The news is full of today’s mortgage crisis. Everyone seems to forget the mortgage crisis in the early 90s or the RTO crisis in the early 80s. The small investor usually takes a very hard economic hit during these times.

Here is a fact that few small investors know. “You don’t have to have all that risk!”

2. Too little return: The short term is the safest types of investment simply because changes in the real estate market usually take time. If the investment brings a return in a few months, economic pressures are usually limited. The problem with short term investments is there are so many costs involved with the purchase, finance, repair, selling and holding costs that a small miscalculation can wipe our all the profits. A decent return for a flip is usually no more than 5-10%.The longer term investor compounds the investment returns but liability, repairs, administration and liquidity hold down returns. Much of the gain in long term investments are appreciation and tax incentives.

Here is a fact that few small investor know. “You can get the best benefits of both types of these investments while getting better returns.”

3. Not having a team: The small investor is usually swimming the difficult economic waters either alone or with an imbalanced small team. Usually, an investor will have one or two money guys, a Realtor® and maybe a handyman. A well-rounded team makes fewer mistakes and brings a better return. Normally what hurts the investor are decisions made while the investor did not know what he did not know. The more common phrase is “Learning from the school of hard knocks!”

Here is a fact that few small investors know. “You shouldn’t do it all yourself to make more profit!”

4. Paying too much to the government: When the investment is lucrative the government steps in with self employment tax 15.3%, federal and state income tax up to 53%. There is little left for the risk taking investor. Even the longer term investor is stuck on a merry-go-round avoiding capital gains tax.

This compounds as profits are taxed which restricts investment and the returns of those investments are taxed etc. in a never ending cycle.

Here is a fact that few small investors know. “You don’t have to pay all that tax!”

5. Having infinite liability: We here in the United States live in a litigious society. Three percent of our total gross national product is siphoned off by the trial lawyers! If you don’t own anything, you have little to fear from predatory trial lawyers. Become successful and you immediately increase the probability of a lawsuit. The odds are 1 in 3 if you have a successful enterprise that you will be the target of a lawsuit. Feeling protected by having insurance is similar to having a large piece of raw meat strapped to your back in a hungry lion’s den. The insurance policy ensures the attorney that he will get paid. When you are called to give a deposition during a court disclosure process expect to be asked about everything you own.

Here is a fact that few small investors know. “You don’t have be at risk!”

6. Your business owns you: The small real estate investor usually takes on tasks that require time and effort. Frequently, the time and effort becomes a problem and negatively impacts the investor’s lifestyle. The investor becomes an employee of the investments running errands and completing tasks at inconvenient times. In other words the small investor has purchased a job.

Here is a fact that few small investors know. “You don’t have be owned by your investment!”

Six Huge Mistakes Investors Make is a post from: George Brunton Team