I am naturally an anxious person and worry/plan out A LOT of things, trying to be prepared for surprises. I know that investing and, real estate in particular, is full of the unknown, especially for a newbie. I definitely feel like I am in analysis paralysis mode and am trying to get the courage to make my first purchase. My husband, on the other hand, is much more spontaneous and has the opposite go with the flow mentality.
I'm just curious.... how long did you spend learning about real estate before you jumped on in? Also, any advice to get over analysis paralysis would be greatly appreciated!
I do not have any answers for you, but I am subscribing as I am a newbie as well.
We are neighbors- I live in Belleville. Welcome to BP!
For us, it took about 2 months of reading up on different types of real estate investing before we started actually looking for property, and about another 2 months to actually start making offers on some. We liked the buy and hold strategy and bought our first house two years ago and the second a few months later. We have been searching for a house to flip (or fix and rent out) but haven't found a deal that makes us comfortable, so we are now going after properties 3 and 4 to buy and hold.
My husband and I are cautious people and both purchases were nerve racking, so if you feel that way it is normal in my opinion!
@Kristi R. - I'm curious to know what others are saying. I've been at this (in theory) for about a 1+. In that time, I've paid a nominal fee to a local real estate investor's association for mentoring; obsessively listened to BP podcasts; spent hours pouring over blogs; and spent hours more watching YouTube videos on investing...
Despite all of my preparation, I don't feel prepared to flip (I am working on other types of deals, though) . It dawned on me a few months ago that I would never feel fully prepared; that's just the nature of some things. I'm a lawyer and I can tell you that no matter how many hours I've spent preparing for a hearing, I simply cannot anticipate every curve ball. If I tried to, I'd literally never take any cases for fear of the unknown. I think real estate may be a little like that and I recently decided to just jump in. I'm currently working with a realtor to find my first property to flip.
That being said, there seem to be a few types of calculations and things to keep in mind when flipping. It's been discussed on these boards ad nauseum. If you get a firm grasp of those things I think you'll be ok. But you won't know unless you try. Best of luck to you!
Find some good team members to work with should make you feel better.
Kristi, My father taught me to swim the old fashioned way, he just threw me into the American River one summer day, sink or swim, it is amazing how quickly you can learn to swim under those conditions.
I used the same technique when I started my investing the same way, I figured I would find out what I needed to learn when I ran into a problem and believe me your a lot more motivated to find out the answer when your standing in quicksand. Now days info and knowledge is readily available on sites like this. So I would suggest time management and scheduling one hour a day as your education hour and concentrate on something that you need to know at the present time. The only way to learn how to swim is by actually getting into the water. Can't tell you the amount of investors that wasted decades or never ever got into the water at all because they thought they didn't know enough. This a classic case of you don't know what you don't know, but if your in a place where you need to know it now, then you know what you don't know.
Knowledge is NOT power. Anyone that tells you that is selling you a book.
Action is power. Take action, learn as you go, not before you go. You cant learn to swim from a book. If you read 5 books on swimming and I spent 5 mins in the pool, who knows more about swimming??
I am NOT SAYING take stupid action. And I am not putting down the books and tapes guys, I have spent over $35k in REI education. But dont let yourself think "i just need to learn a little more about ABC or XYZ than I will take action" all you are doing is procrastinating.
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I figure the average investor takes about 6 months to do their first deal. That is about how long I took, and I cheated I bought mine at an auction. You can do that tomorrow if you have the cash.@Ben Leybovich
took much longer than that and he is one of the most respected people here
Real estate is not a race and is not a way to quick riches. (OK it is one of the fastest ways to get rich but there is no fast way. It is one of the least slow ways). It is more important that you do it right and keep moving, than being fast out of the gate.
Originally posted by @Judah Hoover :
Knowledge is NOT power. Anyone that tells you that is selling you a book.
I disagree with this first sentence but agree with the rest of Judah's post.
There are three distinct types of knowledge you need
- 1) strategies
- 2) how to evaluate a deal
- 3) market knowledge
Many people who get stuck have a LOT of knowledge, but not enough in one of these areas to move forward. When you have enough of all three, you have the confidence to move forward.
You can learn the first two from books and places like Bigger Pockets. However most people are weak on #3. You can't learn that sitting at home behind a computer screen. you learn that by going out into the market and looking at houses and networking with investors
Ned Carey, Crab Properties LLC | http://baltimorerealestateinvestingblog.com/
@Ned Carey - thanks indeed for the kind words! Not sure you are right, but I do my best to speak my mind...
It took me over 10 years. A lot of it was not wasted, but some of it was, I am sure. I often ask myself why I didn't jump in sooner, and I don't have a good answer aside for procrastination due to fear...I wasn't ready until I was ready.
I don't believe that you can separate knowledge from action - it takes both. What we can help with is your knowledge. You will know when it's time...
And if you don't, that's OK. REI is a full-contact sport. You must be of a right frame of mind to jump in. And it's completely OK if you never do...
I too disagree with @Judah Hoover statement that knowledge is not power...and maybe that was simply a mistype..lol
Proper knowledge, in a format best suited for you as a learner (i.e. webinars, podcasts, books, curriculum programs, etc.), is valuable and should be sought before doing anything for sure. The investment into education and knowledge in general is priceless and generally less expensive then your first potential mistake without having it to begin with.
Second step in the knowledge process is, after the foundation knowledge is set and you understand the acronyms in the industry, street talk, construction lingo, valuations, exit strategies...then you can add to your tool-belt some items that may facilitate a further analysis like spreadsheets, apps, etc.
Real Estate Investing is a TEAM Sport, and to try to understand everything on your own to the point that you feel comfortable to then act is an unreasonable expectation.
