Top 5 Mistakes to Avoid When Using Other People's Money in Real Estate Investing

Leveraging Other People’s Money (OPM) is a game-changer in real estate investing. It allows you to scale faster, take on bigger deals, and accelerate wealth-building. But with great opportunity comes great responsibility—and avoiding common mistakes is key to protecting your reputation and investor relationships.

Here are the top five mistakes investors make when using OPM—and how to avoid them to build trust, credibility, and long-term success.

Mistake #1: Not Establishing Clear Agreements

Ambiguity is the enemy of good partnerships. Failing to define terms like returns, timelines, and exit strategies can lead to disputes. Always:

• Use a written agreement that outlines roles, expectations, and contingencies.
• Consult with a legal professional to avoid miscommunication.

Pro Tip: Transparency builds trust. Before raising funds, ensure your potential investors clearly understand the structure and potential risks.

Mistake #2: Overpromising and Underdelivering

In an effort to attract investors, many new real estate entrepreneurs overpromise returns and downplay risks. When things don’t go as planned, this damages credibility and investor trust.

How to Avoid This Mistake:

• Provide conservative ROI estimates based on real data.
• Highlight both potential risks and rewards to ensure transparency.
• Underpromise and overdeliver—exceeding expectations strengthens investor relationships.

Visual Aid Suggestion: Consider adding a table comparing a conservative vs. optimistic projection for a property deal to show realistic expectations.

Mistake #3: Ignoring Investor Due Diligence

Raising capital is not just about getting money—it’s about managing other people’s funds responsibly. Investors are trusting you with their capital, and failing to conduct due diligence can erode that trust.

How to Avoid This Mistake:

• Perform thorough due diligence on every investment opportunity before pitching it to investors.
• Provide regular, detailed investment updates and reports to keep investors informed.
• Make data-driven decisions and share your analysis with potential investors.

If you haven't seen it, here are 3 Ways Competence Builds Confidence in Real Estate Investing

Mistake #4: Relying on OPM Without a Backup Plan

What happens if the deal doesn’t go as planned? Relying solely on OPM without contingencies can lead to trouble.

• Maintain a reserve fund for unexpected costs.
• Have an alternative exit strategy ready if your original plan falters.

A/B Test Suggestion:
Embed a YouTube video: "How I Navigated My First OPM Setback Successfully."

Mistake #5: Treating Investors as Transactions

Investors are partners, not just funding sources. Neglecting relationships can result in lost opportunities for repeat investments.

• Keep communication consistent, even after deals close.
• Show appreciation—small gestures like thank-you notes go a long way.

Pro Tip: Investors are more likely to re-invest if they feel valued and informed.

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The information contained herein is for general guidance on matters of interest only. This information contained herein is not intended to provide you with any advice on financial planning, investment, insurance, legal, accounting, tax or similar matters and should not be relied upon for such purposes. Marcin Drozdz, M1 Real Capital Inc are not financial, legal or tax advisers. You should assess whether you require such advisers and additional information and, where appropriate, seek independent professional advice. You understand this to be an expression of opinions and not professional advice. You are solely responsible for any actions you take with the content and hold Marcin Drozdz and M1 Real Capital Inc or any of it's affiliates harmless in any event or claim.