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Every year, I meet dozens of beginner RE investors. And???
Survive past this year? $60k and $114k losses?
Is THIS how you and they envisioned REI business? Hardly.
Yet, these are the real messages, and only a small sample of them. I have been preparing tax returns exclusively for REI clients since 1996. It is more than 20 years, hundreds of clients and thousands of tax returns. Here is how it looks in real life:
Isn't this depressing? I'd say so.
There must be reasons why so many FAIL!
There are.
After 20 years of observing hundreds of investors, I can identify 15 most common mistakes that are responsible for most of the failures in REI business. Some of them are the obvious "duh!" kind, but many are not. They are more of the "I wish someone warned me" kind.
When I was learning how to drive, my instructor gave me this golden nugget: never assume the other driver will follow the rules. Even if he has a stop sign, and you have a clear right-of-way - it does not mean that he will stop and let you go. His tip certainly saved me from a few would-be accidents. And who knows, maybe it saved my life.
Of course, I could also gain this wisdom by being ignorant at first, totaling a car or two, spending some time in ER, and then eventually realizing that other drivers can't be counted on.
To my endless amazement, too many new investors choose to crash and burn first - and only then start wondering what went wrong. Seems like an awfully expensive way to build your REI business.
Everyone eventually learns from the mistakes.
But it's so much CHEAPER if they are not yours!
So, what are those fifteen deadly mistakes?
I will tell you. I have nothing to hide from you.
Before I do, however, I will share one bonus tip. It has to do with the way we all learn, both you and me. We learn best in small bites.
If I simply listed all 15 mistakes right here, you would have glanced at them and quickly decided that half of them are common sense, and you're not at risk. The other half might look new and interesting, but you would be rushing from one to the next, not stopping to digest any of them. And then you really retain nothing.
It is our nature to learn one thing at a time. Trying to learn several ideas at a time results in learning none of them.
That said, I'm going to give you a taste of The 15 Business Killers. Here is one of them.
One sure way to fail is to deal with family and friends.
Listen, I'm NOT implying that you have a dysfunctional family or lousy friends. My statement applies to the best families and most awesome friends, too. Here is why.
If your cousin or a childhood friend does not pay you rent or a loan - what are you going to do?
If you two cannot agree on your next business move, will you choose business or relationship?
Family and friends expect special treatment. In life, it's cool. In business, it's a time bomb.
Now, don't get me wrong. Family and friends can be your best supporters. If you're lucky to have supportive friends and family - by all means, use their help! Confide in them, ask for their advice, get them to refer business to you. Just don't use their money and don't make them your business partners.
It's bad enough to lose money on a bad deal. It's hundred times worse to lose money AND your best friend.
Are you ready to avoid the 15 Business Killers?
But wait, there is more!
Sometimes, it is better to sit down and discuss these challenges in person. Sort of like a financial therapy session. It is obviously not free - but it can be a business-saving investment. Whenever you're ready - we are here to help.
Michael Plaks
Black Belt in Real Estate Taxation
About Michael Plaks
Michael is known in the REI community as the "Black Belt in Real Estate Taxation." Why? Because after 20 years in private tax practice, working exclusively with real estate businesses, he is the ultimate expert. He is a best-selling author and an awards-winning public speaker, frequently presenting for REI clubs and Realtor groups.
REI Tax Firm
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