Overlooked aspect of investing in RE (Newbies Read)

Overlooked aspect of investing in RE (Newbies Read)

Investor · Saint Paul, MN · Member since 2014 · 48 posts · 39 votes

Okay so this is a new post with a topic I have not seen on here since I have started putting effort into the website. BTW if you do not listen to the podcasts here you should be ashamed of yourself. 

First of all I have a few points to get across. There are 1000 people that are part of BP that are way more successful than I am. I read a lot of post on here about new investors looking at deals and crunching numbers to the point of feeling like I am in freshman algebra again. I think a lot of people are scared to step into the batters box and swing the damn bat. The greatest education of all is failure. Learn to embrace it and you will be unstoppable. Find the failures of Abraham Lincoln, print it and hang it next to your goals. Embrace mistakes so you know not to make them again. 

Now to the point of my post. In this post I would like to bring one of the more over looked aspects of RE investing (in football it is field position and clock management). I think there are a lot of people who will look at every number but fail to look at exit strategy. As long as you have an exit strategy you will be okay in the end. You place may not make the 10 CAP rate you originally wanted. It my dip to an 8 CAP before bouncing to a 12 CAP in year 5. However, if you always buy right it will help take the fear out of your investment.

I would like to know what other veteran investors think are the most overlooked aspect of investing. 

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  • Investor · Dallas, TX · Member since 2014 · 2k+ posts · 1k+ votes
    10y

    First, I recommend having at least 2 exit strategies on every deal.  

    Second, and I think this is actually the underlying message of what you are saying...Know YOUR numbers. It doesn't matter that your deal doesn't qualify as a deal for me. It doesn't matter that your deal doesn't meet the general rules of thumb (2%, 1%, 70%, 10% CAP...whatever). It only matters that it meets your minimum requirements.

    I worked with an offshore investor to help him acquire and rehab his first buy & hold property.  His criteria was that it had to cash flow at least $100/mo.  Yes.  That's right.  But, it met his goal.  That's all that matters.  We exceeded that, but that was his minimum.

    So, my advice to newbies caught in analysis paralysis on deal analysis is...sit down with a blank piece of paper and figure out what your goals are.  I'm not talking about soft goals like, "Leave a legacy for my children."  That's a fine & admirable goal, but it isn't quantifiable.  You need numbers on paper.  Your goals.  Your minimum criteria for each type of exit strategy you are willing to execute.  WRITE THEM DOWN.  Make sure you understand the math of deal analysis.  Then, if the deal, at a minimum, meets your goals and criteria, jump on it!

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