The Three Biggest Mistakes I’ve Made in Real Estate Investing


Investing in real estate can lead to financial freedom. I’m going to get that out of the way here at the beginning, because I believe real estate investments have played a huge role in my quest for true financial freedom.

Not only is it a great source of passive income (you know how I feel about multiple sources of income), but it’s also been well documented that most of the ultra-wealthy citizens of America allocate a good portion of their investments just for real estate.

After all, as Mark Twain famously said, “Buy land, they’re not making it anymore.”

Now, as with any investment, there is a learning curve to real estate – one that will take a good amount of time and effort. And as with any type of investment, mistakes are inevitable and potentially quite costly. Since learning from others’ mistakes is much better than making them yourself, I’m going to share three of my biggest.

1) Trying to Do It All Myself

To get to this point in my professional life, I’ve spent a good amount of time with my head in the books. As doctors, we’re expected to study something and then apply it immediately. I’m used to this, and so I tried to do just that with an out-of-state investment property I had my eye on. From a cash flow perspective, I knew that the numbers made sense, but I wasn’t sure how to get started.

So I began to do some research . . . but all I got were more questions. Which areas of the country would yield the highest profits? Do the numbers favor purchasing or renting? What about nearby school districts?

I finally realized that I needed to assemble a team.

I searched for a real estate agent. Then I figured out that I might need a property manager and perhaps a contractor. A friend suggested that I use a turnkey company or something similar, but I didn’t want to pay the extra fees. Better to do it myself.

Eventually, after sinking countless hours into research and making countless spreadsheets, I was defeated. At last, I broke down and decided to use HomeUnion (details of this purchase here).

My friends, time is money. If I had used a turnkey company from the beginning, the time and money saved would have been well worth it. There are other companies out there designed to streamline the process and I encourage you to look into them. (Future blog post, perhaps?)

By now I could probably do the work myself much more efficiently than before, but the real question is: Would I want to?

2) Went with the Cheapest Contractor

With the help of a partner, I bought my first apartment building just over two years ago. It’s a five-unit building not too far from my home. It was a good purchase, but since the previous owners weren’t big on maintaining the place, it was definitely a bit of a project.

The building was in a rapidly-improving neighborhood, so our plan was to renovate as tenants moved out and increase rent accordingly. A couple tenants moved out just four months later, and we put our plan in motion to renovate a large portion of the building.

We took bids from a few contractors.

  • Contractor #1 told me it would take $30,000 and 4 weeks.
  • Contractor #2 told me it would take $15,000 and 3 weeks.

Who did we choose? Well, even though I knew Contractor #1 from some work he did on my own house, we chose Contractor #2.

Big mistake.

We ended up firing him three weeks later when we used up our budget and weren’t close to being finished. It turned out that in order to keep more money for himself, he had decided not to hire anyone to help him.

Ultimately, we had to hire another contractor, but he wasn’t immediately available. The unit sat empty for another six weeks before we got the work done. All in all, we wasted several months and a lot of money because we were trying to save money from the start. In the end, factoring in construction cost + lost income, the total cost came out to about $45,000 (Contractor #1 + Contractor #2).

In the end, I realized it's better to pay slightly more to get the job done right with someone you trust.

3) Waited Too Long to Get Started

I consider this to be the biggest mistake I’ve made. Honestly, I let fear of the unknown and fear of loss hold me back. I also felt like I had to know everything and plan for every contingency before starting – I had a bad case of “Analysis Paralysis.” Real estate investment opportunities had presented themselves earlier, but I didn’t pull the trigger because I was scared.

Thankfully, what finally got the ball rolling was investing in real estate crowdfunding. I’m glad I finally took the plunge, because otherwise I would’ve missed out on a great upswing in the market and wouldn't be on the track to financial freedom today.

Sometimes, though, I still kick myself for not starting sooner. The moral of this story is this: Don’t let fear of the unknown keep you from trying something.

