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