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We have compiled a list of the top 25 mistakes beginning investors make. This is a comprehensive list created from our first-hand experience as beginning investors. Our goal is to help you become a successful investor by avoiding these mistakes. Armed with this extremely valuable information, you will be able to save an incredible amount of time, money, stress, and frustration. Our success didn\'t happen overnight. Over the years, we\'ve learned how to be successful investors by educating ourselves: creating a solid plan, learning the market, accepting our failures, listening to experts, taking calculated risks, and learning the business inside and out.\nTo access more such knowledge resources, visit https://jakeandgino.com/downloads/\n

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presents

PRESENTS

25 MISTAKES

INVESTORS MAKE

NO MISTAKES

25 mistakes

25 MISTAKES

INVESTORS MAKE

We have compiled a list of the top 25 mistakes beginning investors make.

This is a comprehensive list created from our first-hand experience as beginning investors. Our goal

is to help you become a successful investor by avoiding these mistakes.

Armed with this extremely valuable information, you will be able to save an incredible amount of

time, money, stress, and frustration.

Our success didn't happen overnight. Over the years, we've learned how to be successful investors

by educating ourselves: creating a solid plan, learning the market, accepting our failures, listening

to experts, taking calculated risks, and learning the business inside and out.

NO MISTAKES

NO PLAN 1

If you have no plan, plan to fail. There are many different strategies of

investing in real estate: single family homes, multi-family properties,

commercial, retail, land development, lease to own, fix and flip, etc.

When we began investing in real estate, we knew we wanted to target residential apartments.

One of the biggest mistakes investors commit is investing in several different types of real estate

instead of specializing in a single type to start. The problem with choosing multiple strategies is it

takes time to learn everything about each particular strategy. When you try to learn too much all at

once, you wind up knowing a little about a lot instead of a lot about any one specific strategy. It's a

mistake you want to avoid.

As a beginning investor, you should choose one type of investment strategy and learn everything

you can about that particular strategy.

Should you make the mistake of investing in multiple strategies to start, i.e. pursuing commercial

properties, single family homes and flipping, you'll be so overwhelmed, you'll lose sleep, money, and

even worse, the desire to continue as a real estate investor. You don't want to chase deals. Focus on

one area. That's how you become an expert.

real estate is a local market what does that mean

Real estate is a “local market.” What does that mean? The same

opportunities available in New York are not available in California.

Every real estate market is different. Our market—Knoxville,

Tennessee—attracts investors from all over the world, who are

interested in taking advantage of high cap rates as opposed to cap

rates in most of California, which are much lower than in Knoxville.

UNFAMILIAR

LOCAL MARKET 2

When investors realize the high cap rates available in Knoxville, they get excited; so excited that

they pay more than the market value for properties. Why? Simply because the properties in

Knoxville are less expensive than in many of the other local real estate markets.

After they pay more for a property than what it's worth, they soon realize they made a bad

investment decision - their asset is not performing the way they speculated it would. (Obviously,

cap rates vary according to the price paid for the asset - the real estate investment - versus the

income received).

Not knowing the local market may very well be one of the most costly mistakes a beginning

investor makes. It is crucial to have a thorough understanding of your local market.

These are only a few of the elements you MUST know:

Market Value

Current Rental Rates

Tenant Base

Job Growth

Overall Outlook of Current

Economic Conditions

Cap Rates

Once you know everything there is to know about a local real estate market, you will be able to

evaluate investment opportunities and choose the best one(s).

FAILING

QUITTING AFTER 3

"It's fine to celebrate success but it is more important to heed the

lessons of failure."—Bill Gates. My first venture into a real estate

partnership ended in disaster. My brother and I invested a large sum

of money in mobile home parks in Florida.

In the beginning, everything was great. Then, we didn't receive enough income and missed a

payment. Then, we missed another payment. I blamed myself for losing my money. It was my

decision and my investment. I did not perform proper due diligence. I didn’t even know what that

meant at the time, due diligence, but I quickly learned. And it was a very expensive mistake.

