How The Heck Do You Know When to JUMP?

Question

Is the ultimate question. How did you know when it was time to stop reading, and just do? I guess there never is a perfect time but what finally made your feet leave the ground?

Me personally feel as though I'm not ready. But I think I'm not ready because I'm telling myself I'm not ready. I've been reading Bigger Pockets for months (although I've only been a actual member for the last few), listen to the podcast frequently, been to the last few BWI meetups, and I have recently invested in a book by a fellow BP member... a book that will more than likely be finished today even though I just downloaded it yesterday.

I have my partner we have the cash to fund a flip yet we're not sure when to pull the trigger. Maybe it's because we haven't really built relationships which I think is a key part in trying to avoid some beginners mistakes. It's almost like how the hell do you do that when sometimes it feels like you're just the little fish in the big tank?

Funny I asked myself the same question when it came to quitting my day job, and I just did it. I was almost amazed to find out the world didn't end, I still was fine, and everything was okay once I cut the cord.

When did you know it was time to just do?

Joe Villeneuve · Answer

It's not important to know when you are ready...before you are ready...because you will never think you are ready until after you make your first deal.  Clear as mud?

So, when do you know when to start moving forward?  You don't, but the numbers do...and the numbers will tell you when to move forward...they are always right.

Just remember to never argue with those numbers.

Jeff Rabinowitz · Answer

Never stop reading, never stop learning but you are never going to know everything. Even if it were possible real estate parameters are constantly changing. Available inventory, days on market, interest rates, lending parameters, city ordinances--constant flux. You will never make a profit if you don't take action. The time to take action is when you find a deal that makes sense for your goals and you find the financing you need to move forward. It sounds like that time is now for you.

Lelith Walker · Answer

When I felt a little bit more comfortable in

• knowledge I gained.  
• Relationships that I developed by joining real estate meetups and networking at local REIA seminars and bigger pockets events.  With some people it took 3 years and I still make it a point to talk to someone at least once a week or 2.  Please note everyone in my circle isn't a friend or even a potential one, but they have to share my values or work ethic.
• Matching my personality with the real estate strategies that are there
• Putting together exit strategies.
• Lots and lots of prayer

Ben Leybovich · Answer

Devin  Morgan - So, tell me - am I famous, or infamous?!  I'd love your take :)

I find that the most obvious things tend to be the ones we have most trouble internalizing, and this topic happens to be one of them... A marginal shift in your thinking, I feel will clear this up.

When most people think about these things, they think - if I do this, how much money can I make vs. how much could I loose. That "how much can I loose" piece is what scares you, as it should...

However, what if we frame it this way - how much can you win vs. what do you loose if you do not pursue REI? Or, how about even simpler:

Will you be OK if you don't do this? Do you and your husband make enough money to pay for kid's education and your retirement in spades?

You know, Morgan, if you answer the above questions in the affirmative, then why bother with RE? Your risks will be high, and your opportunity cost low - there's no point to it.  If, on the other hand, you will not be OK, and you view RE as your ticket to get to where you're going, then by staying on the sidelines you are loosing - you opportunity cost is very high in this case, and you need to take the opportunity.

We could get quite mathematical about it, but why? If you can get it done without RE, do it - RE is a pain in the ass on so many freaking levels.  But, if you can't get it done without RE, what the hell are you waiting for?!

Morgan - does this help?

Devin Morgan · Answer

@Ben Leybovich No Ben that would make you an ass. A great ass, a very helpful and knowledgeable ass, but none the less an ass ;) what's life without balance though.

Kids? Retirement? Geesh I just turned 25 less than a week ago although I'm sure those are all things I should be thinking about now as they'll creep up before I know it. Honestly Ben, no I wouldn't be okay with not investing in RE. Not because of the money I could've potentially made, not even because of the countless hours I spent preparing for it, but because it was something I genuinely wanted to do and for whatever reason I decided not to do it.

REI is a pain in the ass? Hey it seems like you're trying to keep all the fun to yourself! I'm sure no matter what route I choose climbing the steps will be a pain in the ass. That's what separates the people that do make it to the top and the people that don't. Some people can go through the discomfort to get to where they want to be, some wont.

Either way you help put things in perspective, thanks Ben! I feel kinda bad now for calling you an ass, you've been great!

Devin Morgan · Answer

Ya know I'm on Bigger Pockets way too much. I just told my partner in my best excited voice "Hey @Ben Leybovich commented on my thread!" He looked at me with the blankest stare ever like who? I'm like *sigh* nevermind Bigger Pockets junkie moment. Well my partner is my literal partner so I guess I better get to it! It's pretty much my project, he just funds it lol.