Learn from Your Mistakes

Ultimately, jumping into real estate investing has been one of the best decisions I’ve ever made. Yes, there have been some bumps in the road. I’ve made mistakes, but I’ve learned from them, and I’m glad for the experience.

So don’t be afraid to invest in real estate because of others’ mistakes. Learn from them. Listen to people who have been successful. If you decide real estate investing is for you, then don’t hesitate. It’s a giant step on the road to financial freedom.

If you invest in real estate, what are some of your biggest mistakes?


  1. Thank you for starting this blog on real estate. It is one aspect of investing I really don’t know much about.
    I think my biggest fear with it is I don’t even know how to get started. I don’t want to spend time doing any work myself. I make more money as a physician than I do as a part time contractor. Using Homeunion makes sense but I don’t actually get to see the property I’m buying have someone I know inspect it and therefore don’t really know where my money is going. I definitely want to get into it just not sure how to get started. I probably had the same angst with stock and option investing but now I really enjoy it.

    • Thanks! I started this blog to highlight a lot of the side hustles and other ways physicians can achieve financial freedom. If I at least get the conversation going, then I’ve done my job.

      Real estate is a big one but not too many doctors talk about it although many have benefitted from it. I treat real estate very similar to any other investment I might buy. I start with the numbers – do they make sense from a return standpoint and what’s the likelihood that those numbers will actually hold up? I’ve never seen the HomeUnion property in person but I could if I wanted to before the purchase and now. I actually recommend that people do if they can.

      When people purchase stocks or funds, I doubt they visit company headquarters, the manufacturing plants, or the fund offices. They go by the numbers. What I like about real estate is the transparency (I know exactly where my money is going) and the control I have over it.

      By no means is sole ownership the only way to get involved. It is slightly more active, but with a good property manager you don’t need to ever swing a hammer.

  2. “With the help of a partner, I bought my first apartment building just over two years ago.” Did you start just two years ago? I’m just curious – how old were you?

    I’m 28 and I’m still a resident (family medicine). I haven’t started investing in real estate yet… The fear of the unknown holds me back. And I have that feeling that I have to do it all by myself too.

    I was thinking and came to the conclusion that I have to find a mentor – like in medicine.

    • Well, I like to say my official career in real estate investing started 3 years ago with my first crowdfunding deal. I was 36 years old and had been out of training about 3 years. I’m all for mentorship. That’s how we train in medicine – see one, do one, teach one. Hard to do one, when you haven’t personally seen one. I wish I had at least started learning earlier so I could hit the ground running when I finished my training. All good though, it’s worked out and I shouldn’t complain. Fear holds everyone back in all of life, not just in investing. You’ve pushed through it in other areas and so I have no doubt you can push through it here if you want. Happy to be a resource, reach out anytime.

  3. I’ll answer the question next, with but want to respond to John.

    The first thing to learn about real estate is what you want it to do for you. Get in touch with your own investment philosophy first. Real estate can give you any return profile that paper assets can. You just have to decide what you are trying to accomplish.

    The big branch point is active vs. passive investing.

    With more active investing you are doing work to locate, purchase, rehab, manage, and dispose of the property. Even if you hire out these functions, you have to be contacted to make the decisions.

    Passive investing is you investing in projects where your expectation is to learn and receive a check and/or tax benefit and that is about it.

    It usually breaks down, the more money you have to invest the more you gravitate towards passive investing (unless you are a control freak type A personality).

    If you have less capital, people tend to lean towards more active types of investing as they are usually lower priced point assets.

    The more passive investments tend to be larger syndicated (a group of investors coming together) projects, like hotels, strip centers, commercial buildings, apartments, agricultural land, self storage etc…

    The active investments tend to be single family homes and condos, this is a gross generalization but it gives you an idea.

    As you move along the real estate investing continuum most people go from active to passive as their time becomes more valuable to them.

