I want to be frank with this article. It’s written to a very specific type of member on BP. We all started off like them, but some of us have grown past it. It bothers me so many people haven’t yet, and I’d like to address one of the main reasons why I think that is.
I’m referring to those who have been spending sizable amounts of time on BP and still haven’t bought your first property. If this is you, you know who you are. You are educated, you understand the process, you have the resources, and you know where to go to find the answers to the questions that will pop up. You are equipped for the journey, but you aren’t taking the plunge.
We have all heard the typical reasons why this is:
- Analysis paralysis
- Lack of mentors
- Too hard to find a deal
- Agents aren’t doing a good enough job
- Interest rates are rising
- Blah, blah, blah
I’d like to suggest there might be one reason that is bigger than all of these, and nobody is really talking about it.
If you’re like the majority of BiggerPockets members, you’re getting a lot from this site. You check the blog weekly for new posts, you follow the webinars, you peruse the forums looking for new information or new questions. You read their books, engage with the community, and genuinely look for guidance. You’re doing everything you can to faithfully pursue this dream of financial freedom through real estate. You really believe it can happen. You know what to do, but you’re not doing it.
Why is that?
Emotion vs. Logic
Let me start by taking a minute to step back to describe a phenomenon that affects our decision-making process. The concept is very simple. When I became a real estate agent and began representing people buying residential property, I did what any other human would do. I took what I already knew and applied it to a new setting. I approached my clients with the same approach I would use in my own previous experience investing.
This usually meant I would work hard to find them a property we could buy under market value, explain how we could rehab it to bring it up to date, and show them all the money they would save. No brainer for us investors, right? Problem is, my clients would sit there and nod their heads, proclaim how “smart” I was, and then say they needed to think about it. Needing to think about it never resulted in an offer being written. After a time, this became frustrating, and I reached out for advice. An experienced agent helped solve my problem. He told me:
“Information makes people think. Emotion makes them act.”
My problem was I incorrectly assumed my clients would have been just as emotionally excited about a great deal or the vision to bring it together as I was. In fact, they were not. It wasn’t until I learned how to find what made them excited that I learned how to find properties that would spur them to act. In the end, it became incredibly simple. People move quickly when they find something they really want. They stop and think about things when you bring them something that makes sense.
Once I learned this, I started to see it everywhere. Pretty much any decision we make can be traced back to some form of emotion being attached to it.
There are times we know we should eat, but won’t until we feel hungry. The hunger is the emotion that springs us to action. Good luck keeping us away from finding food then.
We know we should get in shape, but it’s not until that attractive person has caught our eye that we feel really motivated to go to the gym and look our best. It’s much easier to step away from Netflix and hit the gym when we know that special someone is going to be asking for a picture soon.
We know we should do our best at work, but it’s not until we know our boss is watching and feel that fear of him seeing us shirking our responsibilities that we really buckle down.
If you really think about it, this applies to everything. And real estate is included in everything. We don’t get very serious about real estate until something changes our emotions, and they become tied to this process of RE investing. Everyone knows they should save money, right? Well, it’s usually not until they come up with a really exciting reason to use that money that they really started saving it. RE investing can often be that reason.
Buying the First One
If you’re on this site for any significant period of time, you have heard time and time again the experienced investors repeat the same advice: “Just get out and buy your first property.” I hear this on almost every podcast and in tons of articles directed to newbies. While many of you will probably acknowledge this, your fears associated with failing often are greater than your excitement about succeeding. This imbalance prevents you from buying your first place but keeps you coming back for more information. You are emotionally interested enough to fill yourself with information (which makes you think), but not enough to take a risk and buy a property (that action).
Here’s what you can’t see from the side of the rift you, as a newbie, are on. Once you buy your first place, all the “what-ifs” that could go wrong suddenly become a lot less scary. Your subconscious telling you, “You could lose everything, you don’t know enough, you don’t have enough support, you’ll look like a fool,” etc. slowly dies away as you realize not very much really went wrong. As the process becomes real, you see that most of your fears weren’t based on reality. Your imagination was much scarier than this whole landlord thing, and now that you are based with your feet firmly planted in reality, those fears evaporating as the platform they were once based on disintegrates.
The second property comes much easier. The third even more so. By the fourth, you barely feel any nerves at all.
The benefit comes when your excitement at the thought of a new deal is significantly larger than your fear about what could go wrong. It is at this point that your emotions are now tied to the prospects of what could go right rather than to the fear of the unknown that could go wrong. Now your emotions are working to actually help you make progress as opposed to working against you to stifle it. Your excitement spurs you forward while your fears have less power to hold you back.
