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Are You Caught in Startup Minutiae? How to Finally Overcome Analysis Paralysis!

by Tom Sylvester on December 30, 2013 · 17 comments

  
Startup Minutiae

If you missed it, be sure to check out last week’s podcast - BP Podcast 050: Getting Started and No Money Down House Flipping with Mike Simmons.  It is full of a ton of great information, and there is finally an all out throw down about Detroit.

During the interview, Mike talks about a common problem with new real estate investors, which is getting caught in analysis paralysis.  Analysis paralysis is when you spend so much time researching or switching your strategy that you never actually get started with investing.  Mike spent over a year in this before he finally got started.  His advice for others?  “You can read for days – and never do anything. Get out there and DO something.” (Tweet This!)

I came across another example of this last week in the forums.  An investor was looking for a critique of their website.  In the post, he mentions “I am still a newbie with no deals closed yet, even though I started wholesaling almost a year ago, so hopefully this site will help me out with that.”.  In reviewing the website, this investor had ~10 social media icons on the site, incomplete copy and an amateurish website.  When I clicked on each social media icon, they were all empty.

I’ve been there.  I spent a week trying to come up with my first company name.  I then traveled to the county offices to register a DBA, only to find that my amazing name was taken (Rochester Property Solutions).  I sat at the county office for ~45 minutes trying to come up with a name that was not taken.  The lady finally kicked me out when she got sick of me.  So I went searching for a domain name that was not taken, which of course they all were.

After a month I finally found one that was not taken, RochesterHomeSolutions.net (I couldn’t even find a .com name).  Then a spent a few weeks making my website all pretty and decided that I needed business cards.  I went back and forth trying to come up with the perfect design, then realized that I should probably have a fax number, so I would be prepared when all of the amazing contracts started rolling in.  So I contacted the phone company and had a second phone line installed, then ordered a nice new $200 multi-function printer with a fax line.

Know how many deals I got done in those few months?  0.

Know how many leads I received in those few months?  That’s right, 0.

Why am I sharing these experiences?  Because far too many new investors fall into the same trap.  Whether it is fear of failure, fear of success or something else holding them back, they fill their time with activities that may be useful at some point, but don’t bring them closer to a deal.  Instead of getting caught in this minutiae, use the below steps to get your first deal under your belt.

Pick a Niche and Get Educated

It is very easy to “chase the shiny object” in real estate.  Should you do invest in buy and holds?  Oh, well you can make more money in flips.  Yeah, but you can get started easier in wholesaling.  What about avoiding tenants but getting the benefits with lease options?  There are over 100 ways to make money in real estate.  Find one that interests you and fits with your circumstances/area and spend a week or two learning everything that you can on that topic.  Read the forums, purchase a book and listen to a relevant podcast or 2.

Pick the Brain of Someone Doing it

Once you know your niche, talk to someone who is doing what you want to do.  You might find this person at a local real estate investors association (REIA) or through local connections on BiggerPockets.  Take them out for coffee (or a steak) and pick their brain on your chosen niche.

Find Leads

Once you know your strategy and have some advice from someone doing it, go out and look for deals.  Don’t worry about having a business entity or logo, focus on finding a deal.  If you need an entity later on, you can get on and either assign the contract to your entity or quit-claim it into said entity.  So look on the MLS, Craigslist, your local newspaper, drive your neighborhood, ask family and friends if they know anyone selling a property.  They key is to focus on finding a deal and related activities.

Jump In

Once you find a good deal, get it under contract.  You can have contingencies in the contract that will allow you to get out or re-negotiate if someone isn’t right (such as an inspection clause).  Post the deal up on the Real Estate Deal Analysis & Advice forum to have other members review it for you.

The key with all of this is to focus on the activities that will get you a deal and put everything else on the back burner.  There may be a point in the future where you create a website and get on social media, but it is not that important when you are starting out.  When I realized all the time I had wasted and started looking for deals, I had a property under contract within the week and closed on it a few months later.  I did not have an LLC in place, so we created one after and did a quit-claim deed to get the property into it.  Once you get a deal you can figure out what other pieces you actually need.

What activities took your time when you first started that were not necessary?
Photo Credit: miguelavg

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{ 17 comments… read them below or add one }

Dawn Anastasi December 30, 2013 at 3:42 pm

I get emails probably every month from someone telling me if I just pay them, they can “SEO” up my website and that would increase my business! Well, my website doesn’t close deals, *I* close deals.

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Stephanie Dupuis December 30, 2013 at 7:14 pm

I wish I could like your post, Dawn. Speaking Truth.

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Tom Sylvester January 3, 2014 at 12:53 pm

Yeah, SEO is a tough business. The rules are always changing and it is not clearcut what works and what doesn’t. Therefore there are a lot of snake oil salesmen. I think SEO has its place, but for most people (especially starting out), there are much better ways than setting up a website and spending money on SEO to get started. Most of them involve actual work by the individual, because as you said ” my website doesn’t close deals, *I* close deals.”

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Gerald Harris December 30, 2013 at 11:05 pm

Analysis paralysis was very common to me when I first began my real estate investing career back in 1995. Like many others I got caught up in the late nite Infomercials of wanting to be a real estate investor. It was a dream that was left in the dream phase for years before I got off the bench and started doing something. The day I took action was the day I started winning. I made many mistakes but begin to learn from them. You must take action. In all that you do. Nothing Happens until you begin to act upon it.

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Tom Sylvester January 3, 2014 at 12:55 pm

Gerald,

Could not have said ti better myself, so I will just second your last few lines.

