The three biggest investment mistakes billionaire's make: Craig Turnbull

GUEST OBSERVER

It might surprise you to learn that billionaire real estate investors make investing mistakes. But billionaire real estate investors and the people who are paid as professionals to invest in property on their behalf do exactly that.

But if they make real estate investment mistakes, what chance have you got?

Billionaire investors and those investing billions are above all, still just people. They have all the fallability and emotion of any other living human being.

And so they, like you, like me, make mistakes when investing in real estate.

The challenge is to firstly know what these mistakes are and then secondly knowing how to avoid them or at least minimize the impact of a mistake when they inevitably happen.

And let’s face it they will. If you are out there trying new things and learning each day, you will make mistakes. Though a mistake is not such a bad thing, if you can learn from the experience. Though it’s a different thing if you repeat the same mistake. It means you haven’t learnt and now you have a mistake habit.

I was listening to a recording made about a conference held in New York which which was attended by approximately 200 of America’s premiere billionaire private real estate investors and the professionals who are paid the big bucks to invest for them.

In the discussion around mistakes they made while real estate investing, the top three most common mistakes made were these below. They might surprise you.

1. Overpaid – Yes, the number one mistake was that they often paid too much for an asset. That gave them a cost basis that was too high and was very tough to work out of. I would have thought that such wealthy and professional people would have immense amounts of information and research at their disposal to accurately determine the value of an asset. Yet in the heat of battle in competing for an asset, they often paid too much. Though sometimes it was not apparent that too much was paid until much later.
2. Emotional – Even though they were incredibly wealthy people or very experienced professional real estate investors – they were still people. They still got excited in the process of getting a deal done, particularly in the case of a “trophy” asset – and these emotions often led to overpaying to secure the asset in their portfolio. Sometimes, they had so much time and money invested in to due diligence that they went ahead with the deal anyway, as they just wanted it to close. Often, the money managers had a certain amount of capital they needed to invest and there was immense pressure to secure a deal and get their capital out working. And then there was just the basic fear of missing the market.
3. Fees – lastly, they all felt that they paid way too much in fees – all types of fees, such as transaction and ongoing fees. These could include costs for financing; interest fees; management fees; carry fees; performance fees; legal fees; professional service and advice fees. They all agreed that a lot of money could be saved by being careful and clever on the level of fees paid, which could dramatically affect both the short & long term investment return.

Yes, I was surprised too. Some of the richest real estate investors in the USA still made these basic real estate investment mistakes.

Next time you want to buy some property or make any kind of real estate investment, it will pay you to so these three simple things:-

1. Pay a fair or under market price
2. Keep emotion out of the investment
3. Carefully examine and question every upfront or ongoing fee or charge.

These simple steps could place you ahead of some of the richest real estate investors in the world.

Craig Turnbull is an author, property developer and real estate investor. He can be contacted here.