  4. Now to answer the mistake question –

    Do you mean today 😉

    The biggest mistake I ever made was hiring a bad operator for a project. It was early in my investing and I did not realize the importance of evaluating competency when it comes to operators. They could be the nicest most trustworthy person ever, but if they are just not competent, stay away.

    This does not mean that you shouldn’t invest with inexperienced people, because we all have to start somewhere. But it does mean that the inexperienced person has to have partners, mentors, and advisors who DO have experience in what you are investing in.

    • I’ve invested in a few syndications and I find it’s still hard to vet operators. I like to get a direct referral from someone I know who’s used them if possible. Everyone looks great right now with the way the market’s been. When the market dips, we’ll see what operators continue to stand and follow through on what they say.

  5. I got into real estate with three single family homes after the housing crash. I figured that was a good a time as any. One was like HomeUnion but through the platinum properties network. It was no good, but since I was new, I didn’t know what I didn’t know. The two other single family I bought in my home town have been winners so I’m ahead overall. I think going forward the crowd funding is much more appealing to me.
    I still like my index funds the best of all though.

    • Crowdfunding is a lot more passive than direct ownership so that definitely works better for some people. I hope that those single family homes become cash cows for you someday…

  6. I am fortunate enough to have purchased a rental home 6 years ago that the rental income is significantly higher than the mortgage…consequently it will be paid off in 4 years. I have a 3 year rental agreement with an option to extend and I think the current renters plan to be there for the long haul. My question….should I refinance in 4 years and roll that equity into new properties or just take the smaller monthly income? I do keep an emergency fund of several months worth of expenses that I haven’t wanted to tap to buy another property. I could definitely scrape up the money to buy another property now but I’ve set other financial goals….(finally get rid of the student loan this month yes!)

    • It all starts with your financial goals and how quickly you want to get there. Is there a set amount per month that you’d like to make through passive income and real estate? Once you figure that out you can work backwards to see how you can achieve your goals. If for example eventually you’d like to make $4000/mo in passive income and this one property brings in $400 today, $800 when paid off, you need to acquire more properties. Personally, I’m in property acquiring mode and when I reach a set number of units, I’ll let them get paid off and enjoy the cash flow. We’re looking to refinance this building and acquire the next one. Plus rates are fantastic right now.

      • I would just say from an asset protection stand point paying off mortgages opens you up to more liability than you would otherwise have.
        Debt can be used as a very effective tool to ward off plaintiffs attorneys fishing for deep pockets.
        If you are considered the “rich doctor” with other assets, they are will do an asset search and a lien search to determine if there is anything that could be forced to be sold so that they can get paid in a judgement.
        The first rule of asset protection is to not appear to be a target with collectable assets because that is all attorneys care about, getting paid.

  7. Great info! Analysis paralysis is real thing! I was like this on my first property, then realized how easy it was to teach myself how to do the tasks necessary to make it successful which makes the next property easier.

  8. Do you think there is an upper age limit to starting to dabble in real estate investment? Is there a minimum upfront cash allocation? I’m new to this but wanting to diversify my portfolio and looking into various passive income streams.

    Thanks in advance!

    • Hey p59,

      Great that you are looking at real estate as an investment vehicle. I often caution my investors against thinking about these types of investments as “dabbling”, while you do not have to become an expert in all aspects of real estate, it is a serious endeavor. One that does require that you learn some new skills.

      You have to first decide whether you want to be active (owning things like single family homes yourself) or passive (investing in syndicated projects where you are one of many investors in much larger projects). Each has a different level of knowledge needed to be an effective investor.

      Now to your questions –

      1. Age limit – No, I helped my mother more than triple her real estate holdings after age 66. You reference passive income streams for yourself and that is certainly a potential benefit, but also think about direct ownership of real estate (not a REIT, or similar vehicle) in terms of your long term estate planning and charitable giving as well.

      Real estate is one of the best ways to pass on generational wealth tax free (if you have the correct advisors) to either heirs or to charitable causes of your choice.

