When are you ready for that first deal?

Question

I hear and read a lot of advice given to beginners on starting. A lot of the advice seems to fall into two categories. The first is to educate yourself. Network. Learn. Listen. If you have five hours to chop down a tree spend the first four hours sharpening your ax. Etc.

The second piece of advice I hear repeated is to not wait too long. Your first deal will teach you so much. Don't be afraid to get started.

Both are great pieces of advice, but it is difficult to figure out the balance between the two. When is a wanna-be investor ready to take the leap?

Chris Nowlin · Answer

Start with the education and networking. There is so much base knowledge to learn and you will have plenty of time to meet key people during the process. Try to meet people that align with what you are currently learning. For example, if you are going through rehab education, reach out to contractors. Some will be open to chatting and some won't.

Another part of the education is analyzing deals. If you are relying on a wholeseller's numbers, you probably aren't ready. Once you start to feel comfortable with the numbers and start to see the potentials in the deals, it's probably ok to jump in.

This is where the other half of the two categories comes in to play. You will absolutely learn more from doing your first deal than you will ever read in a book. If you over estimate your rehab and underestimate your ARV, you will have some room for error.

Our first deal was a success. Our second  was far from it. $30k over the wholesellers rehab estimate. Fortunately, we also sold the home $15k higher than their ARV. It was about 6 months of hard lessons learned, but it didn't break us.

Every deal will come with new lessons. You will never be 100% ready. You just have to pick the time you feel your knowledge and preparedness align and make the leap.

Joe Villeneuve · Answer

Ignore the second one.  If that advice made any sense at all, you should contact the REI that lost the most money investing in RE.  That person must be a wealth of knowledge.  Trouble is, the only knowledge that person can offer is what NOT to do.  Although that is important, it doesn't help you be successful.  It just means you will learn how to lose money s...l....o.....w.......l..........y.