Investing in real estate can be a powerful way to build wealth, but it’s not without its challenges. This article draws on the real-life experiences of a U.S.-based investor who ultimately went bankrupt after a series of missteps in the American real estate market. While his arguments and insights are rooted in the unique dynamics of real estate in the United States, they carry valuable lessons that apply to international real estate markets as well.

Whether you’re buying property in the U.S. or abroad, the common pitfalls outlined here—such as poor planning, underestimating costs, and choosing unreliable partners—are universal risks that all novice real estate investors should consider. By understanding these mistakes, you can navigate real estate investing with greater confidence and a sharper eye for detail.

Challenges of out-of-state property investment

One of the major mistakes highlighted was investing in properties far from home. The U.S.-based investor shared, “Out-of-state property investment is difficult unless you have trustworthy, personal connections in the area.” Without reliable local contacts, they fell prey to property managers who inflated repair costs and lacked transparency.

Tip for Beginners: If you’re considering remote property management—whether in another state or internationally—ensure you have reliable, independent contacts, such as property managers, realtors, and attorneys, to create checks and balances.

Overestimating real estate ROI

The investor meticulously calculated returns, expecting their rental property management to yield steady cash flow. However, unexpected costs like vacancy, tenant turnover, and repairs ate into profits. They admitted, “Good months, I got 80% of the rent I counted on, but there were many months where there was nothing coming in.”

Tip for Investors: When estimating real estate ROI, use conservative figures for rent and account for higher-than-expected expenses, especially when investing internationally, where market dynamics and costs may differ.

Underestimating risk tolerance

The investor’s biggest realization was their low tolerance for financial risk. They confessed, “I have no stomach for the degree of risk that comes with increased debt.” Carrying multiple mortgages on underperforming properties became a significant burden.

Tip for Beginners: Evaluate your risk tolerance in real estate investing carefully. International markets may involve additional risks, such as fluctuating currencies and unfamiliar legal systems. Understanding your limits will help you decide if the potential rewards justify the challenges.

Choosing the wrong property manager

A recurring issue was mismanagement of properties. The U.S. investor learned too late that their property manager overcharged for repairs and failed to ensure consistent rental income. They advised, “Discuss the process of ending your relationship with a property manager before signing a contract.”

Tip for Beginners: For international real estate, vet property managers thoroughly. Look for local expertise and ensure contracts clearly define roles, responsibilities, and termination processes.

Hidden сosts of tenant turnover

Tenant turnover turned out to be more expensive than anticipated. The investor shared an example of being charged $400 to remove debris after a tenant left. These hidden costs quickly drained their cash flow.

Tip for Investors: Budget for tenant turnover costs as part of your real estate investment plan. When investing internationally, consider additional costs like travel for property inspections or dealing with unfamiliar regulations.

Realistic expectations for time and effort

While real estate is often marketed as passive income, the investor found it anything but. They described it as “a colossal waste of time” due to frequent travel, repair negotiations, and unexpected challenges.

Tip for Beginners: Evaluate whether real estate investing aligns with your available time and resources. Managing rental properties, especially across borders, can demand significant involvement and expertise.

Final thoughts on real estate investing

The story of this U.S.-based investor is a cautionary tale for anyone entering the real estate market, whether domestically or abroad. Many of the common mistakes in real estate investing—such as poor planning, misjudging risks, and underestimating costs—are universal challenges that every novice investor should anticipate.

But what if you could avoid these pitfalls altogether? At VelesClub Int., we specialize in guiding investors through the complexities of real estate investments across a wide range of jurisdictions. Whether you’re exploring opportunities in the U.S. or considering international markets, our expertise ensures that you have the knowledge, resources, and local insights to make informed decisions. With a commitment to transparency and tailored support, we help investors navigate everything from property selection to legal requirements—minimizing risk and maximizing potential.