new investors make is trying to buy a fix and flip or a rental 

property without enough money. When buying a rental, you need money for 

the down payment, closing cots, repairs, and carrying costs. You also need 

money for reserves in case there are vacancies or maintenance. If you don’t 

have enough money for reserves you may end up missing payments and 

possibly lose your rental property. Skimping on repairs will make a property 

hard to rent and increase your vacancies as well as lower your rent. On a fix 

and flip not having enough money means you can’t finish the flip. As a new 

or seasoned real estate investor, you must have enough money to buy a flip, 

pay for carrying costs, pay for repairs, and plan to keep the property for at 

least six months. Investing in real estate can seem like a safe bet. After all, 

you can touch and feel the physical asset, but that creates a false sense of 

security, experts warn. Aspiring real estate investors can quickly get 

themselves in trouble, turning potential gains into never-ending losses. 

From underestimating maintenance costs to wrongly banking on 

appreciation, here’s a look at two common mistakes new real estate investors 

make: 

Error No.1 Example: Underestimating the Cost 

When calculating the costs associated with a rental property, many new real 

estate investors will factor in the mortgage, insurance and taxes, but leave too 

little room for maintenance costs. 

Take Kathy’s rental property as an example: The house is valued at $380,000 

and with a 20% down payment, the mortgage and interest payment is $1,585 

a month. Add taxes to the mix and that increases to $1,895 a month. 

She rents it out for $2,250 a month, which should mean she is cash-flow 

positive. However, taking into account the landscaper, pool guy and a 

property manager would put her in the red each month by $335. 49 



Most new investors bank on the fact that right off the bat the property is cash 

flow positive but they aren’t factoring in all the expenses. If Kathy holds this 

property for 30 years without increasing the rent, she would have a 6% total 

return on investment. “Six percent is not horrible, but any type of balance 

mutual fund over 30 years has done 6%. 

Error No.2 Example: Banking on the Property Value Appreciating 

One of the reasons so many people can get into real estate investing is 

because they can borrow money to purchase a home. This works when home 

prices are on the rise, but as we saw in 2007, prices can’t rise forever. 

Leverage is what draws investors in when real estate values are growing, 

but if the value of a property decreases, the investor using leverage will not 

only be multiplying losses on the investment, but interest payments on 

the loan will also continue to build up. Be careful using debt to generate a 

return. Take your time and calculate your expenses properly and this will 

help you increase your monthly cash flow in the short and long 

term. 50 



Mistake # 10 

Overpricing Fix and Flip Properties Once Completed and Ready to 

Market 

51 



I see new investors try to get the very most money out of their flips by pricing 

them too high. Usually a flip costs more than they thought, it took longer 

than they thought and they are making less money than they thought. To 

make up for their miscalculations they overprice a property to make up for it. 

Pricing a property too high makes the situation even worse. It increases the 

carrying time, increases the costs and may cause a property to sell for less 

than if it was priced right to begin with. When a property is overpriced, it may 

stigmatize a property because it sits on the market for an extended period. 

When a property sits on the market for an extended period of time, people 

wonder what is wrong with it (even if the price is good after a couple of price 

changes). Most investors tend to see offers on their properties after 2-3 

weeks on the market if it is priced right. If there aren’t any offers in the first 

month, the price should be lowered immediately. The longer a property is 

held, the more money it costs and the less money is made. It’s best not to get 

too greedy when you go to sell! An overpriced property will not get the 

attention it deserves when it first goes out for sale. 

The first time a property is listed is when it’s on most people’s radars. If you 

are priced right, you should be getting interested buyers as soon as it gets 

listed. For a variety of reasons, you want your property to go under contract 

within a few weeks of getting listed. The obvious reason is that you want to 

sell and get your hard-earned profits. The second reason is that you don’t 

want it to sit on the market. The kiss of death for a fix and flip is your 

property getting stale. It’s hard to get attention from buyers once you’ve been 

on the market for a while, even if you drop your price. The problem is that 

savvy buyers will see that you have been out there for a while and that you’ve 

reduced your price at least once. You may get offers, but odds are, they will be 

well below asking. Price it right as soon as it hits the market and you’ll be 

well on your way to your next fix and flip property with more cash in the 

bank. 

52 



Epilogue 

The “10 Costly Mistakes to Avoid as a New Real Estate Investor” was written 

to educate anyone who’s interested in investing in real estate. Despite the 

challenges of investing in real estate, the reward truly outweighs the risk. The 

hope and goal of the author is that these experiences will help you avoid 

these costly mistakes and inspire you to achieve your real estate investment 

goals with less challenges. 

53 



Give Damon the opportunity to earn your trust by allowing him to guide you 

through the real estate investment process. Damon will be more than happy 

to help you avoid the 10 costly mistakes in real estate investing. He'll 

provide you with clarification and answer any questions about any of the 

information that was shared with you in this ebook. Whether you’re ready 

to buy, sell, or invest in residential or commercial real estate, please don’t 

hesitate to contact Damon directly for a FREE, over the phone, no obligation 

private consultation at 562.688.6279, or via email at 

PurposeReCompany@gmail.com. Visit his website at 

www.PurposeRealEstate.com

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