      Minimum investment –

      This is extremely variable. If you are looking at crowdfunded real estate sites the minimums can be as low as 5K. The downside is that you will not personally know the principles who are organizing the investment, which is one of the benefits of private real estate investing in my book.

      For direct syndication projects where you own an equity piece of a larger project, then you are often looking at between 20K-250K an investment. The good thing is you can often use money from 401K and IRA’s to invest in these projects if you feel like you do not want to use all of your available cash. You just have to move that money to a self directed IRA custodian and you are all set.

      If you want to directly own your own real estate like single family homes or condos for investment, then you are going to be putting down anywhere from 20-35% of the purchase price and then making sure that you have some cash in reserve for maintenance issues.

      Hope this gives you a very basic and broad understanding of your options.

  9. Definitely curious to hear about how your returns compare with crowdfunding vs syndication bs direct ownership. I’ve got a few syndicates I have my eye on and would love for that to be my main method.

    • Not sure if this to me or to passiveincomemd –

      I’ll take it backwards to forward.

      Direct ownership of single family homes and condos appears to on the surface create higher monthly cash flows if you can effectively manager the property yourself. You are looking at anywhere from $200 – $900 + a month in cash flow per unit depending on how much debt you use, the price of the property in question, and the market you are in.
      But this analysis often fails to take into account your time. It also does not take into account the “hassle factor” of receiving phone calls, coordinating contractors, etc…
      I would say in our portfolio we are in the 12-20% cash of cash range a year, depending upon vacancies and repairs. And around 3-5% a year (after very large gains after the great recession). All in all we have about 100% capital gain on most of our single family homes, but this was a special period when we bought when everyone else didn’t want them. In our market today (Houston) you are going to be looking at 8-10% cash on cash returns plus 3-5% capital gains a year, plus some tax write-offs for depreciation and the like.

      As for syndications – I am biased because I put together syndications for doctors. So there is a major hassle factor for me, not so much for our investors. Our current syndications were a new development hotel project and a massive renovation on an apartment complex so there was no cash flow for the 1st year or so, but that was expected. We are projecting around 8-15% cash returns when it starts, but investors have received capital gains of around 10-12% a year, and on one project a 27% return in the tax write off they could take against other income.
      So it is variable.

      I do not participate in crowdfunding, so I cannot speak about if from personal standpoint.

    • I think the basic principle is that the more active you are and the higher risk involved, the higher potential for earnings. However, not everyone wants to be that active or take on that much risk and you’ll have to figure out what’s the best balance for you.

      That being said, I’ve found that the potential returns for direct ownership have been the greatest for me, but a lot of that is on paper and dependent on me selling the properties. At this point, I plan on holding on to most of these places for the cash flow they provide. I like to have a balance of direct ownership and more passive type investments. The difficult part in crowdfunding and syndications is finding good people you trust. For crowdfunding, to some degree you have to trust the company to vet things out properly. As for syndications, it helps to find others who have invested with them, and once you find operators who you feel comfortable with, stay close to them.

  10. Thanks for sharing your mistakes. I’m currently 25 but have been interested in real estate for a few years now. I remember reading several books and listening to all the podcasts I could get my hands on. I completely relate to you on analysis by paralysis.

    I’ve come to the conclusion that I will never be 100% ready, and I’m currently searching for a rental property to invest in. I think your story has let me know that I’m making the same decision. Regardless, mistakes will happen but I hope to become successful with real estate such as yourself.

  11. A lot of people think that there has to be this perfect platform wherein you can train your skills as a real estate investor. If you are still asking where to train real estate, well the answer is simple, you can look at everything as a form of training. Even conversation! Yes, although hard to believe, talking with other real estate investors usually help you improve and also serve as a training for you.

  12. Nice post! Everybody makes mistakes but the biggest mistake that one can make is not learning from that mistakes. It is rightly said in the article “learn from your mistakes”. Thanks for sharing your experience with us.

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