Watch out for these common mistakes investors are making now…
Investors have been enjoying an incredible run recently. There are still great opportunities, and more attractive deals to come. Yet, it is also a phase of the market which can trick many investors into making the wrong moves too.
Aside from overpaying for assets, and failing to diversify well, here are some of the financially perilous mistakes some are being lured into making.
It’s a great time to be growing and expanding. Yet, that’s what many thought in 2005 and 2006, and we know what happened in 2008.
Grow, expand, seize on opportunities. Just be wary of making things more complicated than they need to be, and moving down the food chain, instead of up.
Be simplifying, freeing up your time, and increasing profitability instead of busy-ness and liability.
Holding When You Should Be Selling
There are still opportunities to buy and hold. Yet, there are many more to be liquidated. Be cashing out mature investments and flipping for cash. Be wary of paying so much that you can’t sell, and being stuck with assets that aren’t yielding positive cash flow. This is exactly what took out 90% of investors in the Great Recession.
Not Doing The Full Math
There are lots of shiny things out there. Many strategies which look so profitable on the surface. Especially when you just look at the gross figures on ‘reality’ TV shows. The truth about the net math can be much different when you add it all up.
Rentals, and especially short term airbnb vacation rentals are the perfect example of this. They can be highly profitable. They can also be a money pit. Thinking you can rent a unit for $100 a night, or $3,000 a month on vacation rental platforms versus just $1,500 on an annual lease can be very enticing.
Then once you dig in, you may find your daily costs just to market and service it are easily $50 a day or $1,500 a month. That’s on top of any debt service or improvements. All while taking on an enormous amount of liability and a new full time job.
Before you dive into something new that looks too good to be true, ask around for advice from those that have the experience and be sure you aren’t missing any of the math.
Committing To Projects Without The Labor Resources In Place
Labor and material shortages are some of the big challenges today. Committing to projects without having reliable, trusted labor in place is a recipe for disaster. The idea may look good on paper, but you’ve got to have the people lined up in advance. You don’t want to be stuck with a portfolio of rentals or a dozen rehab projects in another state, and which you can’t find the help to renovate or manage.
Find out more about investing in secured debt and real estate, go to NNG Capital Fund