I think "just jump right in" is stupid advice. People are quick to criticize for "Paralysis of Analysis " However few understand it.
There are three distinct types of knowledge you need
- The strategies - you don't need to know them all, You only need to know one, enough to do a deal
- How to evaluate a deal. - Many never get to this point. You can spend an awful lot of money on rei education and still miss this important step
- Knowing your market. - Knowing theoretically how to evaluate a deal does no good in you don't know YOUR market well enough to apply it.
Everyone gets #1. That is the fun part to study and teach. Some get #2. Very few really get comfortable with #3. If you are stuck in paralysis of analysis it is probably because you are weak on #2 or #3.
If you have spent a lot of time and $ on #1, you may feel pressure to "Just jump in" But if you are not comfortable with 2 and 3 you are not ready.
I never buy a property I think is a good deal . . .
. . .
I only buy deals that I know are good. That is because I know the market value, I know what other investors would pay, I know what it would take to renovate and I know what it will rent for. Most importantly I know the hidden costs most new investors don't consider. OK I might not always be right, but I am making an educated decision based on knowledge not just guessing and speculating.
Are there people who "Just jump in" and do fine? Yes, but just as many crash and burn. You certainly won't find me pushing a newbie to take that risk.
So when Do you move forward? When you are confident what you are looking at is a good deal and you have a plan and resources to do it.
Ned Carey, that is incredible advice. I greatly appreciate it. I know there is no shortage of avenues in which to learn #1 to the degree that I need to, but how would you suggest really becoming knowledgeable on #s 2 and 3? I know being able to understand my market takes time, and I’m sure making connections with experienced people in my market would surely help. As far as analyzing deals, do you think that just constantly running the numbers and physically analyzing it would do the trick? Or do I need to find a more in depth way to really be able to see those underlying costs you’re talking about?
The biggest thing is get educated ,read books listen to podcasts and browse the forums here everyday. Once you have an understanding ( and money) then start going to look at properties ( it’s free) get to know what a 30 40 80 thousand dollar house looks like so you can know value when you see it . Then buy something .. look you must take action or you’ll be like the other 90% of people over 60 that are living on government programs . Real estate is a funny business you can’t just dip your toe in it you gotta run and jump in the water . Buying something is going to teach more in a month than all books or podcasts you ever heard . I’m not saying just jump into any old deal with knowledge ...but I will say it’s very easy to get scared and allow fear to paralyze you because of the unknown . Don’t stand with the bat on your shoulder son , you must take a swing .
Dennis, thank you for the advice. I am definitely motivated to jump in as soon as possible, but the conservative part of me controls the money and would hate to see it disappear. So I definitely agree that my education is my first step. I like what you said about understanding what value a house should be at and knowing a deal when I see it. That is something I absolutely need to pay more attention to. I guess that would be the experience I’m looking for to help me know my market? Thanks!
Get yourself to a REIA meetup! If you want to learn your market, you need to get to know the people in it.
Nicole, that is definitely a step that I want to begin as soon as I can. I know networking will absolutely be my best asset in getting things started and learning from people already active in the market. I just found some potential meet ups in my area that I hope will continue and I can be a part of!