However, instead of quitting, I enrolled in a real estate coaching program and began my formal

education. Even after educating myself, I made mistakes, but I plowed ahead. Fortunately, I never

quit and found my new partner jake if i had quit

quit and found my new partner, Jake. If I had quit, I would never have continued on the journey of

wealth building. Remember, we all make mistakes in life.

When I read about other people failing, Donald Trump, Michael Jordan, Henry Ford, Bill Gates, I

realized they all had one thing in common: failure. The other thing they had in common was

accepting failure and moving on. It isn’t the mistakes that define a person, but how they react to

their mistakes.

Plan on failing because you are going to fail. In fact, failing is part of success. When you fail, pick

yourself up, face your fears, get out of your comfort zone, and get back in the game!

FALLING 4

IN LOVE

Falling in love with the property and not the performance. When I

was a child growing up, my dad would take me to construction sites

where we would sneak into houses that were almost complete. I

dreamed of living in one of those beautiful homes, and thanks to

my dad, my dream became a reality.

My love of real estate is why I became an investor. As a beginning investor, my outlook was

simple—if the property looked nice and was in a desirable neighborhood, I wanted it.

I had no idea what a cap rate was, but I did know the construction materials used to build the

home. I quickly learned that only the numbers tell the story, that investors should purchase only

investment property based on “actual” numbers and not some broker’s fantasy pro-forma

calculations.

If you make the mistake of falling in love with the property and not the performance, your investing

career may be over before it even starts. Do not fall in love with a property, perform your due

diligence to make sure it meets your investment strategy.

LISTENING 5

PEOPLE

TO WRONG

Everyone from family members to colleagues, and friends is going

to give you advice. Unless these people have experience and proven

success as a real estate investor, they are not qualified to give you

advice. You can listen to them, but don't be swayed by their opinions.

you ve done your due diligence you know what

You've done your due diligence.

You know what you're doing.

You've developed your plan.

Some people may tell you what you're planning to do is too risky, or

you should do this or that, but you know better.

Remember to always trust yourself.

You've run the numbers.

What’s the common

denominator here?

Falling in love with the property

and not the performance. When I was a

child growing up, my dad would take me to

construction sites where we would sneak into houses that were

almost complete. I dreamed of living in one of those beautiful

homes, and thanks to my dad, my dream became a reality.

IN WRONG

INVESTMENT 6

AREAS

Economic conditions—employment rates and potential job growth—was the reason the properties

had no appreciation potential and an unstable tenant base. The main employer in the area was

Kodak, but the company packed up most of its operations and left the city with empty buildings.

There is little hope for markets that have weak employment opportunities, so seek out cities that

currently have a minimum 2% job growth rate for at least two consecutive years. Fortunately, my

investment is producing a positive cash flow, however, its value has not appreciated in seven years.

Lesson learned - investing in an economy that does not have a healthy employment rate and

appreciation potential is not a good investment.

NOT INSPECTING EVERY UNIT BEFORE CLOSING. When investing in

multi-family properties, every unit must be inspected. We have our

property inspector walk through and assess each unit in the

complex. In our contracts, we stipulate that we are purchasing

rent-ready units, and we make sure they are all in good condition to

rent or we will go to the seller and ask for a repair allowance. If you

do not inspect every unit, the seller may only show you the units that are in good condition. This act

of due diligence will save you thousands of dollars.

EVERY UNIT

NOT INSPECTING

NOT SECURING THREE BIDS FOR EVERY JOB. If your investment

property needs repairs, get bids from three vendors. Compare the

prices, check the reputation of the companies, and ask for

references. Contact the companies' references and ask them about

their experience. If you want to choose a vendor whose bid is higher

than the other two bids, contact that vendor, let them know you

have two other bids that are lower, and ask them if they would be willing to reduce their bid.

