Previously, I shared with you the number one mistake I see new real estate investors make . . .

. . . Not running the numbers BEFORE buying an investment property!

What do I mean by running the numbers?

Before getting into any deal, you have to determine the after-repair value. This may sound daunting to a first-time investor. But I promise you, all this means is doing your research first. It will truly save you so much time, stress, and MONEY!

I’m even guilty of making this mistake.

In February 2020, I was interested in buying a property. I hired a home inspector and took some contractors to get some estimates. Everything looked great to me, so I bought it.

Sounds like I had my bases covered, right?

Nope!

In this case, my big mistake was not getting an inspection on the sewer line. When I was ready to start renovations, the plumber dropped a huge bomb!

He told me the sewer line was backed up, and it would need to be replaced. I was going to have to pay an additional $9000!!!

The problem was, the $9,000 wasn’t in my budget!

Because I didn’t do my due diligence on the front end, I was way over budget for the renovations. And this is a very common mistake I see with other new investors.

Investors will do a home inspection, and that’s it. But if you’re going to do renovations, you need to have all your contractors inspect the property, too. Especially if you’re buying an older home that you plan to do a full renovation.

When you miss things like checking the sewer line, it could turn into a $10,000 mistake!

So…how do I get in front of it?

Now, with every single property that I buy, I get a thorough inspection done. And, most importantly, I build a contingency into the budget. This means, if the budget is $50,000, then I’ll add a line item that is 20% of that total cost for surprises.

Not adding a margin in your budget isn’t just about protecting yourself at the beginning. If you blow your financial plan, then you also risk losing the equity you would have when you finish upgrading the property.

What could this mean for you?

If you are flipping a property to sell this means that you can leave on closing day without making hardly any money on your investment. You could leave feeling defeated and like you’ve wasted all of your time and hard work.

If you are keeping the property for a long term investment this could leave you with a start of low to no cash reserves and extra credit card debt. This can leave you feeling fearful and nervous about the future of your investing journey.