10 Common Mistakes in Real Estate Investing & How to Avoid Them

We all make mistakes; it’s part of life and business. But when it comes to real estate investing, whether you’re taking on a new construction build or a fix-and-flip rehab project, too many missteps will cost you big time.

One of the benefits of working with a private lender like Cetan Funds is having a partner with the expertise and local market knowledge to help you save time, protect your budget, and avoid some of the common pitfalls that investors sometimes encounter if they are not cautious. 

Zach Smith, Principal & COO of Cetan Funds, has seen his share of mistakes made by new and experienced real estate developers, builders, investors, and small businesses, and knows how to mitigate them.

“We address these by setting expectations upfront, structuring conservatively, and staying engaged throughout the process. That way, newer investors are set up for success instead of surprises.”

In this post, we’ll share some of the most common mistakes we see new investors make and how you can avoid them. 

Mistake #1. Not Having a Strong Team in Place

More often than not, the success of a project comes down to the people you have around you, no matter how good the deal looks on paper.

“In reality, contractor issues are the most common roadblock we see,” says Smith. “Many new investors underestimate contractor-related risks and assume rehabs or construction will be straightforward.”

That’s why we ask upfront whether a borrower has the skills to self-perform or the right team of qualified contractors in place. A strong team with experienced contractors helps you avoid costly surprises, keeps your project on schedule, and saves you time and money.

The investors who succeed consistently are those who take contractor selection and team-building as seriously as they do the numbers, checking references, reviewing past work, putting agreements in writing, and building their networks early.

Mistake #2. Biting Off More Than You Can Chew

A new investor should start small with a manageable project. Jumping into a multi-lot subdivision or apartment complex right out of the gate typically leads to challenges, both in execution and in securing a loan approval.

Lenders want to see a proven track record, and without it, obtaining financing for a large project can be difficult.

Starting smaller allows you to build experience, credibility, and relationships with lenders, setting you up for bigger opportunities down the road.

Mistake #3. Expecting All Construction Funds Upfront

You’re setting yourself up for frustration if you assume your entire loan is funded at the start of the project.

Cetan Funds Associate & Loan Officer, Landon Matta, says one of the most common mistakes he sees with new investors is a misunderstanding around how a construction draw process works.

“Most private lenders do not release construction funds all at once, but rather in stages through a draw process as work is completed and the project meets key milestones,” says Matta.

“Borrowers typically need some additional working capital to cover project costs between draws.” A draw schedule helps ensure the proper use of funds, improves cash flow management, and reduces risk for both the borrower and the lender.

Mistake #4. Misunderstanding Timelines

Sadly, too many investors fall into the trap of unrealistic timelines, and the consequences can be costly.

First, with the lending process, it’s important to understand how long things typically take. “Some borrowers assume private lenders are as slow as banks, while others think we can fund the same day,” says Smith.

“In reality, most closings take a minimum of 3–5 business days, primarily due to the time it takes title and escrow to organize and close the transaction.” If there are any factors making the property, the transaction, or the financing request unusual or unique, then borrowers should expect a longer closing timeline.

Second, when planning for the project, it’s critical to understand and anticipate delays in permitting, longer-than-expected renovation work, or slow market conditions, as these can all quickly eat up profits. At Cetan Funds, we expect project timelines to align realistically with the scope of work, contractor estimates, property condition, and local market trends.

A well-prepared timeline should clearly outline milestones such as permitting, inspections, construction phases, and resale, with some buffer built in for unexpected delays.

Mistake #5. Unrealistic Expectations on Leverage

New investors must understand that when they partner with a private lender, both parties are expected to share some risk; in other words, they must have some “skin in the game.”

At Cetan Funds, we typically require a minimum investment of 10% of the project costs or existing equity from the borrower, so they also have a stake in the property. While 100% leverage is possible in rare cases, it requires creativity and usually another capital partner alongside us.

For example, you can use equity from another property or bring in a second private lender to “fill the gap.” As long as you are transparent about your cash reserves and the deal makes sense, we can frequently find a creative solution.

That said, here at Cetan we’re strong proponents of borrowers having real equity and cash invested in their projects as it shows a strong financial commitment to the deal and realistic consideration of the project’s risks.  

Mistake #6. Overestimating After-Repair Values (ARV) or As-Complete Value

When evaluating a loan, we always consider the estimated market value of a property after you’ve completed renovations or construction, especially for fix-and-flip and new construction projects.