8

EVERY JOB

3 BIDS FOR

system

SYSTEM

NO BUSINESS

NO SYSTEMS IN PLACE TO RUN YOUR BUSINESS. To run efficiently

every business needs systems in place—rental policies, billing,

maintenance, management and financial reporting, to name just a

few. If any of these systems are weak or non-existent, then the

investment will not run at optimal efficiency.

9

I received my education in real estate through coaching and by reading countless books.

Unfortunately most books focus on acquiring property. I asked my coach for help in building these

systems and on running the business. I also sought out help from mentors for advice on

implementing these systems. We now have efficient systems in place to run our business. Make

sure you have a complete system in place so that your investment runs efficiently.

FAILING TO SCREEN POTENTIAL TENANTS. When I

bought my first rental property, I didn't think it was

necessary to perform background checks on potential

tenants. I thought it was a waste of time and I did not

want to be bothered with having a tenant complete an

application, ordering a credit report, checking past rental

history, and reviewing the information. I thought my gut

TENANTS

SCREEN

FAILING TO

10

feelings were a better indicator for choosing a tenant. After I rented a property to a nightmare

tenant, I quickly learned my lesson.

Screen every tenant or hire someone to do it for you. Have the tenant complete an application,

verify their employment and past rental history. You can obtain a background check from online

services for a small fee. Charge potential tenants an application fee to cover the cost of screening.

You will never eliminate the possibility of renting to a nightmare tenant, but your odds will be

greatly reduced when you take the time to screen tenants.

FLOW

CASH

NEGATIVE

BUYING PROPERTY WITH A NEGATIVE CASH FLOW.

Purchasing an apartment building is equivalent to

purchasing a business. Would anyone buy a business

that loses money? I know I wouldn’t. Properties that

produce negative cash flow are called alligators (they

will eat you alive). One of the main reasons to purchase

11

investment property is to create passive income, not passive losses. Do NOT buy an investment

property with the expectation of capital gains in the future. You buy for cash flow and capital gains

are the icing on the cake.

investors have a short memory one of the main

Investors have a short memory. One of the main culprits of the real estate bubble that occurred in

2004-2008 was that investors were purchasing real estate with a "greater fools" theory—there is a

fool out there that will pay more for this property than I did. Cash flow was a thing of the past.

Sooner or later, the fools stopped showing up and the investor was left holding the bag. If you buy a

property with positive cash flow, it will allow you to ride out a storm.

RUNNING OUT OF MONEY BEFORE FINISHING REPOSITION.

When an investor undertakes repositioning a

property—cleaning things up, rehabbing apartments, and

running things properly—one assumes more risk, but the

rewards are greater. Repositioning a first or second property is

not recommended. An investor needs to have a keen

OF MONEY

RUNNING OUT 12

$

understanding of expenses, holding costs, remodeling costs, and needs to be able to run the

property while these renovations are being undertaken. If you decide to reposition a property, it is

imperative to budget enough capital to finish the renovations. It is always helpful to have a great

relationship with a local bank that may be able to lend the necessary funds to complete the project.

NOT FOLLOWING POLICIES, SUCH AS LATE FEES. Policies are

created to be followed and enforced. It is unwise to be selective

when faced with imposing late fees on a tenant if that tenant

can't pay the rent. Tenants talk amongst each other, and you do

not want to get a reputation for being soft or showing

favoritism. If you do not like a certain policy, then it is at your

POLICIES

NOT FOLLOWING 13

discretion to alter or remove it. Just make sure that all tenants are treated fairly and equally. Keep

in mind, it's more cost effective to keep a good, paying tenant in your property versus the expense

of a possible eviction, make-ready and re-leasing the property.

NOT MAXIMIZING POTENTIAL INCOME OF PROPERTY. This

is a huge and often overlooked mistake that new investors

commit. We search for properties that do not charge

application fees, pet fees, late fees and utility fees. One

overlooked area of potential income is storage space.