The investors who seem to be crushing it, who are hitting home runs and seem to string deal after deal together — they are doing this because it excites them. They like this stuff! It is fun, energizing, and addicting to take shots and connect. These investors have all the same fears you do, but they have learned to keep these fears in context. They know things can go wrong, and they have contingencies in place for when they do. This prevents their fears from paralyzing them, but also assists them in making sure they have plans in place for when things don’t go well. This is a healthy way to approach real estate. With each deal, it becomes more exciting and less scary.
Now, what I want to say is, you shouldn’t expect to be in that place on your first deal.
Starting Any New Journey
Any time you start something new, it is usually really scary and not very fun. Haven’t been to the gym in awhile? I’ve got news for you — you won’t leave feeling buff. You will just leave feeling tired and will wake up super sore the next morning. The process sucks, bad. However, if you consistently keep going, it gets easier and easier until at a certain point, you don’t really hate it, and you actually start to crave it.
I remember when I first got to the point that it didn’t burn the whole time — when working out stopped hurting. It felt like I just lifted until my arms didn’t have anything left to give, and then I was done. Working out didn’t seem so miserable at that point, and it actually became kind of enjoyable. Think that might have had something to do with me wanting to be at the gym more?
The same was true for every job I’ve ever had. The first day is terrible. You don’t know where they keep things. You don’t know who’s gonna be nice to you. You don’t know how to use the software, when you’re allowed to take breaks, if it’s OK to check your phone. It’s nerve wracking and miserable. All of us have been there.
Related: 5 Steps That Took Me From Scared Newbie to Accomplished Investor
But let me ask you, did it stay that way? No way! If anyone’s job was as miserable several years in as it was that first day, they would have quit. Nobody can bear that anxiety forever. It would be overwhelming. We were made to feel that anxiety in the beginning because it keeps us honest. It prevents us from cutting corners and helps establish the habits we will keep with us throughout our time there.
It was like this when I was first a trainee with the police department. In the beginning, pure fear. I didn’t want to even get out of bed. With each day, it got more comfortable, and I hated it a little less. Eventually, I stopped hating it. Then I started to like it. Then, when I got good at it, I really liked it.
Everything works like this! Pretty much every job, sport, task, role, responsibility, anything I’ve done has been somewhat miserable in the beginning, then got better. If I thought it would always be that bad, I would never, ever start anything new. Sometimes, the only relief I had that helped me not to quit was the understanding the next day would be better.
If I had started the journey expecting to be as confident, carefree, and excited on day one as I was on day 300, I would have been sorely disappointed. Truthfully, I probably wouldn’t have started.
So What’s This Got To Do With Me?
Well I’m glad you asked. What concerns me is I hear many people who haven’t even bought their first property complaining that they aren’t finding home-run deals. The expectations for their first deal are grossly out of wack. Now, I’m not saying you should buy a “bad” deal just to buy something. Not at all. There are standards and terms that should be met, and you should stick to them. What I am saying is that maybe your definition of a good deal shouldn’t be the same as Brian Burke’s, or Ben Leybovich’s, or Brandon Turner’s.
The more experienced investors have resources working for them that you don’t. They have helpful, experienced, great contractors. They have networking connections to bring them hot, awesome deals. They have acquisition employees. They have top notch, experienced and connected real estate agents. Years of time in this business, and more importantly, multiple deals in this business, have left with them advantages you don’t have. They have helped make other people money. In turn, these people help make them money.
If you are new, this isn’t you. If you’re defining a good deal, or success by any other measure, in the same terms as these guys, you have wildly inappropriate expectations. I myself often buy properties I can purchase, rehab, then refinance and recover more than 100 percent of the capital I put in. I can do this for several reasons. My contractor is better than most, I can make all-cash offers, I have a better lender than most, my agents are better than yours, and I have a reputation that if I say I will close, I will close.
As a new investor, you don’t have that. That’s OK! You don’t need to. In time, if you stay committed to this, you will. But in the meantime, you shouldn’t be using my investment criteria for your goals. It’s OK if you aren’t getting the same deals as me. You don’t have my resources. When I first got started, I didn’t hit these goals either. It wasn’t until I did this for several years and slowly got better and better, that I was able to achieve this. Had I expected to do this well on my first house, I still wouldn’t have that first house.
What I’m trying to say here is that you may be passing up on several good deals because they aren’t as good as the deals you hear other people getting. When you read about the success stories on here, don’t get fooled into thinking this happens all the time. Success stories are important in the sense they encourage us all to keep going. They are not, however, good indicators of what to expect each time — especially on your first deal.
