97 percent of real estate investors will fail. This is a sobering statistic that comes with any number of follow up questions. There are some who will look to debate these numbers but others have one simple question….why?

The answer is not as complicated as some might believe. Since the average business will fail, it is not hard to see why real estate investments often suffer the same fate. No one wants to end up as a casualty. That’s why this guide is here to help. These are the seven mistakes that are most commonly made.

1. No Discernment Between Speculation and Investment

There is a major difference between investment and speculation. Investment takes place when the principal is safe. Speculation occurs when the principal is unsafe. Speculation is great but a real estate investor must be sure to preserve some of their available capital. Otherwise, they are placing themselves in a precarious position.

Consistent speculation is the equivalent of playing double or nothing repeatedly. Sure, it may work a few times in the short term but the investor will eventually land on nothing. Investment should not be this exciting. Those who want a thrill ride should head to Six Flags instead.

2. No Discernment About The Harsh Truths of Risk and Return

The real estate investor tends to be an optimistic sort. Lower risks lead to lower returns, while higher risks lead to higher returns. This is easy enough to understand, of course. However, there is one key amendment that must be made before an investor can truly get started.

A higher risk does not always lead to a higher immediate return. By taking on more risk, the investor is merely increasing their return’s potential. They are also leaving themselves open to greater losses. Don’t be blinded by optimism.

3. Failure To Understand Investment Cycles

Confirmation bias can cause any number of issues, especially when the real estate investor is not willing to take an honest look at the investment cycles. Many investors will find a method that works for them and ride it until the wheels fall off, so to speak.

They allow themselves to believe that the statistics that apply to these cycles do not affect them. Don’t make the mistake of only looking at the statistics that support the status quo. Stay ahead of the curve at all times.

4. Lack of Discernment Between Gurus and Teachers

Wealth gurus have a way of making their clients feel like they are moments away from becoming rich beyond their wildest dreams. If these “gurus” are showing off pictures of their Bentley and their mansion, this is a sign that the investor should look elsewhere for assistance.

A true teacher is never going to sell their clients this sort of fantasy. They believe in offering investors the chance to formulate a realistic strategy. Anyone who is asking the investor to provide them with capital is not someone who should be trusted for any reason.

5. Confusing Knowledge With Action

Sometimes, a real estate investor will learn about a new truth and start to feel as if they have it all figured out. They are not actually applying the lessons they learn but they have convinced themselves that they are. This is a mistake that is made on an all too regular basis.

Knowledge and actions have to align with one another. The investor that spends all of their time acquiring knowledge and refusing to act on it is an investor that is never going to reach their full potential.

6. Inability To Say “No”

This one should be fairly self explanatory. An investor who is always saying “yes” is placing themselves in a precarious position. Eventually, the bubble is going to burst and the real estate investor will be left with nothing.

7. Attempting To Build Wealth Too Quickly

Wealth that is built quickly is bound to vanish just as quickly. On the other hand, wealth that is accrued slowly over the course of time will have far more staying power. The top investors are well aware of this principle.

Enduring the monotony of continued smaller success may seem like a good problem to have. Conversely, there are a wide range of investors who always looking for the “big score”. The road to investment success can be boring but this means that all is well.

In Summation

Real estate investment can be challenging but success is within the grasp of anyone who takes the time to study successes and failures. The more the investor is willing to learn, the more likely they are to avoid the usual pitfalls.