Tenants bring with them an inordinate amount of stuff, and

INCOME

POTENTIAL

NOT MAXIMIZING 14

$

are always looking for places to store their stuff. What better place than an empty garage or

basement to create a storage unit? Some investors even build storage units on their property to

generate additional income, offering a storage facility to the tenants.

Another area to explore for extra revenue is a laundry facility. Most tenants love this amenity, and if

your competition offers laundry, you had better be prepared to offer it. The complex that offers

amenities, such as laundry and storage, will also be able to charge higher rents.

keeping disorganized books and not being able

KEEPING DISORGANIZED BOOKS AND NOT BEING ABLE TO

TRACK THE PERFORMANCE OF AN ASSET. Investors lose

thousands of dollars when they do not keep proper records. Real

estate investments provide numerous tax advantages. Being

able to differentiate between a repair and a capital expenditure

will allow you to save money on your taxes. Hire a competent

BOOKS

DISORGANIZED 15

bookkeeper and accountant who both have experience in real estate.

We generate monthly reports that include profit and loss statements, rent roll, and operating

expenses. These reports allow you to see trends in the property, such as tenants who are paying

rent late, increases or decreases in operating expenses, etc. It is vital to create these reports if you

have partners invested in the property. They should know how the property is performing, and you

can answer all questions if your books are in order.

INSURANCE

NOT ENOUGH 16

NOT PURCHASING ENOUGH INSURANCE ON THE PROPERTY.

There was a fire in my restaurant a few years back and it was

closed for business for 10 weeks. I was fortunate to have the

proper insurance in place that allowed me to complete all

renovations of the damage caused by the fire, to pay my

employees because the policy included business interruption

INSURANCE

CLAIM

insurance, pay all the bills while I was closed, and even had some cash left over.

Find competent insurance agents who deal specifically in your niche of real estate and have them

give you ideas on additional forms of insurance, such as umbrella and business interruption

protection. Be sure to compare prices from different insurance companies, based on the amount of

coverage offered and the type of insurance.

NOT HOLDING REAL ESTATE IN A PROPER ENTITY. There are

several entities in which you can hold real estate to limit your

liability. Our preferred entity is a limited liability company, or

LLC. Consult with your accountant as to which entity is

appropriate for your situation. This is one area where you do

not want to be cheap. We place every property into a different

LLC so that any legal action affects only one property; the

ENTITY

WRONG 17

RIVER

LLC.

liability is limited to the assets in that LLC/property. The liability does not extend to our other

holdings.

This is crucial for us because we do not want to put our entire portfolio in jeopardy. For instance, if

a tenant sues us for slipping and falling at our River Bend Apartments, that property is owned by

our River Bend Apartments LLC, therefore, the other properties we own will not be affected.

you can see the potential problems

You can see the potential problems if all the properties are held under one LLC. What is even worse

than using only one LLC for all of your holdings is when an investor holds a property without an

entity. Some investors decide to hold the property in their personal name because they do not want

the expense of forming an LLC or paying to file a corporate tax return each year. Your investing

career and your finances can be derailed forever if you do not structure your investments properly.

Once again, please consult with your tax professional on this crucial issue.

Another benefit to holding your properties in different entities is that it will be easier to maintain

proper records. Once you begin to grow your portfolio, rent collections will increase and you want

to be certain that each property is recording the proper income and expenses. My partner uses

creative names for each entity, but you can call each entity the address of the property to avoid

confusion once you have accumulated several properties.

NOT HOLDING MANAGEMENT COMPANY ACCOUNTABLE.

When hiring a management company, the only way to hold

them accountable is to receive weekly reports on rent

collection and expenses. If their policy is not to issue these

reports, then find another company. How else will you be

able to track if rent is being collected on time, or if expenses

took an unexpected jump this month? You should be able to

HOLDING

MGMT CO. 18

ACCOUNTABLE

MGMT.

COMPANY

receive reports every Monday. Some companies use software that records data in real time. All you

do is log in and check the status of your investment.

