How to Fail at Real Estate Investing in 2026

0:00This is how you fail at real estate in 2026. Dave and I have more than two decades of combined real estate experience. And let me tell you, that means a lot, a lot of failures. I have a deal right now that I'm going to lose at least$10 ,000 on. We've all been there, dude. But the good news is we've learned enough to create an entire blueprint of real estate investing failures. Now, all you need to do is the exact opposite of these mistakes. The crazy part is I still achieve financial freedom in less than 10 years, even with all those errors along the way. So imagine how quickly you could do it if you learn from these failures first.

0:42What's going on, everybody? I'm Henry Washington, and I am joined by my co-host, none other than Dave Meyer. What's up, buddy?

0:49Henry Washington:Not much, man. I'm excited to talk about this because hopefully everyone listening to this could just do the opposite of all the things we've done wrong and just coast through real estate investing with no issues. Yeah, that'll be exactly what happens. You'll be the first person to ever do that, but maybe at least reduce the amount of mistakes that you make. If anybody tells you they've never lost money in real estate, either they're not doing deals or they're lying to you. What we want to do is be transparent, share with you the mistakes that we've made so you don't have to make them. And hopefully that makes your journey a little bit easier.

1:24Are you still going to screw up? Yeah. Yeah, you will. But hopefully those screw ups won't be as impactful by learning from knuckleheads like Dave and I.

1:32Henry Washington:Losing a little bit of money on one deal or not being perfectly optimized is part of the game. The goal in real estate is just don't have a catastrophic error. And that is definitely possible. Well, with that, let's jump right in. And Dave, I'm curious to hear what you think the number one way of how to fail in real estate is. The number one way to fail in real estate is overly trusting other people or random people. Just trust no one. Yeah, I know it sounds incredibly cynical, but I am not saying that there are some people are trustworthy. It is me just like not doing my due diligence on the people that I am going to be working with is probably the thing that has led to the most difficulties and losses in my real estate investing career.

2:23There's some truth to this one. There is some truth. I hear you. And you know what I like about this one for real is that when you're new, you depend heavily sometimes on other people's analysis and perspectives and opinions. And I think you do need to weigh those things out. But I also think you've got to get yourself to a place where you can do enough analysis on your own and feel confident in doing a deal based on you and not what someone else is telling you.

2:53Henry Washington:I see this all the time. I work with new real estate agents now when I'm looking at new markets, and they'll send me deals. And probably earlier in my career, I would have just taken their word for what the rent comps were going to be or what the ARV of the project was going to be or what vacancy was in that particular area. now I am much more skeptical, not that they're always wrong, but I'll talk to several agents and really do my due diligence almost more on them than the deal. Especially if you're building a permanent team, like an agent or a lender, like these are people you're going to work with a long time.

3:31Henry Washington:You should be learning about them, calling references, calling other people who have worked with them and gotten their experience. Like I know it sounds like a pain in the butt and it is a It is the pain in the butt. Yeah, it is. But it is so worth it. And I want to be very clear here that I am not trying to blame other people for my failures. It's my fault. I did not do enough due diligence. Or just as the simplest possible example, if you were to go out and just use the first quote you got on any deal, like you call a contractor, you call a tradesperson, and they show up, they give you a quote, and you're like, oh, that seemed reasonable.

4:09Henry Washington:I'll take that quote. As we all know, quotes can vary by tens of thousands of dollars. So those are the basic kinds of things you need to do and not just trust that the first person that you interact with is the right person for you and your business. All right. So then what's number two? What is the number two way to fail in real estate? Man, Dave, I remember as I was getting started in real estate and I was seeing the things that people were buying and hearing how people were making this calculation. And I just remember thinking, this is wrong. Why do so many people do this? And that is calculate cash flow the easy way.

4:49In other words, they would just take their mortgage, subtract that from the rent they get, and tell me that's how much cash flow they were making. The amount of people that were doing this was just mind-boggling to me. The conversations I would have with people. Oh, this agents to everybody. This deal cash flows$1 ,000 a month. Your mortgage will be$1 ,000. The rent's$2 ,000. And I'm like, this is wrong. Yeah. That is not cash flow. What you want is net cash flow. Rent minus mortgage minus taxes minus insurance minus expenses. all expenses equals net cash flow. All expenses includes things like vacancy, not just maintenance and repairs.

