Real estate investing can without a doubt be a profitable business. It’s a proven fact. If you’re not careful, though, you can end up making mistakes along the way that could really hurt and possibly doom your business from the start.

Let’s review the most common mistakes new investors make and how to avoid them:

1) Taking on a seller’s mortgage yourself

You may think that taking over a seller’s mortgage is a good idea, but if you’re just assuming a mortgage, you don’t own the property. This means that your credit is affected and you owe money to the bank. You don’t want that. You should instead find the funding needed to purchase the property in full so you don’t have to worry about that.

2) Not bringing in enough leads

This is without a doubt, the most important piece of an investing business. You need leads in order to do deals, right? Not only that, but you need a consistent flow of leads you would be willing to invest in. The more good leads you bring in, the more potential deals you will have. Now, don’t think that generating a huge list of leads all at once will do the trick. You need to bring in leads on a steady basis so that your leads don’t get cold.

3) Not pre-screening leads

You must make sure that every lead you bring in is worth pursuing before spending any time or money on it. Most of the information you need to pre-screen your leads can be found online. In many cases, you will direct the home seller to your website to submit their information or have them send it via email. That way you have the basic information needed to research the lead. Always make sure to come up with a win-win solution for both yourself and the seller. Otherwise, most likely the deal will fall through.

4) Making an offer without an exit strategy

Making an offer without knowing your exit strategy is like walking into a burning building without knowing where any exits are. It’s not smart and can cause a disaster for you. First, you need to decide what you will do with the property; wholesale, rehab, hold, rent, etc. That’s your exit strategy.

At that point, you’ll know what kind of funding you need, if any.

Although there are many reasons why you need to develop your exit strategy, the most obvious is that you could lose money! Not only that, but if you make an offer and back out on a deal, you will end up with a bad reputation. This will make it difficult to build your credibility, partnerships, network, etc.

5) Using the wrong type of funding for your deals

A lot of investors don’t understand the different types of funding sources available and which kind should be used for each type of deal. Knowing the right type of funding is crucial to growing a successful business. You don’t want to pay funding fees or interest when it’s not needed. That’s profit you’re taking out of your business and your pocket. You can learn more about the different types of funding by clicking here.

Avoiding these common mistakes will help increase the profit you make on every deal you do and result in you achieving success faster.