When you sign a contract with a management company, it is advisable to remove any clauses that

require a certain time period to elapse before the contract can be terminated. You should be able to

end the relationship within 30 days if you are unhappy, and you should be able to access the funds

in the bank account at any time.

Some management companies are the only cosigners on the bank account. You want to have your

name on the bank account in case you run into a problem with the company. I have heard of

investors being denied access to their own funds because their name

was not on the account. The other clause I would remove is the one

that states if you decide to sell the property, the company will

become the listing agent. If you like the management

company, then you should have the discretion to choose

them to list your property. But if they have under-performed

for you, why would you reward them with the listing?

paying contractors in full before work

PAYING CONTRACTORS IN FULL BEFORE WORK IS

COMPLETED. You need to develop a strong relationship

with all of your vendors. They are an integral part of

your team and you want them to service your property

as quickly as possible. We always pay our contractors as

soon as the job is done, so that they will be more

responsive to our needs. If they have to choose between

IS DONE

WORK

PAY BEFORE

19

$

$

$

$

$

$

$

$

$

an employer who pays on time and one who pays late, who do you think they will choose? The only

caveat to this is to pay in full only when they have completed the work. Good luck trying to get a

plumber or electrician back to the job site if they have collected the entire sum of money and the

work is not complete. In business, this is called “Having skin in the game.” As long as they have

some money to collect, it is in their interest to finish the job and get paid.

To be fair, it is difficult to run a successful contracting business. Their emphasis is on locating new

work while collecting money from jobs that were completed weeks ago. If you make their job

easier, they will be more inclined to work with you and may even give you better pricing on work

performed.

SPENDING TOO MUCH TIME AND MONEY REHABBING

PROPERTY. I made this mistake rehabbing my first few

properties. In the rental business, concentrate your

remodeling efforts on those that will bring you the

greatest return. For example, replacing counter tops

and fixtures in the kitchen is an excellent return on

investment because renters will see the perceived value

of having a nice new kitchen.

& MONEY

TIME

TOO MUCH

$

20

This is where I got into trouble. In one of my less expensive properties, I installed expensive counter

tops and fixtures, when installing less expensive counter tops and fixtures would have been a wiser

decision. The type of tenant who would rent this property did not expect granite counter tops. I

could have saved a ton of money if I had used the less expensive materials, and the tenants would

have been satisfied with the property.

As your experience grows, you will be able to determine what needs to be fixed and how much

money should be allocated to each rehab. There are certain items, such as roofs and driveways that

must be maintained and yet add no value to the asset, but try renting an apartment with a leaky

roof.

At Wheelbarrow Profits, we have developed a successful “fix-up” strategy to increase value and

keep our costs down.

staying on the sidelines the most common reason

STAYING ON THE SIDELINES. The most common reason

people do not start their investment career is FEAR. When I

began investing outside my market, I was afraid that I would

not be able to control my investment and I would fail. I ended

up seeking a partner and pursued investing in the Knoxville,

Tennessee market.

STAYING ON

SIDELINES

21

If I had succumbed to my fear, I would have never partnered with Jake and invested outside my

local market. I went outside my comfort zone. I pushed the fear away. I educated myself, developed

goals and a plan—specific steps to achieve my goals. Allowing my fear to subside and having the

confidence to step outside my comfort zone, led to success with a purchase of a 25-unit property.

I advise all new investors to invest in whatever properties they feel comfortable managing. I

preferred to start small so that when I made my first mistake, it would not derail my dreams of

continuing to invest in real estate. You can recuperate from a small mistake, but a big mistake

might derail or end your investing career.

HAVING NO POLICY FOR TENANT RETENTION. Once you fill

your vacancies, your focus should be on tenant retention. One

of the highest expenses an owner incurs is tenant turnover.