Surround yourself with a strong Team, an experienced Mentor local to you, have that foundation education completed, put that tool-belt together and then act on a sound opportunity.
NOTE: Wholesaling gives you an opportunity to practice what you learn, gives you an opportunity to vet your Team and affords you the opportunity to valuate the property without risk to start with. Wholesaling, when done right, has you go through all of the tasks that an Investor will go through yet with the risk of usually no cash...it's a great learning experience. When you have Wholesaled a couple of properties properly, then you may be ready to take on your first project.
As mentioned above, Investing is not a sprint...so don't rush yourself.
I think there are things you should consider before buying. Once you have these AND STUDY you are ready.
1) get your house in order. pay off all credit cards and unsecured debt. Lower your Debt to income ratio below 36%.
a) If starting with student loans, consolidate and push them to 25yr terms. This lowers your monthly spending and helps your debt to income ratio.
b) if you owe on a car, consider selling and buying an inexpensive truck (4-8k). Not a must but extremely helpful.
2) Join Mint.com and CreditKarma.com to monitor your score. Get it over 640.
a) Dispute every bad thing regardless if you actually did it. The owness is on them to report the discretion again or it is removed.
b) Use credit cards and pay them off every month to increase utility rate. 30% is optimal. You should not pay fees, you do it have to carry the balance.
c) Call an ask for increases on your limits to help your utilization rates in the event you keep a balance. Call every 6 months to 1yr to request better rates or increase limits.
d) get your parents or spouse to add you to their oldest credit card without bad remarks; effectively increasing your average age of credit.
e) hard inquiries on your credit history do very little to lower scores, do not pay much attention to them.
3) Set up property management procedures and team build
a) join your local reia and keep the newsletters. Log all the advertisers. They are a good starting point for locating cpa, attorney, roofers, realtor, handymen, insurance, lenders, etc.
b) get all your forms organized and put them in drop box. I used free forms from Mike Butler's book Landlording on Autopilot.
c) Join websites. postlets to advertise. Set up payment collection (cozy.co, chase bank, paynearme, etc).
d) talk to your attorney and understand eviction laws and process. Be sure you follow process and evict quickly.
c) know your insurance company policy. Dog bites, vandalism, fire, flood, ACV vs RC pay out methods, frozen pipes, tornado. and anything else that scares you.
4) decide on your strategy
a) Choose type of financing you need and talk to lenders: will you buy all cash then finance yourself out? Buy turnkeys 20% down? Get two lenders on your side. It is possible one will bail on you last moment and require you to scramble for money.
b) Talk to attorney and start llc. This is the only thing that may cost $200 or so.
c) Decide on your criterea and get emailed alerts from your chosen real estate agents.
I think an easy fix to this small debate it Knowledge applied is power. Knowledge without application is simply potential energy. I think everyone above is partially correct.
I study personalities in depth and I can tell you a book that will help you tremendously is Personality Plus by Florence Littauer. Don't let this add to your list of to do's before you take action, but put it high on your reading list. I can tell by your post you are a Meloncholy and your husband is a Sanguine. A Meloncholy will almost certainly always suffer from analysis paralisys in any large decision they ever make....even small decisions like what tv, stereo, even sneaker you purchase. If you read every label of everything you purchase, you are a meloncholy. If you read the instructions and follow them to the T, you are a Meloncholy. If you are not truly clinical but could be considered "OCD" by yourself and the people around you that know you the best, you are a Melocholy. If you notice every fault, stain on clothes, hair out of place of every person you ever come in contact with, you are a Meloncholy. I say all of this to tell you that this book will arm you with the info about yourself to be able to strike a balance and enable yourself to make well informed decisions in a timely manner. Hopefuly this helps.
Thank you so much, everyone, for taking the time to respond! Your thoughts are very insightful and I will spend some time re-reading everything. I am definitely getting ready to jump on in!
A couple weeks, we sign papers today for our first rental property. I was driving myself crazy trying to learn all the laws, then I realized, I'm not a lawyer. Once I told myself that, I felt more confident. I can ask our lawyer legal Qs and we'll make contracts together. BP has been the best find. Without BP, I don't think I'd be at the realtor's this afternoon!
Well I didn't take exception to Judah's post about knowledge is not power because he is right but he should include one more word, unused knowledge is not power, used knowledge is power, and that requires having the knowledge and the use of action by a decision to use or not to use the knowledge. Or as Yoda (is that right?) said, to do or not do. I compare action without knowledge to a raging bull in a china shop. Lots of action but very little knowledge, and only the bull is happy with the results.
I was once asked to join MENSA so went to a meeting. My first thought was all that knowledge and mental ability yet most of those I met had actually accomplished very little in their lives, the highest IQ there had been a night time janitor for 30 years and didn't apparently spend any of that time trying to solve some problem of some kind, definitely not an Einstein, they seemed happy though. So when asked to join I declined and said it is apparent to me that all these people I have met tonight are far more superior then I am mentally and I know I just wouldn't add anything to your fine group. (Lots of knowledge there but very little action.)
About 5 years - I learned a lot - made a ton of mistakes.
Now we try to help newbies avoid those costly mistakes.
Best of luck!
I jumped the gun 10 years ago and got in over my head investing on my own. I believed the hype about the market never going down (what exactly was I thinking?). So being cautious is a good idea, but not to the point where you never act.
Find good guidance on BP to learn your market, how to evaluate deals and the best type of REI for your area. You can't beat having a team of experts in your corner so you can avoid the landmines. You will definitely get those experts on this board!
Took me 5 years of dragging. Now we bought 13 multi family properties just last year.
My advise, put in offers and get under contract. Take action now and figure out the rest later.
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