Our culture looks at failure as a curse word. We view it as an unnatural thorn in the side of what should otherwise be a smooth path to success. But this is the wrong way to view mistakes and disappointments. Because while they never feel good in the moment, failures have the ability to cultivate success in the long run.
The desire to avoid failure is quite natural. We don’t set out and try to fail at something. But when failure occurs, we shouldn’t view it as something terrible and abnormal. Instead, it’s helpful to reframe your view of failure. There’s actually a lot of good that can come from it.
When you fail at something, you have two choices. You can retreat or you can learn from it. It takes more effort to do the latter, but it’s ultimately worth it. Here’s a look at some of the lessons you’ll learn from failing at real estate investing (and how these failures will help you experience future success).
Have you ever run across a real estate deal that seems too good to be true? Have you ever followed through on that deal? In all likelihood, it probably burned you.
The lesson here is pretty simple: If something sounds too good to be true, it usually is. You aren’t the only person in the world who has been offered this opportunity. Ask yourself why others aren’t taking advantage of it. You’ll discover that it’s not all that it’s cracked up to be.
Some people think they have the Midas touch. If you have a couple of successful real estate deals to your name, it’s easy to fall into this way of thinking. When you do, you’ll start to think you can make anything out of nothing. However, the truth is that you make your money when you buy a piece of real estate. If you get it at the wrong price point, you’ll spend years trying to get yourself out of a hole. Be patient and wait for the right value.
Cash flow is everything – particularly on rental properties. Don’t let people talk you into taking a deal that loses money or even breaks even. The tax breaks you get from these properties are over exaggerated. Every deal should be viewed from the perspective of how much cash flow you can generate on a monthly/annual basis.
On a related note, failure teaches you to be more conservative with your cash flow projections. You’ll learn about the importance of factoring in things like vacancy rates and repair allowances. This can mean the difference between staying afloat and sinking.
You can’t hack your way to the top of the real estate world. No matter how many blogs you read or podcasts you hear, there are very few reliable shortcuts in investing. You might get lucky a time or two, but you’ll ultimately fail.
The takeaway is that real estate investing requires patience and due diligence. Take your time and immerse yourself in the fundamentals – this is how you find success.
Diversification is a must in any form of investing. If you’ve been burned in the past, chances are, you had all (or most) of your money tied up in a single piece of real estate. This will teach you to spread out your money and rely on multiple streams of income. When one inevitably dries up, you won’t fall and crash. You’ll be able to use the success of your other investments to prop you up.
Communication is important in every area of life. From marriages to parenting to real estate – how you communicate will have a direct impact on the results you get. Don’t give money to something you don’t know anything about and always be certain that you can get in contact with the people you need. If someone doesn’t pick up the phone or return emails in a timely fashion, this is probably a sign that you don’t need to be working with them. Failure has a way of imparting this lesson with great clarity.
As important as communication is, make sure you’re communicating in a way that it can be tracked, recorded, and documented. Failure will teach you that verbal agreements mean nothing. If it isn’t in writing, it didn’t happen.
At Green Residential, we’ve been a part of the Houston real estate market for more than 30 years. Over this time, we’ve worked closely with real estate investors to help them manage their properties and maximize success. To learn more about how we can help you do the same, please contact us today!
TREC Broker License # 9001367
CALL US