“Inflated value assumptions create unrealistic profit expectations and higher risk,” says Matta. For instance, suppose an investor buys a fixer-upper for $150,000 and plans $50,000 in renovations, projecting an ARV of $300,000 based on newer homes in a different neighborhood.

In reality, comparable sales in the property’s actual area support an ARV closer to $250,000. That $50,000 gap can erase expected profits and make the project far riskier, especially if the market slows or construction costs rise.

“Conservative valuations can keep projects profitable, especially in stagnant or cooling markets,” he says. The after-repair value must be based on truly comparable properties with similar locations, ages, sizes, conditions, and other relevant factors.

Here at Cetan we closely review property values in our underwriting process, often with our rapid internal valuations. If a property’s projected value doesn’t support a profitable project, we will let you know and hopefully help you avoid this costly mistake.

Mistake #7. Underestimating the Capital Needed

Sometimes, new investors focus solely on the purchase price. Still, they fail to set a realistic budget that includes all relevant expenses, such as holding costs, permits, and potential unexpected delays.

To keep your project on track, we typically advise our investors to have a clear line-item budget with contingency funds built in to help avoid costly surprises. Your budget should be accurate, well-documented, and grounded in real-world experience, and budget projections should go beyond the property improvements.

“Closing costs, insurance, property taxes, utilities, loan fees, and other holding costs like interest must be factored into the project,” says Smith. “Ignoring them can make a deal seem far more profitable than it actually is.” The more thoughtful and detailed your financials are, the better.

Mistake #8. Assuming Hard Money Lenders Don’t Review Finances

While private lending is often faster and more flexible than traditional banks, it still requires thoughtful risk assessment.

Since the Great Recession of 2008, most private lenders carry mortgage lending licenses and are required to evaluate a borrower’s ability to repay. At Cetan Funds, we review the borrower’s cash balances and income history to ensure they have the financial wherewithal to complete the project and make payments on the loan.

While we also look at credit reports and a good credit score can help expedite funding, it doesn’t mean you have to count yourself out if you’ve experienced setbacks. We’ve worked with many Oregon investors with imperfect credit histories by structuring deals that still make sense.

What matters most is transparency and a plan that works.

Mistake #9. Not Having a Clear Exit Strategy

Ask any successful real estate investor, and they will tell you that an exit strategy is essential.

Private loans are short-term bridge financing; most of our loans are for 6 to 12 months, so you need a solid repayment plan before signing the paperwork. Without this plan in place, investors risk running out of time and facing costly extensions, penalties, or even foreclosure.

A solid exit strategy not only protects you but also builds lender confidence, making it easier to secure favorable terms on future projects. 

Mistake #10. Unresponsiveness & Poor Communication

In fast-moving markets like Oregon and Southwest Washington, timing is everything.

Yet, some investors undermine their own deals by failing to return phone calls, respond to emails, or provide necessary documentation within the required timeframe. It’s one of the biggest mistakes we see from investors, but fortunately, it’s an easy one to fix by simply prioritizing responsiveness or bringing on additional help, such as a personal assistant.

Once the application is in process, stay alert and respond quickly. Be prompt about replying to emails and calls, produce all requested documents without delay, and keep your lender informed about your timeline or any special circumstances that may affect it.

Your Local Partner in Real Estate Lending

At Cetan Funds, we’re Oregon-based, which means we understand local zoning, permitting timelines, and market trends in towns large and small across the state of Oregon and Southwest Washington.

When you’re ready to move forward with your next real estate investment, we’ll be here to guide you through our efficient and transparent lending process, enabling you to get funded faster.

Contact us or visit our Loan Programs page to learn how Cetan Funds can support your real estate success.

About Zach Smith

Zach Smith, Principal and COO of Cetan Funds, is an experienced private lender and active real estate investor dedicated to helping Oregon developers, builders, and small businesses succeed.

He oversees daily operations, loan origination, underwriting, and investor relations, bringing a strong focus on integrity and exceptional service. A licensed mortgage loan originator in Oregon (NMLS #1748167), Zach is a graduate of the University of Oregon’s Robert D. Clark Honors College, holding a B.A. in Psychology with minors in Business Administration and Spanish.

About Landon Matta

Landon Matta, Associate and Loan Officer at Cetan Funds, is a lifelong Oregonian with a Bachelor of Science in Accounting and Economics from Linfield College.

A licensed CPA and mortgage loan originator in Oregon (NMLS #2524246), he brings financial expertise, integrity, and an analytical mindset to every client relationship. Landon is passionate about real estate and is dedicated to helping borrowers structure smart, efficient financing to achieve their investment goals.