Expecting to nail a super deal on your very first buy is akin to expecting to perform just as well on your first day on the job as the company’s top employee. No reasonable person expects that. All of us know we need to give ourselves room to grow and freedom to make mistakes. Why is it that when it comes to RE investing we seem to lose this context?
Analysis paralysis happens when it becomes more enticing to think about a property than to act on buying one. This is the classic example of those who find comfort in the logic that makes people think as opposed to the emotion that makes them act. If you haven’t bought your first property yet, your emotions likely aren’t in line with the things that make investing easier. When you buy that first one, this all starts to change. This is why you keep hearing everyone tell you that you have to actually buy your first property! It’s like telling someone they need to show up for work on the first day. The worst is when you sit at home imagining everything that could go wrong. Once you’re there and see what the job actually entails, it all gets easier from there.
Give Yourself Permission to Make Mistakes
It’s OK if you make mistakes when you’re new at your job. It’s OK if you make mistakes on your first property. It’s OK if you have to go through several property managers, several contractors, several lenders, and several other vendors before you find the one that’s right for you. This doesn’t mean you failed. We all do this! In fact, it’s really only once you find a really good support crew that the opportunity to take on new projects starts to form.
Brandon Turner refers to this process like a construction worker getting more tools for his belt. In the beginning, all he has is a hammer. This means he can’t do anything but look for nails. Once he acquires a screwdriver, he has a new tool in his belt and can new look for screws. When he gets a saw, he can do even more. As he acquires more and more tools, his opportunities to do more jobs increase. With a whole truck full of tools, he has the confidence to take on any project.
This is a great analogy. The construction worker who eventually has all the tools is able to get the most projects. As he takes on more and more projects, his reputation begins to spread, and people start coming to him! The better his reputation, the more he can charge, and the better he will do.
It would be foolish to look at the construction guy with the truck full of every tool imaginable and expect to make the same as him when you just have your hammer and some work boots, right?
Don’t think that your first project needs to be building a skyscraper. It’s OK if you’re first one is closer to using your hammer to build a fence. Do your best job building that fence and watch what happens. You’ll meet other people when you’re building the fence that will help you. When others on BP hear about the fence you built, they will ask you to help build theirs. At some point, someone will ask you how to build a fence so well, and you can trade showing them for them showing you how to lay tile.
This is how the whole process works, but so many people never take those first steps to put themselves in a situation to succeed.
If your goal is to invest $20k into a cash flowing property within 30 minutes of where you live, start looking at all the options that meet that criteria, then buy the best one. If nothing around you cash flows, change your criteria and look somewhere else. If you won’t do that, consider flipping instead.
If you are that person who is always here on BP absorbing all the info there is, you are financially able to purchase an investment property, and you have decided to do so, you need to understand that no amount of knowledge you acquire is going to ease your fears. They don’t go away until you act on them. In this case, acting on them means buying your first place.
If you’re putting stress on yourself by looking for super great, brag-worthy deals, you may not be doing yourself any favors. Let me tell you something, friends — real estate is a get-rich-slow game. You could have way overpaid for something in 1962, and nobody would ever know the difference by today. You wouldn’t be upset that you bought it. Given enough time (and assuming your property cash flows correctly), just about any investment starts to make sense. It is the ultimate safety net in this industry and should help ease a lot of your fears about getting started.
Stop asking yourself if the deals you are finding sound as good as the deals the big boys are getting. They are playing a different hand of cards than you. If you go to the gym for the first time, find the buffest dude there and try to match what he’s lifting, and you’re just going to hurt yourself. If you think the weight he lifts should be the same standard you set for yourself on your first day, you’ll get discouraged and never go back. This is the worst thing you can do if your goal is to get in shape!
It’s OK to adjust your expectations to a reasonable level. The real value in purchasing your first property is in what you will learn and how much easier it makes buying the next ones. There is a lot of bragging that goes on in this industry, trust me. People fudge numbers to make themselves look better. Nobody wants to be the one to broadcast their mistakes, but trust me, it happens. Brandon Turner lost money on his first big flip. Big whoop. What he learned during that experience made him able to make tons of money on the next ones. You think he regrets that now?
Unreasonable expectations are stopping a lot of new investors from getting started, and this is hurting them in the long run. If this is you, stop and take a good, hard look at if you are expecting too much and if this is leading to your paralysis in moving forward. Babies don’t come out of the womb running, and it’s OK if you start off at a crawl! As long as you keep learning, keep improving, and keep striving to be your best, you will start to find how the big dogs are getting such great deals.
Please keep in mind RE investing is just like anything else. Nobody does great when they start, and you may benefit from easing some of that pressure off yourself as well.
Newbies: What do you think is holding you back from that first deal? Do you agree with this assessment?
Let’s talk in the comments section below!