Top 5 Mistakes New Real Estate Investors Make and How to Avoid Them

Are you a new real estate investor eager to generate passive income but feeling overwhelmed by the complexities of the market? This episode is for you! Join us as we sit down with David Davidenko, Co-Founder and Managing Partner of Sunrise Capital Group, a seasoned real estate investor with a portfolio exceeding $600 million. David will break down the top five mistakes new investors make and provide actionable strategies to help you avoid these pitfalls and set yourself up for success.

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Transcript

 Ready to dive into the world of real estate. We're talking building your property empire from the ground up, but more importantly, avoiding those rookie mistakes that can really cost you. Mistakes are expensive. That's why we're hanging out with the wisdom of David Davidenko today. Oh yeah. He's built quite a portfolio.

We're talking a 600 million real estate empire. And lucky for us, he's spilled his secrets in a blog post called top five mistakes new real estate investors make and how to avoid them.  So let's jump right into it. What's the very first trap David warns us about? The first one is a big one for sure. It is failing to do your homework.

And I'm not talking about a quick glance at some listings.  David compares researching the market to like a full time job. Because it is. He stresses understanding your market inside and out. Think the things like projected growth, population trends, even the nitty gritty like average income levels in the area.

It's not just about finding any property. It's about predicting, honestly, what's going to be profitable down the line. What's the future demand going to look like? So it's really the difference between dipping your toes in the pool and like cannonballing into the deep end, right? You got to be prepared. A hundred percent.

And the way David breaks down how to avoid this mistake is where his advice really shines. You've got to go beyond just the numbers. Talk to local real estate agents, city council meetings, he even says, chat up potential tenants, get a feel for what they need, what they want. He calls it becoming a market expert.

And honestly, it's that next level dedication that separates the successful investors from, well, the rest. You know, I love that David also recommends really immersing yourself in the neighborhoods. We're not just talking Zillow surfing here. No, no, like actually go there. Walk the streets, grab a coffee at the local shop.

You know, get a feel for the vibe. It's smart. It is smart because you're not investing in bricks and mortar, right? You're investing in a location, a community, a whole slice of the market. Okay. Okay. So you've got your market figured out.  Now, David says the next pitfall is where people really slip up the whole financial side of things.

And this is way more than just plugging numbers into a mortgage calculator. Right, way more. David is all about a rock solid financial plan. And we're talking everything. Property taxes, potential maintenance nightmares. He even mentions things like vacancy rates and legal fees. This is where I think a lot of new investors, they get blindsided.

It's like being handed the keys to a Ferrari, but then realizing, oh wait, I can't afford the insurance, let alone the gas. 100%. David is a big proponent of something called due diligence. Basically, a magnifying glass to a property's financial history and any potential hidden costs lurking in the shadows.

His advice.  Call in the experts. A real estate attorney, a seasoned investor, anyone who can help you navigate those tricky waters because what you don't know can really hurt you. I love how David emphasizes that this doesn't mean you need to be a financial whiz yourself. You don't have to know everything.

He actually encourages building a team of experts. And I think that's something we can all relate to, knowing when to phone a friend, right? It's like building your own real estate. I'll start to bring it. Everyone's got their specialty, their superpower.  But you know what's not a superpower? Trying to do absolutely everything yourself.

Oh, I agree. And that leads us right into David's next big piece of advice. Yeah, he's really big on not getting in over your head. Especially when you're just starting out. You know, start small, learn the ropes. He's all about gradually scaling up. It's like that classic saying, Don't put all your eggs in one basket.

Exactly. He actually uses the metaphor of, like, building a skyscraper. You wouldn't start with a penthouse, would ya? You wouldn't You'd probably want a foundation first. Exactly. You lay that strong foundation. And it's funny, he actually started with a single family rental property. You know, humble beginnings before the empire.