Definitely @Tony Gonzalez good luck to you as well. We're currently looking at deals and calculating our mpp (maximum purchase price) for each. We'll be jumping as soon as we find a deal where the numbers tell us to. Hopefully you'll be taking the jump soon as well!

Ben Leybovich · Answer

Guys - I'm not being silly here.  I jumped when my wife said "OK"!

Seriously, I wasn't about to go without Patrsha's blessing and input.  It took some time...

Hope this helps!

Neil Schoepp · Answer

Your ready.  Now go get 'em.

Just remember to never argue with those numbers. (Yes it's that important, that I stole borrowed it from Joe)

Joshua Chen · Answer

hm.. I like to ask myself a few key questions:

How much education do I truly have?

Look at it from an objective standpoint, as in tally up the exact number of books you've read, videos you've watched, etc. Although it is possible to become educated in real estate without utilizing books, being well-read on books does go a long ways to increasing the probability of your success. By "well-read," I'm talking about numbers of books in the double-digits. Again, it's not required, but it helps if you want to be secure.

How much networking have I done?

Look at it from an objective standpoint as well. What is the number of people you've met in real life? The number of people you've met on here? The number of people you've met in other related RE groups like a local REIA? Consider the quality of your connections as well. Having connections just for the sake of connection is always nice, but take a good look at who you know that actually has the solid experience to back you up if you get yourself into a sticky, confusing, and/or otherwise undesirable situation. The more support you have to fall back on, the more secure you can be.

How well do I know this market?

Real estate circumstances vary noticeably depending on the condition of your particular market. To truly understand whether a deal is good, you need a holistic view of what's going on in the market. Take the time to really research the market in-depth. If you're not sure how to do market research, make sure to look into the various methods people use to get a good grasp on markets.

Do I have my relevant team members assembled?

This relates to networking - it helps to have your relevant team members assembled ahead of time, rather than trying to improvise them in the middle of the deal. Especially for flips, having a great contractor is pivotal. Bad contractors will drag the project on and cost you many unneeded expenses. Having a great agent will provide you guidance along every step of the deal. Bad agents will just be lazy, complacent, indifferent, and/or otherwise headaches to try to work with. Some other worthwhile team members to evaluate include mentor, mortgage broker, handyman, escrow agent, property manager, inspector, appraiser, etc. Maybe an accountant as well, but that usually comes later down the line when your business is well-developed.

Where will my financing come from?

It doesn't matter how good a deal you find if you can't actually get your hands on the deal. You will need some way of obtaining the money to put down for the deal. In some cases you don't have to put down much, or even any at all. That would be using "creative financing" and OPM (other people's money). How much money you put down, interest rate on borrowed money, and etc many other variables, depends all on the terms of your financing. You don't have to have every detail worked out, but it helps to have some general sense of which direction your financing will take, because financing will be required no matter what (unless you fund 100% of the deal with your own cash, but I'm assuming you don't have that means since you're just starting out). As an example, I rather like the FHA loan. It has a very low down payment of only 3.5%. However, it does have a limitation in that you have to take up residence in the property you finance with it. So those are some of the terms to consider in using a FHA loan as financing.

What is my plan?

Take a look at the overall picture of your plan. What are your short-term and long-term goals? How much risk can you afford to take? Where do you see yourself in the next few years? Where do you see yourself many years down the line? How much time do you have to work with? How much starting capital do you have to work with? What sort of properties are you interested in? What is the your target market (sometimes called "farm")? How do you intend to get financing? These are examples of some of the questions that should already be answered in your business plan. If you don't have a business plan, it is highly recommended that you craft one. It's not impossible to succeed without a plan, but it would be like trying to run to the finish line in the dark, hoping that you don't collide into obstacles or fall into a trap on the way.

What are my exit strategies?

You mentioned that you'd like to flip with your partner. While having plan A succeed is ideal, reality will not always conform to your expectations, which is why you need to have plan B and plan C in place just in case. If you aren't able to pull off the flip, could you possibly rent out and hold? Renting and holding would allow you to "weather out the storm," and maintain positive cash flow until a great opportunity arises in the future for you to flip it. Another exit strategy to consider is to apply seller financing, where you take a promissory note and have the buyer of your property pay you back in a steady stream of income over time. An advantage of this strategy is that you can charge interest. Trading up the property with a 1031 tax-deferred exchange is also a possibility. As the name suggests, doing so allows you to defer capital gains taxes.

And finally..

How confident do I feel?

This is self-explanatory. If you don't feel confident in what you're doing, chances are you're not good to succeed at what you're doing. Let your intuitions guide you in terms of when you feel that you are ready.

Whew.. it took me a while to write all that, but hopefully it helps!

Ben Leybovich · Answer

Devin  Morgan

Get in the game!  And feel free to reach if I can help,

Good luck!

How The Heck Do You Know When to JUMP?

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