How to get over analysis paralysis on the first deal!!

137 Replies

Any tips on getting over the initial fear of the first deal would be much appreciated!! I currently made an offer on a single family home in joliet, IL. I've ran the numbers and it should cash flow around $250-$300 per month after all expenses paid. What were your first rentals cashflowing? I know analysis paralysis is normal but how did you stop it from keeping you out of the game? Thanks for any tips!

Jamie,

What about doing a deal are you afraid of? 

Maybe you should try to fear the things that come from NOT doing a deal? That may help motivate you. 

Rentals typically return $100-$300/mo in cash flow. 

@Cameron Tope that's a great way of looking at it because I have passed on a few deals and regretted it. I guess I'm just afraid of the unknown. My goal for 2020 was to get my first rental and I just got an accepted offer! I'm excited but still scared and hoping it will subside eventually! Thanks for your reply!

Hey! Also a newbie in your exact same spot! I've put a few offers and no bites, but my goal is the same: get a rental by the end of 2020. 

As far as the math goes, every BRRRR calc I've done that was worth bidding on was cashflowing around $200-$300. For whatever that is worth :)

Is this first house a fixer? or turnkey? Excited for you!!

$300 per month after expenses is pretty good cashflow...

Your first deal will always come with the jitters. 

1) Did you buy a deal with equity already built in?

2) Did you estimate the rehab correctly (yes, your first deal, you'll likely be off by a good bit unless it's already perfect...this is okay)

Likely the thoughts in your head are: 

...what if I can't find a tenant? 

...what if I find a tenant and they destroy the place? 

...what if the house falls apart and becomes a money pit? 

...what if I calculated the numbers wrong and the house is worth less than i thought? 

All of these will likely happen at some point. 

#1. That's okay

#2. Holding real estate gives you a good buffer for errors

FLIPPING is a lot harder...and a much different animal as it's much easier to lose money. 

The worst thing that could happen is you lose a few months of cashflow for extra repairs...but yoru tenant paid down your mortgage, and you got a lot of juicy tax benefits.

Bottom line...again...congrats on the deal. You have a great buffer with $300/cashflow. 

Worst case scenarios rarely happen...

Buying and holding real estate is VERY FORGIVING (vs other types of investing like flipping/wholesaling)

@Kelli Loo awesome thanks for your reply! This property is outdated cosmetically but all the big ticket items have been replaced which was the deciding factor for me. No work needed as far as I know. Hopefully it will pass inspection and appraise well. Good luck to you and your goal!!

@Joe Cassandra The property is a bit outdated but no rehab is necessary in my opinion for the area. It should still rent well. Its super clean and all the big ticket items are new!! And yes those thoughts are exactly what worries me! Thank you so much for taking the time to reply and making me more confident in my decision! You made a lot of great points!!

@Jamie Kammers That's great! I'm currently trying to BRRRR so its properties that need a rehab. So scary but also so exciting. I fully expect there to be "learning experiences" aka failures so I can just rip the bandaid. I've been dreaming of this for so long! Good luck to you!

@Jamie Kammers for me, it’s about running a worst case, most likely, and best case analysis. Figure out based on your market what the absolute lowest rent you are going to get. If you can live with the return in the worst scenario, you’re not going to hesitate going after the deal. You’re going to love the investment when you come closer to the most likely. Over time, you may be able to figure out ways to get it up to the best case cash flow.

@Matt Leber Yes! That's a great outlook! Even at the low end it would still cashflow $100/month. This is less than i would like of course but its still worth the investment. I feel that if keep postponing my first purchase I'll regret it and lose precious time I could be learning and gaining equity! Thanks for your reply!!

Analysis paralysis usually has nothing to do with analysis, it usually has to do with confidence and focusing on the correct learning tools and not just spinning wheels. Most people in paralysis either haven't seen enough homes in person or are feeling uncertain about their financing vehicle or just don't know enough to be walking the plank yet.

I don't agree that $250-$300 is great for your first deal based on how you described the house and being not in great shape, but also major issues resolved. How much are you holding in cash for reserves on this? Say you are at $250 cash flow/month and have six months in reserves, what does that get you if the furnace breaks this winter? Your cash flow is gone for a long time. Alternatively, is the appreciation cycling up, that would make it better. And do you expect to appraise high, meaning you got a good deal?

@Jamie Kammers - Doing a deal with an experienced partner will help you get through your first deal jitters.  Yes, you sacrifice $, but you gain security and avoid losing $ in the short term by avoiding newbie mistakes.

I won't look at SFH deals in my market because there's no property appreciation. I set my sights on $400~/month/door cashflow on our investments

@Michael Ablan good idea! I will definitely consider a partnership on my next deal as i am leaning toward multi-family. Fortunately the area I live in has had a great deal of appreciation and hopefully that continues! Right now I'm just trying to gain experience and get in the game. When do the jitters go away? Haha thanks for your reply!!

@Jonathan Greene thanks for your reply! I believe the home will appraise for 10-15k more than the purchase price and the homes in the area have been appreciating very well. This particular home appears to be meticulously cared for over the years by an older couple. The inspection should give me a little more insight and confidence there.. It is outdated as far as old oak cabinets and linoleum tile in the bathrooms and kitchen. I don't intend on dumping any money on the cosmetics immediately because i believe i can get high rent as is based on my research and the homes nearby that are currently rented. The roof, furnace, water heater, permasealed basement, and hvac have been replaced within the past 5 years so thats a huge plus for me. I also have a dependable handyman that can fix just about anything for a great price. Does that change your opinion or do you still think I should aim higher on the cashflow side? Thank you!!!

@Jamie Kammers

Congratulations on getting your offer accepted! It’s exciting and terrifying I had my first accepted offer on first official investment property on 8/15 I close this Wednesday. You’re right around the corner from me too I’m in sugar grove, property is in Batavia.

@Jamie Kammers

Thank you.

Don’t mind at all, should be at about 240$ I accounted for lower vacancy 5% strictly because it’s in a great school district (Geneva) and I self manage. My other rental is a sfr but was accidental land-lording situation I’ve had those tenants going on 5 years. The tenants in this house in purchasing now have been there 5 years as well and I haven’t closed yet and they’re already leased in with me. Also allowing me to improve parts of the house while still collecting rent.

I think joliet has a occupancy inspection right?

Do you have Facebook? I’m part of a great group on there for joliet real estate investors. Look me up Zach WG I’ll send you invite to the group.

@Jamie Kammers ,

Something that can help you build confidence is education. Yes, you pay for the education. The cost of education is often only a fraction of the cost of an error in analyzing a deal or doing a deal that would have been better left behind. What people have posted as their losses on their initial deals would have paid for their education many times over. They might have avoided the losses and instead made a substantial profit.

Plus, education connects you with others who are not only educated, they are also experienced and actively investing.

My $0.02 ...

@David Dachtera thank you so much for taking the time to reply! Do you have any leads as to where to find this type of education in our area? I've read all the BP books and listened to countless hours of podcast for years but I do lack the connections with experience and education. Thanks again!

I was just talking with someone about holding back from making your first deal! This is an exciting time! Just look at the numbers and don't let your emotions hold you back. It sounds like good numbers for cash flow and if you go over budget you will still be ok. We had plans to cash flow the same as you 300-400/m but went 25,000 over budget and it still cash flows. 

I think my husband and I's view on money helped us move forward for our first deal. We knew there were risks but we also knew we would learn and grow from it. Best of luck!

@Jamie Kammers Is there any particular software you are using for analyzing your deals or do you have your own custom spreadsheets that have worked for you? 

Congrats on the deal and keep us all updated in this thread on your progress!