Too Many Options! Analysis Paralysis!

5 Replies

I have decided to take the deep dive into real estate investing. I've been doing an insane amount of research and I think I'm (Lets be real, I KNOW) getting stuck with analysis paralysis and I haven't even looked at a house yet.

My first hurdle is on the topic of funding. I don't have the funds to purchase a house outright and I don't have the 8-10,000 needed for the 20% down on a 40-50k house. (Roughly the ballpark I'm looking at)

I have options, I have a LOC and I could potentially get a HELOC/HEL.

I could get P2P lending for the downpayment and then take that money to a conventional lender.

My house is in my name, but my wife could get a FHA loan and shoot for a Du/Tri/4-plex (This would go above the 50k soft limit of course but I am concerned about the down payment rather than getting the loan itself.)

I could get a hard money loan for a few points, use credit to fix and flip, or get the hard money loan and hope to find a conventional lender after the place is fixed up with tenant in place.

Along the FHA route I could do a 203k to fix a place up (Especially the before mentioned 4-plex)

I could try to find someone who is willing to do seller/owner financing and cut the bank out entirely if possible.

On the other hand, I could do a few wholesales to build up some capital...

The problem is, I get nervous and can't talk confidently even about things I am deeply passionate about. I could talk to my wife or friends all day about investments or budgets but as soon as I'm talking to strangers I get mushmouth.

I have a decent chunk of info and understanding about the topic but I just can't seem to pull the trigger. I'm not concerned about an 'easy' way rather I am afraid of messing up and it knocking down my house of cards. I'm not so poor off that I cannot sustain a small hit but I am afraid of somehow getting a house I cannot sell or rent out and losing money month after month until having to default.

What should I do? What does the Bigger Pockets community consider to be the least risky (even if it means the least returns) way of investing? If anything, to build up the capital to purchase a house from a better standpoint.

I guess wholesaling would be the best start, but how do I find the investors when the home owner couldn't?

yep, you've given yourself too many options.  You may benefit from setting some goals and clearly and finitely defining exactly what you want to accomplish.  There are several goal setting programs out there - a quick google search should get the wheels turning. 

Wholesaling is hard, like really, really hard to do.  Not impossible, but freaking hard. Good wholesalers are hard to come by, and bad wholesalers will usually only end up doing 1 or 2 deals before their reputation gets demolished.

I agree with @Blair Poelman , you're going in too many directions. You've, literally, mentioned almost every method of real estate investing in your post. First and foremost, what's the goal? It sounds like you want to buy and hold rentals, Start there. Do you want to buy turnkey properties or do you want to get involved in fixers? If you have little capital and want to buy fixers to hold as rentals, I would either go the hard money route or 203k. The reason why I think this is the way to go is that they will vet the deal with you. They wont lend on a bad deal that you'll lose on. They want you to succeed so you pay them back and do another deal with them. They'll validate the ARV, the Reno budget, and make sure there is enough buffer in the deal to make you money. You'll need some capital to get started but you can use a LOC to get the ball rolling. But in the end, it's all about what your goals are....

@Andrew Coffey how much of your own funds do you have right now? You can’t borrow money for a downpayment with conventional (ie most lenders), to this and say it’s not a loan would be mortgage fraud.

Second you need closing costs. Sometimes sellers will cover some or all of this but usually not. This will run 4-5k.

So to buy a 50k house investment property, you’d need 20 percent down, plus closing costs. If it’s multifamily it’s 25 percent down unless you live in it.

How long would it take you to save that much money? Took me 10 months to get money for property one. This is a slow game.

Agree with all the posters here. Especially about wholesaling. That's an 80-100 hour week hustle when you're just starting out. And it does require some money. Personally I'd strike that off the list right now cuz if you really wanted to do that your post would have been about wholesaling and wholesaling only. 

Next I agree with @Caleb Heimsoth about saving for the down payment. If you're worried about all these factors, one way to mitigate a lot of that is to have a down payment AND some reserves saved up. Make sure you're able to comfortably buy your first rental. While you're saving pick your area and examine 100 deals on the BP calculator, walk 100 houses in the area before you buy. Focus on learning how to identify a good rental house and then buy one. Get it up and running and see if you like being a landlord. You may hate it. You're going to learn a lot and then you can start getting more creative with financing and such. 

I know you're itching to get started, but slow down and do it right in the beginning, that's my free advice. Sounds like you're about halfway there already.  

Check out the money podcast from BP for strategies on accelerating your savings. 

Thank you everyone for your replies. Indeed the primary purpose for being interested in real estate is buy and hold rentals with the ultimate dream goal of being able to replace my income with rental income.

Unfortunately I have about 3k saved up.(Not including the HELOC I just started started the paperwork for yesterday) I know that's not the 20% needed for even the most basic deal, which is why I began to look for other options. And from there is was a cascading overload of information. (You should see my computer room, I have notebooks, sticky notes, printer paper and flash cards everywhere as I was connecting the dots trying to figure out the perfect plan.

What I'm thinking would be the best bet for me, would be to go the FHA/203k route if I could find a reasonable Quad or Tri plex and take one of the units for myself, renting out my current home AND renting out the other 2/3 units of the small multi.

It's not a matter of if I could save up the money, I could have 8-10k saved up by christmas if nothing catastrophic happens, it's just a matter of the fact that I have been studying off and on for weeks and itching to pull the trigger. 

As a side note, I fully intended to use a property manager from the get go, and I discovered they usually charge around 10% assuming that is fair enough to not fight over, even if I only make $100 a month (profit) then I would consider it a victory, albet a small one. So ultimately a turnkey would be ideal since the property would already have a tenant or at least be tenant ready.

It's not that I don't know what my options are or what my next steps should be, it's that my hands are bound because I simply don't have enough for the conventional loan and the hard money lender option is a little intimidating because of the high percentages and short terms (What if no one buys the property within the year... Then I'm screwed and possibly ruined)