5:45Calculate vacancy and calculate real vacancy, not calculate, you know, I put 3 % for vacancy. That won't cover one month's rent. You need to figure out what does two to three months of vacancy look like? Be realistic with your expense numbers. Underwrite them so ridiculously conservative that if you're cash flowing on top of your underwriting, it's a bonus because you're obviously hopefully going to perform better than that. And the other expense, the other one people love to leave off is property management. I'm going to self-manage. Yeah, you may. You probably are until you get to a certain point or until your job changes or until your spouse is like no more self-managing.

6:32You don't know how long that's going to last. Calculate management fees so that when and if you decide not to be your own property manager, you don't give away all your cash flow because you didn't underwrite properly.

6:45Henry Washington:You want to ensure the highest probability of success, underwrite conservatively, and then you'll know what could happen and the downside because you're underwriting for that. You're saying, hey, what if things don't go well? That's why you have a vacancy contingency? What if rents aren't what I thought they were going to be? You already know what that's going to look like. To me, the only times I've ever really gotten upset about a real estate deal is when I didn't see the risks coming or didn't account for them. I personally, I don't know about you, I don't get upset. If I'm like, oh, there's a vacancy for a month, it's like, yeah, I plan for that.

7:21Henry Washington:That's fine. It's frustrating. I'd rather not have it, but I plan for it. Or maybe, you know, the rent comps were$1 ,500. I got$1 ,400. It's like, okay, I planned for that too. I underwrote for that. And I actually put all the line items in my underwriting, like I said, vacancy and CapEx and all of these things. Drives me absolutely insane to see people say they're getting 10%, 12 % cash on cash return when they're just not counting half of the expenses. I think what makes it challenging is when you do underwrite conservatively and you start making offers based on those conservative numbers, obviously the offers that you're making are lower than what maybe some other people are offering.

8:02And then you start to get beat out on deals that you really wanted. And that's when people make the mistake. That's when they start going, oh, well, I can come up 10 grand on my offer. Oh, well, I can come up 20 grand. I'm tired of losing out on these deals. It's not the initial underwriting. It's the monotony of making several offers, not getting a yes so that you're like, well, these other investors seem to be doing it. They're paying a little more. So maybe I'm missing something. I'm going to pay a little more because I feel like I'm missing out on deals. Totally. You're not missing out on deals.

8:34What you just signed up for is losing sleep.

8:37Henry Washington:This is a hard balance to strike because we also say on the show all the time, we're like, go out and get your first deal. Just like, go do a deal. That is true. You should go do that and not expect a home run. I think that's kind of the point. You can't analyze your way out of any risk. You can't analyze your way out of uncertainty, but you need to analyze your way out of the big risks, the known risks, the known things that you have some control over, which are things like doing your numbers right and your rents and your vacancies. When you find a deal that works with all those things, that's when you go execute.

9:17Henry Washington:Don't just go out and buy anything, but also don't expect to find some perfect deal that's going to have every number perfectly lined up for you and you're never going to have any chance of failure. That's also not going to happen. All right. Obviously, I think these are great points, but I'm curious to know what you think the third best way to fail in real estate is, and we'll jump into that right after the break. Are you looking for a simpler way to find your next investment property? Lenar Investor Marketplace is a free platform built for real estate investors. Create an account and get access to investor-ready new construction homes, plus real-time data on projected rents, returns, and neighborhood insights.

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12:52all right we are back on the bigger pockets podcast and dave and i are talking about how you fail in real estate in 2026 we've already covered dave's number one way to fail which is don't trust anyone and my number one way to fail which was the second item on our list was to stop calculating cash flow the easy way and just subtracting your mortgage from the rent and calling it cash flow. So Dave, what is the next way people fail in real estate?

13:21Henry Washington:The number three way to fail in real estate is not talking to a lender or agent until you are quote unquote ready to buy. I get it. I know people want to think about the end in mind. They want to create these businesses and have a perfect business plan. But you need to go in a logical order of operations to get to your first deal and talking to a lender and talking to an agent, even if those conversations go poorly, is an absolutely essential, I don't know if you call it first step, but it's in the first two or three steps to being a successful investor. And if you don't do this, you will fail, right?