“The day I took action was the day I started winning. I made many mistakes but begin to learn from them. You must take action. In all that you do. Nothing Happens until you begin to act upon it.”

Pure Gold!

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Daren H. December 31, 2013 at 8:23 pm

I remember being caught up in start up. I spent a ton of time (almost a year) reading books, reading BP, talking with my Mentor, etc. I was doing things like compiling statistics, demographics, economic development data, etc on areas I was interested in investing in. I also created a very detailed business plan which prompted why wife to finally say, “dude, all of this is great, but are you ever going to actually buy a house.” Thanks to her nudge, what I realized is that I didn’t have to be a full blown expert first in order to buy an investment property. I had the basics already to act. I was able to close two buy and hold deals in 2013 and I am looking forward to closing on at least two more in 2014 (per my business plan).

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Tom Sylvester January 3, 2014 at 12:57 pm

Daren – That is an awesome story, especially with it taking an outsider so kick you into action. Although there is definitely benefit to research and learning, it can also be taken too far. At some point we all have to follow Nike and “Just Do It”. There will be failures, but by using some common sense and resources like the BP community, we can all get through those challenges.

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Dominika M January 2, 2014 at 10:52 am

Tom, great post. I’d like to offer an opinion on a situation when delaying the decision may be good. I have yet to close a buy and hold deal. I live in an area where average prices for house/condo are $550,000 and even travelling 2 hrs away will cost $230,000. I’m really excited to get my first property and and I think that I’ll learn so much that it doesn’t need to be a super hot deal. But I gave myself a 4 month coolling off period to get a more well rounded education (informal). During that time I had to face the fact investing away in a less expensive area was a better risk scenario for me than getting a huge mortgage liability (on top of my own mortgage). Cash flow lost from 4 months = $800. Debt liability averted: $150,000 plus. Local investors are used to getting much less than the 1% rule here, so I’m really glad I rounded out my view on BP. Tom, your posts help :)
Conclusion: consider the major risks of your investment area and consequences of things going against you before you jump in.

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Tom Sylvester January 3, 2014 at 2:10 pm

Dominika – You bring up an excellent point. I actually don’t see you caught in the “startup minutiae”. I see you taking time to learn about investing and find your target area, which is great and is definitely progress made. So you points above are definitely valid. And I would be VERY afraid (I actually would not do it) to invest in a property that did not meet the 1% rule. I generally don’t invest in less than the 2% rule and sometimes I am over 3. That is definitely based on being in a favorable market, but if I was in a market where the best I could get is less than 1%, I would either look for a different market or a different strategy.

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Susan Gillespie January 2, 2014 at 12:21 pm

Yes, it’s easy to get stuck in the beginning. I got great advice from a successful investor and friend who told me, after several phone discussions, “Susie, you just need to start.”

However, even worse than all-talk-and-no-action is making a bad deal like @DominikaM wrote above. This can haunt you for years and wreak financial havoc.

The key is creating goals with action steps AND measurable outcomes, like your example to “choose a niche” (goal) and then listen to a podcast, read a book, talk to others, etc. (action steps). Outcomes might be: create a buyer list with xx names, connect with xx investors on social media, etc.

Action without a clear goal doesn’t lead anywhere. And without defining where you want to be after doing the work (outcomes), you’re not likely to be any closer to achieving your goals.

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Tom Sylvester January 3, 2014 at 2:15 pm

Susan – Yeah, it is definitely not good to buy a bad deal. People should definitely take time to get educated enough to be able to identify a good deal from a bad deal. You nailed with with the planning, action steps and measuring outcomes. Actions without a plan/measurable outcome may not actual get you closer to your goal (ex. creating 20 different social media profiles to try and get your first wholesale deal). Planning without action is also bad, because the perfect 100 page business plan will not get you a deal without action. You need the combination.

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wave January 2, 2014 at 9:52 pm

Great article. I have been researching and reading and attending seminars for years, never pulling the trigger. I can really relate.

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Joshua Dorkin January 2, 2014 at 10:13 pm

Stop with the seminars . . . get active on BiggerPockets and let our network of over 150,000 other real estate enthusiasts help you out. Set up an account today and introduce yourself. Let us know how we can help you get the ball moving!

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Tom Sylvester January 3, 2014 at 2:21 pm

Wave – I agree with Josh 100%. I’ve been in your shoes. I attended seminars and spent a lot of time calling myself an investor without actually investing. Then after spending a lot of money at a seminar, I decided that I needed to take action. I found a duplex in the newspaper, put in an offer and bought it (you can read all of the details here – https://www.biggerpockets.com/blogs/4317/blog_posts/29895-real-estate-investing-my-first-deal). Yeah it was scary, but as you can see if that blog I asked the BP community for help for 3 times before closing the deal. After that deal, I realized that I got more benefit from actually investing that attending seminars about investing and did not even attend the remaining seminars from the guru.

What’s holding you back from actually getting started?

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Paul Z January 3, 2014 at 8:22 am

Another excellent article Tom! HNY!

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Tom Sylvester January 3, 2014 at 2:22 pm

Thanks for the read and comment Paul. HNY to you too!

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Shaun January 7, 2014 at 7:34 am

Did all the trying to figure out the perfect name, URL, memorable phone number, logo stuff. I do think I cycled through that stuff fairly fast. Also got caught up in worrying to much about social media BS when I didn’t actually have a business yet.

Biggest road block was how I actually thought I had to see a house before I even put an offer on it! Sometimes I would even look at a house and NOT offer on it! Wow what an unproductive time suck that is…
I started buying a lot of houses once I started making a lot of offers. I started making a lot of offers when I stopped being afraid that someone might accept one. :)

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