How to Fail at Real Estate Investing in 2026

In this episode of the Bigger Pockets podcast, hosts Henry Washington and Dave Meyer share six key mistakes that can lead to failure in real estate investing, drawing on their extensive experience. They emphasize that while mistakes are inevitable, learning from them can significantly accelerate success and financial freedom. The first and arguably most critical way to fail is by **overly trusting other people or random individuals without conducting thorough due diligence.** Dave stresses the importance of trusting no one in the initial stages, not out of cynicism, but to ensure that adequate research is done on everyone involved in a deal. This includes agents, lenders, contractors, and any team members. Henry elaborates on this, explaining how he learned to be more skeptical of information provided by new agents regarding rent comps, ARVs, or local vacancy rates. He now speaks to multiple agents and vets them as thoroughly as the deal itself. This principle extends to all service providers; accepting the first quote from a contractor without comparison can lead to significant financial losses. The core message is to verify everything and not rely solely on others' analyses, especially when starting out. The second major pitfall is **calculating cash flow the “easy way,”** which is simply subtracting the mortgage payment from the rental income. Dave highlights that this common mistake, often perpetuated by agents and other investors, leads to a gross misrepresentation of profitability. True cash flow, or net cash flow, requires accounting for all expenses: mortgage, taxes, insurance, maintenance, repairs, and crucially, vacancy and property management fees. Henry emphasizes the need for conservative underwriting, factoring in realistic vacancy periods (two to three months) and management fees even if self-managing, as circumstances can change. Underwriting with a buffer for unexpected issues ensures that actual performance exceeding projections becomes a bonus, not a necessity for survival. This conservative approach helps identify risks and prepares investors for potential downsides, preventing the frustration of unforeseen losses. The challenge arises when conservative offers are consistently outbid, tempting investors to increase their offers and potentially compromise their initial analysis. However, the hosts advise against this, stating that overpaying for a deal leads to sleepless nights. The third way to fail is by **not talking to a lender or agent until you are “quote unquote ready to buy.”** Dave argues that engaging with lenders and agents early in the process, even if those initial conversations are not immediately fruitful, is an essential step. Henry adds that it’s crucial to speak with multiple lenders to understand the variety of loan products available and to inquire about specific programs like down payment assistance or grants. Lenders' advice should not be taken as definitive; gathering information from several sources provides a more comprehensive picture. Furthermore, it’s vital to ask lenders why they might not pre-qualify an investor and what specific steps can be taken to become more "bankable." This proactive approach provides a clear plan for improvement and increases the likelihood of securing financing. The fourth significant mistake, particularly for new investors, is **not getting a property inspection.** While Dave admits he no longer gets inspections on properties he buys off-market due to his extensive experience, he strongly advises against this for beginners. He explains that his ability to assess a property's condition and potential repair costs comes from years of hands-on experience. For those without this background, an inspection is a few hundred dollars well spent for peace of mind and to avoid costly surprises. Henry points out that in the current market, inspections are not just protective but can also be a source of savings, as they often lead to seller concessions or repairs that would otherwise come out of the buyer's pocket. Even a “pass/fail” inspection, where the buyer agrees not to negotiate repairs but simply decides whether to proceed with the purchase, can provide critical information. Ultimately, if a seller is unwilling to allow an inspection, it’s a strong signal to walk away from the deal, as there are always more opportunities. The fifth way to fail is **not repairing things properly and allowing deferred maintenance to accrue.** Henry admits this is a personal failing, citing a recent costly mistake. He emphasizes that while acquisitions are exciting, long-term success hinges on operational efficiency. Ignoring minor issues can lead to significantly larger expenses down the line. A problem costing $200 to fix initially could balloon to $2,000 a year later. This is why cash reserves are essential. Henry shares an example of a house that cost $80,000 to replumb due to delayed maintenance. He also discusses two scenarios where this has been detrimental: first, when renovations are planned but delayed due to existing tenants, leading to forgetfulness and continued maintenance costs; and second, when a property becomes consistently maintenance-heavy, and the cumulative costs are not tracked holistically across a larger portfolio, leading to missed opportunities to stabilize or divest a problematic asset. Staying organized and addressing maintenance proactively is crucial for long-term profitability. Finally, the sixth way to fail is **not screening tenants properly.** Dave finds it astonishing that landlords who self-manage often skip thorough tenant screening, including calling past landlords and employers. He asserts that excellent tenant selection is the key to profitable landlordship, as vacancies and bad tenants are the most significant financial killers. Henry agrees, emphasizing that good tenants not only minimize vacancies but also proactively communicate maintenance issues, fostering a more efficient and trusting landlord-tenant relationship. He shares examples of long-term tenants who have treated properties as their own and even facilitated contractor access. The hosts recommend a screening technique of calling current and past employers and asking if they would rent to the applicant. If the employer says no, it’s a red flag. This due diligence, though sometimes uncomfortable, is essential for protecting investments. They clarify that this doesn't mean not trusting people, but rather verifying that the applicant is not an exception to the general trustworthiness of most individuals. In conclusion, the overarching theme is "trust but verify." Investors must conduct thorough due diligence not only on the property itself but also on the processes involved, from renovations and inspections to tenant screening. Taking that "one extra step" in each of these areas can significantly reduce the risk of failure and pave the path to financial freedom. The hosts encourage investors to walk away from deals that don't align with these principles, emphasizing that there will always be more opportunities.