Why New Real Estate Investors Fail

Real Estate is a business which requires patience and persistence. It takes a lot of effort to succeed as a real estate investor. The rewards, however, are quite satisfying. But, the road to being a successful investor will have mistakes on its path.

It is only inevitable that all real estate investors will make mistakes at some time or the other. Beginner real estate investors will also make many mistakes when they are in the early part of their journey.

While making mistakes is not a bad thing, repeating those mistakes over and over can make a young entrepreneur lose confidence in himself/herself.

You may be surprised to know this, but more than half the people who think of becoming a real estate investor, never actually do. They end up never buying even a single property. They drop out even before they begin.

The ones that do take the plunge do not always succeed. Some of them do. The rest fail, and out of the ones that fail, some end up dropping out.

To avoid some familiar yet demoralizing failures from happening, we have tried to find out the most common mistakes that new real estate investors make.


By listing out and explaining these mistakes, we hope that a new real estate investor can avoid the missteps which many before could not. If you have already made these mistakes, then we hope that you can recognize them and work towards avoiding them in the future.

Read the top reasons why new real estate investors fail and begin your path towards building a successful real estate business on the right note.

#1: Not getting enough education

One of the most common pitfalls in any business endeavor and also real estate is not learning enough before you start running. Research is very important in any new line of work.

Educating yourself will allow you to see where the opportunity is and what factors you need to be careful about. By education, we do not expect that you spend tens of thousands of dollars on “educational seminars” or expensive real estate courses.

What we do encourage you is to read books, blogs, and other freely available information. Listen to podcasts, watch videos on YouTube, and spend a bit of money if you have to in order to get quality information from credible sources.

The idea is to become familiar with the topic of real estate investments. You always want to study something that interests you. Learning about real estate will also give you a clear idea of where you want to focus within the real estate space.

Real estate is a broad field with plenty of sub-classes within the industry. Go deep into the area that interests you.

Check out our 16 chapter real estate course that dives into each topic you need to know to become all around knowledgeable in real estate investing.

#2: Not getting the numbers right

Before you do any deal, it is important to do the math correctly. Many new real estate investors end up buying properties which aren’t very good deals. They then realize that their math was not right and end up taking a loss.

Real estate numbers aren’t as complicated as stock valuations of elaborate discounted cash flow models. There are slight differences depending on the type of property and the type of deal that you are looking to do.

For example, flip properties will have certain costs which a rental buy-and-hold property will not have. The exit strategies for both are also different and hence the financial analysis will be a bit different for both.

There are some useful resources that you can use to learn how to get the numbers right on a real estate investment. The first resource is YouTube. Search for “four square method”, which is a great technique to analyze a real estate deal.

The second source is online webinars. There are free webinars on various websites where you can learn about a new topic every week. Look for free webinars run by experienced or credible real estate investors to learn all that you can about the analysis and numbers behind a real estate investment.

The third resource is online investment calculators. If you don’t feel like opening up excel or do not know how to do some of the calculations, then search for online investment calculators that allow you to simply enter in all the numbers.

These calculators have all the formulas in place and they will give you the final output with just the click of a button. You do not need to know the formulas yourself. You only need the input numbers.

#3: Lack of good management

You could be a financial hotshot who knows how to analyze deals, do the numbers, find great properties, and negotiate sweet deals. However, none of that counts if you cannot manage your investment once the property is bought.

For example, if you buy a property which you want to renovate and flip, then you have to be good at handling contractors, maintenance workers, timelines for the renovations, and cash flows throughout the process. The quality of renovation and the speed with which it is done will determine your final return on investment.

Another example would be a rental property which you plan to buy and hold. In this case, you would have to manage the tenants living in your property. People skills come into play here.

Tenants will expect quick service from you if something breaks down or if an accident occurs. At the same time, you will expect tenants to pay rent on time.

Hence, relationship management is a key component of any successful rental property investment. If you hire a property manager, then managing the manager is something you will have to learn to be good at.

Management begins when the number-driven analysis ends, and some of the soft skills are as important as the numbers.

#4: Giving up

“Success is going from failure to failure without losing your enthusiasm”. This is the most fitting quote for this very damaging reason for new real estate investors to fail.

Many investors do all the hard work, strike the right deal, and put up their hard-earned money only to get frustrated by some challenge or the other and simply give up.

There are many challenges and sources of frustration in real estate investing which make new real estate investors give up and quit. Someone might end up pursuing the wrong deal, someone might hire the wrong contractor, or some investors might not find the right tenants after slogging for months.

Failure can either be a learning opportunity or a permanent failure.

If you ask yourself what went wrong and try not to repeat the same mistake again, then each failure is a learning opportunity. However, if you give up and say to yourself that you are never coming back to real estate investing, then failure becomes a permanent one.

It is good to connect with other real estate investors and discuss your challenges with them whenever you are in a tough spot. Make mistakes and do not be afraid of them because it is the only way you will learn.

However, remember not to repeat those mistakes. You can also learn from other people’s mistakes by listening to them or reading what they did wrong. That way, you do not make the same mistakes that they made.

We hope that after reading this piece, you can become a successful investor and live the life that you have always wanted to. Some successful real estate investors managed to quit their jobs in their 20s and live off the cash flows from their rental property investments.

By avoiding the above-mentioned reasons for failure, we believe that you can cultivate the right mindset to become a successful real estate investor. We hope that you can also achieve your financial and personal goals by investing in one of the greatest assets in the world i.e. real estate.

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