14:01Henry Washington:Like you're not gonna get a deal if you are unwilling to talk to agents and lenders. What I would add to this is talk to more than one. Every lender is a little bit different, especially if you're talking to local community bank lenders. And also, I think people just have a lack of understanding of exactly how many different types of loan products there are. So yes, go talk to a lender and find out how much you're qualified for, but be specific and ask them, hey, are there any types of loan products that are specifically for the kinds of deals that I'm doing? Or are there any kinds of loan products that are new or that are coming out soon that I need to be aware of.

14:43Henry Washington:What about asking them for down payment assistance programs or grants that are available in your area? Because that might mean you're eligible or can borrow more or have down payment assistance that you never knew about. Absolutely. And lenders will talk to you as if they speak for every lender. So don't take what they say as the holy grail of getting a loan. Take it, write it down, take the notes, and then go talk to another one. You'll learn something different. But the more lenders that you talk to, A, the more you can prepare yourself, and B, the more information you'll have about what types of loan products are out there.

15:21And then the other key with this, guys, is it will help you figure out what it is that you need to go fix if you're not getting the answer you want. Yep, exactly. Yeah. Don't just get a no or get a, hey, we can't pre-qualify you or, hey, we don't think you're ready. Ask them why. What is it that I need to fix? What would give you more comfort to lend to me so that now you at least have a plan for what to go fix to make you more bankable?

15:49Henry Washington:All right. Well, that was the number three way to fail in real estate. Henry, what is the number four way? This is especially if you're new, not getting an inspection. Oh. And I know that's a lot for me to say because I do not get inspections when I buy properties. Really? I've always gotten inspections. Yeah. Well, you buy mostly on the market, right? Yeah. And I don't flip. And you don't flip. I buy off market and I typically don't get inspections because I'm experienced enough now to walk a property and feel comfortable on whether that thing is going to cost me a ton of money to fix. You're your own inspector.

16:23I'm my own inspector at this point. But it takes a lot of looking at houses, a lot of buying houses, a lot of renovating houses, and a lot of dispositioning those houses before you can feel as comfortable as I am doing that. So if you are not in that boat, you better be getting an inspection. You just don't know what to look for. And there are things that you can miss with the naked newbie eye that can literally price your deal out of being profitable and put you in a very tough financial position. It's a few hundred dollars. Spend the three to$600 and sleep better at night. It is well worth it.

17:13Even if you get that inspection report back and there is nothing wrong, good. That's what you wanted. I will pay three to$600 for peace of mind all day long.

17:21Henry Washington:There's no reason to do this anymore. Like during COVID, I guess you could have made the argument that, you know, things were so competitive. And if you knew you had a great deal, like maybe you waive the inspection. That has totally changed. Like, honestly, not only inspections help protect you right now, they're one of the best ways to save money. Most people are getting leverage during the inspection period and negotiating concessions or discounts off of the sale price during the inspection. So for most people, this is not going to be true for everyone, but you're actually going to probably make money by having an inspection because it's going to cost you 500 bucks, but you're going to have five grand back in concessions from the seller or they're going to fix something that you would have had to come out of pocket for.

18:03Henry Washington:So I just like, there's no reason to do it. The one thing I will say that I have done that has been pretty effective when I'm trying to be aggressive about a bid is doing like a pass fail inspection where you basically say, I'm not gonna nickel and dime you on the inspection. I'm gonna get one. And then I'm gonna tell you if I'm buying the property or not, but I'm not gonna ask you for money. Yeah, no, we have done that in the past where we said, look, I just need someone to get eyes on this property with a little deeper look. look, I'm not going to ask you for anything. I just need to know what's going on.

18:36And I will give you a decision, buy or no buy, right after I look at that inspection report. Because you're right, a lot of the fear that sellers have with buyers doing inspections, it's just that most people understand that inspectors are paid to find things and they're going to give you a list of things that they think is wrong with the property. And then the buyer is going to want you to fix those things and that's going to cost them time and money. But at the end of the day, if you're new in this business and you want to do an inspection and you're dealing with a seller who does not want you to do it, walk away.

19:06There's more deals.

19:07Henry Washington:Yep. Totally. Even if you think it's a great deal, don't take that risk because there's probably some reason. And if they're not going to tell you what that reason is, and they're not going to allow you to at least get a professional size on it, just move on. There's other deals. A hundred percent. All right. So there's my number four. Make sure you get those inspections. Dave, I'm curious to know what you think the fifth way to fail in real estate is. But again, we'll find out after the break.

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