On your first deal...

2 Replies

Go back in time. Remember the first deal you were excited about. How did you overcome the fear of failure and take that big step? What thought process did you use to take that step? For most, fear stops them. I do not want to be THAT person!! Any insight would be helpful! How did you do it?? 

Easiest way to get over that fear is to get a mentor to underwrite the deal.  Having a second set of eyes with more experience approving the deal with you will make you feel better and give you someone you want to avoid letting down.

@Kim Horn

A mentor isn't a bad idea but with my deals, I've done my best to eliminate risk which can be done in a variety of ways.

So with my first home, I chose to buy intentionally with my FHA loan so I could get an owner occupied duplex that I could turn into an investment property. So to eliminate risk I chose to buy in an area i knew like the back of my hand (I knew the market rent, local property values, etc) and a property that I knew could only benefit from improvement. Now I always tell people new to the industry to get educated before diving in. I was fortunate because I was already a licensed Realtor so I knew a good amount about the real estate business and financing (plus I'd get paid for the transaction). I also had construction background as a professional contractor so that helped too with improvements and renovations. So never a bad idea to have someone like that on your team. And although I did have money into the deal, I took advantage of the the FHA financing and picked a property where I didn't have to put much down. So I really only had $5,500 in the deal altogether, it was a lot to me back then but it really wasn't too much to lose.

When I was going to buy my first actual investment property, I utilized credit cards to finance the purchase of a home (again, in an area I knew, that I could fix up, etc) and to renovate the property. Utilizing credit is really just a form of OPM (other people's money), which eliminated my personal risk in the deal. If the deal failed, the most it could affect was my credit score and maybe they could take back the rental property....but big deal. I could improve my score over time if need be and if I lost the rental property I would just be back to where I started to begin with. Now I wouldn't recommend that exact strategy today because now there are significant cash advance fees but the same type of leverage could be applied if one were to utilize private money (or hard money).

So I would say, if you want the best way to circumvent fear, take risk off the table. I personally think I didn't have much fear starting out because I grew up poor and was relatively broke starting out. So I really could only go up from there! Even today, I know many people who have gone bankrupt and most have come back from it. Some people have even had to reinvent themselves or their career because of bad investments, but that's something I had to do much of my working life as I've adapted to the marketplace.

And if you have a specific property in mind, you might want to do what's called "A Ben Franklin Close". This is a salesperson technique where you essentially put together a pros-and-cons list for the investment. There's something about putting a pen to paper that really solidifies these risks and benefits.

Hope this answer could point you in the right direction.

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