Once a tenant vacates the property, the apartment has to be

turned over, or made ready. It might need new paint, flooring,

etc. In addition to make-ready costs, you, as the investor, have

to spend money to get a new tenant and that means you'll be

NO TENANT

RETENTION

TENANT

RETENTION

22

losing revenue every day the property is vacant. We focus our efforts on retaining the tenants who

are currently living at our properties.

PART OF OUR STRATEGY INCLUDES:

1.

Offering excellent customer service. When a tenant has a maintenance

issue, we dispatch our techs to handle the situation quickly. Keep your

tenants happy!

Maintaining the appearance of the property.

Offering amenities such as renters' insurance and laundry facilities.

Sending tenant surveys for feedback on our performance. A happy tenant is

one who stays and one who recommends his or her friends to move in the

complex.

Trying to build a community at your property. A tenant will more than likely

extend his lease if he feels that he is living at a nice, safe community.

2.

3.

4.

5.

When we sent out surveys to our tenants, we were pleasantly surprised at the comments we

received. One tenant told us that whenever he arrived at his apartment, he felt like he was “home.”

This is our mission at JakeAndGino.com, to offer modern, safe, affordable, housing.

other comments we received from our surveys were

Other comments we received from our surveys were complaints that people were not picking up

their dogs' feces. We dealt with the situation immediately. We constructed dog stations for the

tenants and now, we are considering building a small dog park on the property.

Surveys allow you know what you're doing right and how you can make important improvements

to keep your tenants happy.

ALLOWING PROPERTY TO FALL INTO DISREPAIR, NOT

PERFORMING DEFERRED MAINTENANCE. Some landlords

allow their property to accumulate deferred maintenance,

and are unwilling to reinvest money to maintain the asset.

These types of landlords are generally referred to as

slumlords. Their main objective is to milk the property and

not spend a dime on maintenance or improvements that

should be made.

DISREPAIR

PROPERTY

FALLEN INTO

23

We look for these types of properties to purchase because it doesn’t take much effort to add value

to the asset. There are countless reasons to maintain the property, but I think the two most

important reasons are: retain quality tenants, and maintain the value of the asset. Sometimes

maintenance issues can be inexpensive, such as replacing shingles on a roof that leaks, rather than

replacing the entire roof.

Set up a cap expense account and fund it every month to pay for your capital expenditures, such as

paving parking lots and replacing roofs. For example, we deposit $250 per apartment per year in an

account to help pay for these big-ticket items. If we have a 20-unit building, we deposit $5,000 per

year or just over $400 per month. Doing this will help an investor pay for any unexpected expenses.

Once we had to replace an entire septic system, and were fortunate that we had the money in the

bank.

HAVING A SUBPAR TEAM. Any great businessperson will tell

you that the key to their success was the ability to assemble

a superb team and then follow the recommendations of the

team. It is impossible for an entrepreneur to be an expert in

every facet of his business. He has to rely on his team for

expert advice and be willing to act upon that advice. At

JakeandGino.com, we have assembled a team of key

HAVING A

SUBPAR TEAM

24

members and the value they bring to our business is instrumental in our success. Do not let your

ego get in the way of assembling a good team.

never stop learning some investors believe they

NEVER STOP LEARNING. Some investors believe they know

everything they need to know about investing, so they stop

learning. Laws change, regulations are revised, and

strategies change. Don't ever get complacent—thinking that

you know everything you need to know about investing in

real estate. You can never read or learn too much.

NEVER

STOP LEARNING

25

My passion for real estate makes it easy for me to read books, attend seminars, and learn

everything I possibly can about investing in real estate. I continue to grow as a person and

everything I learn makes me a better investor. After I master one area of real estate investing, I

move on to learning everything I can about another area of investments. Don't ever stop learning.

Ninety percent of all millionaires become so through owning real estate. More money has been made in real

estate than in all industrial investments combined. The wise young man or wage earner of today invests his

money in real estate. ~ Andrew Carnegie

Join us at JakeAndGino.com and we'll help you on your journey to

becoming a successful real estate investor.