It's a good reminder, Rome wasn't built in a day. Yeah. And neither are real estate portfolios. Nope. It takes time, it takes patience, and it takes, honestly, a willingness to learn from those early experiences, those early mistakes. You've gotta learn.  Speaking of learning, David really stresses due diligence.

He does not sugarcoat it. He says neglecting this step. That's how you end up with a financial and legal migraine. Yeah. No, he's right. This is where you got to put on that detective hat we talked about. Go beyond the standard inspection. Bring in a specialist if you need to. Sewer scope. Get it done.

Permits, old renovations. He even says look into the history of insurance claims on a property. You'd be surprised what you find. It sounds like a healthy dose of paranoia can be good in real estate. A little bit, yeah. You want to make sure you're buying an asset, not signing up for a whole bunch of problems.

Exactly. And that's where documentation is key, which he talks about too. Have everything checked by a real estate attorney, contracts, agreements, the whole shebang. Even if it feels like an extra expense, he says it's worth it. It's like that saying, an ounce of prevention is worth a pound of cure. 100%.  And that brings us to David's final piece of advice, and I think Honestly, one of the most crucial, especially for new investors, don't go it alone.

He is all about building that network of trusted professionals. So we're talking real estate agents, mortgage brokers, attorneys, contractors, property managers, basically anyone who can offer some specialized knowledge, some expertise. Surrounding yourself with the right people. He says it's essential.

These are the people who can give you insights, help you dodge those, those costly mistakes, and honestly just make the whole investment journey smoother. He says even with his level of experience, we're talking hundreds of millions of dollars worth of property, he still leans on his team. Calls them the backbone of his operation.

Wow.  That says a lot. And really speaks to that power of collaboration of mentorship in this field. So.  Taking a step back, looking at all this, what really speaks to you? What's resonating from David's advice? You know, for me, it's interesting. I think what sticks out is how David emphasizes both knowledge, right?

But also relationships. Like it's not enough to just understand the market and crunch the numbers. You need those people. You can trust that support system to really. Drive. Yeah, it's like this blend of, like you said, the expertise, but also that human element of collaboration. I think that's what sets apart those really successful investors.

And it made me think about something else David said, how real estate is always changing.  What worked a year ago, five years ago. That might not work today. Exactly. So you've got to be constantly learning, adapting to the market. He actually calls it, I love this, being a student of the market. Always keeping your finger on the pulse, you know, trends, new tech, even how demographics are shifting.

Yeah. And that goes back to building the right team.  Your network becomes your lifeline.  To information, fresh perspectives, he even says that's how you find new opportunities sometimes. It's like surrounding yourself with people who challenge you, mentors, advisors. People who push you. And not just yes men, either.

Right, right. People who are going to point out your blind spots, who see things from a different angle. That diversity of thought, so valuable when you're navigating real estate, which can be complicated, let's be honest.  David really emphasizes seeking out mentors who have different strengths, different experiences than you.

It's like building your own personal advisory board, almost. I love that. Yeah. And it makes me think of something else he said about self awareness. Oh, interesting. Knowing your own strengths, sure, but also your weaknesses as an investor. Because nobody's perfect, right? Exactly. But if you understand what you're good at, your risk tolerance,  David believes that's how you find your niche.

Maybe you're amazing at spotting those diamond in the rough properties, or you're a renovation whiz. So instead of trying to be good at everything, focus on your zone of genius. Love it. You play to your strengths. Exactly. And then those areas where you're maybe not as strong,  that's where your team comes in to fill those gaps.

I think David's ultimate message is real estate. It's a journey, not a get rich quick scheme. Yeah, it's a marathon. And to be successful, you've got to have a vision, you've got to have a plan, and you've got to have the right people by your side. And on that note, I think it's time to wrap up this deep dive.

But before we go, one final thought for you. David talks about building your dream team, but he also emphasizes knowing your own strengths. Could focusing on those unique skills be the key to unlocking your own real estate success? Something to think about as you navigate your own property journey.