Real Estate Investors: Their Biggest Investment Regrets

Real estate investing can be one of the greatest ways to build wealth quickly without having to invest a tremendous amount of your own money up front. Unfortunately, it’s also an area where it’s easy for things to go wrong and lose big, too.

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From bad partnerships to market timing, numerous factors can tank a real estate deal. So, GOBankingRates asked real estate investors to weigh in on the investments they regret the most .

Money mistakes the super wealthy never make - that you might be doing now.

A Partnership Gone Wrong

Nick Disney, a real estate investor and the owner of Sell My Antonio Home Fast , regrets a real estate investing deal he did with a friend years ago that cost him nine months of time and netted him only $300.

While it seemed tantalizing because the partner recommended going in with “half the money and half the work,” he said, in retrospect he realized he didn’t know the person well enough to undertake such a huge joint venture together.

Know Who You’re Dealing With

Disney stressed that it’s essential to know a person’s personality and capacity for stress before entering into any kind of business dealing. If you don’t know their personality, you don’t know how they run a business which can cause friction.

Moreover, Disney explained that investing can be very stressful at times, especially when there’s a lot of money on the line.

“It’s not $20 widgets, right? It’s a house. So, it’s hundreds of thousands of dollars. And when that money’s on the line, it will add to the stress,” added Disney.

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Know Your Roles

You also need to know each other’s strengths and role in the deal, Disney stressed.

“Do you both have the vision for who’s going to do what in the project? And when you don’t have those things… it will lead to hurt feelings. It can definitely end relationships really quick. And it’s bad for the bottom line,” he said.

While the deal didn’t technically lose money, it only wound up netting them a total of $600, which they had to split, and it took nine months of labor and effort to basically go nowhere.

“I would not do a deal with that person again because we didn’t align, and we shouldn’t be working together,” Disney said.

Verify Everything

In retrospect, Disney realized he was naive at the time.

“I didn’t know enough about them. They told me they could bring a lot of work and running the project and a lot of other stuff to the table and they could not, but I didn’t verify any of that,” he said.

“I didn’t check, so that’s my fault that I didn’t really look into it.”

He realized he should have done more research, clarified what each of them were bringing to the deal and laid it out in writing.

“And while we didn’t lose money, it was a huge waste of time. I lost that for sure.”

Set Clear Goals

There are numerous ways to invest in real estate, Disney pointed out, and there’s always someone trying to talk you into a particular kind of deal. You should listen to yourself and your own goals, rather than be talked into something.

“You need to think about what you hope to get out of it. And sometimes that’s cash flow…,” he said. “The projects you choose to do are going to give you very different results.”

Treat Investing Like a Business

The biggest piece of advice Disney has for potential investors is to treat it like a business.

“Even if it’s just one house, you need to treat that one house as your one business and approach it that way, operate it that way and not treat it like a side hobby.”

A Significant Loss

Gagan Saini, a real estate investor and acquisitions manager for We Buy Houses in Metro Detroit , suffered a $90,000 loss on one property all because he thought he could hire a contractor to do what an inspector needed to do.

“I assumed a contractor is just as good as an inspector,” said Saini. “They should know everything — what needs to be replaced to code to pass inspections, whether you’re trying to hold it as a rental to pass city inspections, or if you’re trying to flip it and need to make sure it meets FHAs minimum requirements.”

Unexpected Damage

When the contractor began the rehabilitation part of the flipping process, he discovered the residence was a “hoarder house” according to Saini.

The contractor had to basically gut the place and discovered that not only were the subfloors trashed, but so was the foundation.

“So what was initially expected to be a $45,000 rehab ended up ballooning to $100,000, which effectively killed the deal,” continued Saini.

“Not to mention that I discovered after the fact that the contractor, who gave me the quote for the foundation repairs, wasn’t licensed or able to complete the job. So, it wasted three months of our time. The building got red tagged.”

Sold at a Loss

Unfortunately, no one would buy the home for what they’d already put into it.

Saini said, “We ended up selling it for less than what we [put into it, considering] the money we spent on the contractor attempting to resolve the foundation issue.”

Always Vet the People Involved

The moral of the story, Saini said, is to hire a legitimate inspector prior to buying any house. Then, make sure the real estate agent pulls comparable houses so you can ensure that the value of the house is worth what you’ll pay in repairs and closing costs.

“You’ve got to do the inspection. Pay the extra $500 to $1,000 bucks,” advised Saini. “Don’t trust your contractor because they won’t look for things like an actual inspector would.”

According to him, an inspector’s job “is trying to pick apart the house and then showing you all the nitty-gritty violations.”

Additionally, Saini recommended finding a competent agent and vetting your contractors. Don’t run on blind faith.

No matter what kind of real estate deal you’re making, be sure to do your research at every step of the way, don’t make assumptions and know what you don’t know so you can get educated.

This article originally appeared on GOBankingRates.com : Real Estate Investors: Their Biggest Investment Regrets