QOTW: How to help a new investor stuck in “Analysis paralysis?
New year, new challenges is our focus for our Question of The Week!
We've all been there, excited about a new adventure, but scared to take the plunge. With the new year, lots of people are looking at starting their real estate journey, but they are trapped by "analysis paralysis". It makes sense. Not feeling like you know enough, imposter syndrome, or the potential financial risk all come into play. Let's help out our newbies or even those who are "leveling up"! How did you get over the analysis hurdle? Did you find out more that you wish you would have known? Did the move work out, or were you able to change your approach to make it successful? Let's show some encouragement that getting started can be scary, but worth the journey!
I just broke out of that phase in November! I now have 5 properties in process—4 flips and 1 triplex BRRRR.
Although I educated like crazy and was building the connections necessary to start, I didn’t “go” for a long time. My catalyst was finally connecting with a couple others who were also looking to get started. We have been able to motivate each other, share each of our own knowledge and expertise, and pool our money.
Everyone will need their own catalyst. I hope this idea may help some people take that next step!
I'm just getting going, but things that keep me taking smaller steps are 1) BP podcast 2) friends who are in real estate and 3) goals, and 4) the impending sense of our life savings shrinking into nothing because of inflation. 2022 is my year to take action!
@Brad Jacobson thank you for your input. I would love to chat with you about the 1% rule. My biggest obstacle and paralysis is exactly that.
I always think less is more! Showing facts, numbers and data and then letting them pass up a deal but updating them on what happened on the deal they passed up. Once they see how much money they left on the table on a few prior deals that they passed on it may motivate them to jump in and trust your guidance.
Thanks for posting this excellent question. One book that offers some great techniques for overcoming analysis paralysis and making better decisions when the stakes are high is How to Decide by Annie Duke. I'm preparing to make an offer on a rental property in the next few months and am doing a lot of research. I am trying to weave in the framework and tools that the author presented for the purpose of limiting bias and to make sure I am including known and unknown risks in my decision-making. She wrote another book, Thinking in Bets, that is also very useful. For those that are familiar with the concepts Annie Duke describes and would be interested in forming an accountability group (or truth seeking group, as she calls it), please PM me.
I'll be honest.I am yet to buy my first property but i probably appreciate capital formation from saving from the household budget seeing it go towards down payments etc.i know also understand a little better :private money lending, syndication of a deal over and above wholesaling, lease options etc and other creative finance options.
One successful real estate investor said "Adversity is a necessary panacrea of success." Technically i am a newbie, but i have a bit of experience with cold calling large numbers to get appointments from my network marketing days
PARALYSIS BY ANALYSIS??
...i think so....i know some people with less books read and less podcasts listened to, who just went for it, probably with an actual mentor to guide them??
Education by reading books and listening to podcasts is necessary....the market keeps changing hence we need to stay up to date on trends, data so that we adjust where necessary....but action is crucial too...making offers...seeking new private capital sources, motivated sellers, cash buyers etc
Tell them stories of regret... Tell them I wish I had done "X" and why... what was learned in retrospect... But only after you have learned them. What is their greatest fear, hurdle, and limitation. Breach each within your delivery. