I am new to this Real State world, I have been, and still am a CEO and founder of a pharmaceutical company for animal health here in Mexico. Real state has always been a "huge" deal for me, I always looked at it as something for people with a lot of money, but recently this has changed and opened a completely new world, full of possibilities for personal growth and a clear path for financial freedom.
I have been looking for my first deal very hard for the last 4 weeks, so far, I have gone through, maybe 150 properties, and 2 with some potential. I am looking for houses to buy and hold and rent in a high-intensity scheme, meaning as many rooms in the property as possible. I discarded one of the potential properties I found, and now I am going through a revision process for one property that looks promising. I fear that since I want to have my first deal so bad, I will force my "promising" deals to match my financial objectives, what would you recommend to keep my head focused and not let my emotions rule the analysis of my deals?
RE investing is a grind. You cannot bring emotion into the transaction. Wealth isn't achieved overnight, and it makes no sense to take on unnecessary risk. Stay patient. Good luck!
Any time you try to force a bad deal into a good one, you are setting yourself up for failure. Focus on learning the market and becoming an expert in it, set your criteria and only make offers that fit that criteria. You are bound to find a deal that fits into that criteria eventually and if not, take a step back to reflect and decide whether you need to change your strategy, your market or maybe even asset class.
"I fear that since I want to have my first deal so bad, I will force my "promising" deals to match my financial objectives, what would you recommend to keep my head focused and not let my emotions rule the analysis of my deals?"
Stick with your numbers. Follow what the numbers tell you what to do, or as you've experienced so far, and correctly I might add, they will tell you what NOT to do. Always remember, sometimes the best deals, are the one you DON'T make.
It already sounds like you want it too much and are trying to fit a square peg in a round hole. Renting by the room is one of the most time-intensive options. I think it's pretty clear from your post that you are passionate about getting in the real estate investing space, but that you haven't done enough due diligence to warrant a purchase yet to be safe with your money. Did you see any of those deals in person? How do you know your number-running is even valid?
@Danielle Jackson Thanks for your comments! I understand what you say, the real thing is that going through a promising deal gets me excited, I am sticking to the numbers and letting them give me the answer, but I can not stop getting excited. Maybe its because I haven't done a deal like this before...
@Tanner Sherman thanks for your post! Definitely! the thing comes when there is a deal that fits the criteria, and I start asking for more information and things keep looking good, I feel this is the one that could be my first deal, and excitement is there and I just want to hear this type of advises I am getting from you guys, it helps me focus, thanks again!!
@Joe Villeneuve thanks for your comments!!
"...sometimes the best deals, are the one you DON'T make." Thanks for this!!
@Jonathan Greene thanks for your comment!! I am doing the due diligence at the moment, until now, it looks good. If this is an option, and the deal I am looking at keeps promising, I would like to share it with you and go through it... I am not sure if this is an option, but it would be great if you find it interesting... let me know if this is something we could do...
@Jorge Castro it is hard to not get emotional on your first deal. It is exciting and scary at the same time. I am here to tell you that emotion is fine. Anyone who tells you they don't let emotions impact decisions is lying. We all do to some extent and more so in the beginning before you have some experience. The key is don't let emotion make you do irrational things.
A more common problem starting out is actually analysis paralysis. This is when you look at things too analytically, which is really the opposite of making purely emotional decisions. When you become a victim of analysis paralysis, you find a reason to not do any deal.
I would argue it is better to do a an average deal for your first deal and get it done, versus waiting for the perfect deal. The key to success in business is taking massive action. Every deal increases your portfolio and gives you more experience.
The final thing people rarely talk about when investing is the power of time. Over time you get the benefit of inflation/ appreciation and you get the benefit of debt pay down. For that reason, doing a deal now, versus a year from now, gives you an advantage. When you wait for the perfect deal, you lose time.
I try and lay out my thoughts in a non emotional place first. Do all your research, ask questions, refine your thoughts. Then go for a walk, a drive, whatever you do to relax. While you're relaxed think about what you want, define the asset and returns you want, WRITE IT DOWN!
"I want a 4 bedroom home on a hill that has a 10% cash on cash return after management"
Once your goal is defined and written it becomes much easier to focus on that goal, become an expert on that asset, and find your deal.
Make a spreadsheet, or some type of metric you can quickly plug possibilities into. Once you can turn emotions and pictures and descriptions into numbers it becomes much easier to remove emotion.
"This place returns at 8%, therefore it is not 'the' place".
Good luck, this is a challenging thing. I try and remember "Be hungry, not desperate".
"How to avoid getting emotional?" - Be a Jedi in your analysis and execution
@Jorge Castro I'm not going beat a dead horse over what people have insightfully said: sticking to your numbers and writing them down as hard-set criteria is very helpful. It keeps you from slacking off on an analysis and letting it slide.
Something that may help keep emotions out of it: think of REI as a business, not just a side hustle or project. Stay passionate, but always keep in mind that it's not the same thing as Monopoly. If your REI career HAD to reach certain goals/criteria, and the business would crash and burn if it didn't, you would make sure you met those criteria. Keep that mindset
At the same time - make sure your criteria are realistic. If you are investing in a market with little cash flow but your analysis requires a minimum of the 1% rule, you may never hit that.
@Jorge Castro no emotion. All business, nothing personal.
Last night I went through about 20 properties analyzing deals for myself. I intend to go through about 50 or so a week (my primary focus right now is as an agent).
One thought I had was taking a look at interesting properties and determining what price works for me. It is free to write an offer so what do I have to lose?
It's kind of funny, with the low interest rates it means we qualify for higher price points. But because the interest rates are so low in order to offer less it has to be a big drop in price.
At the end of the day, it's your money, time, and investment. That is your focus because no one else will care about it nearly as much as you will.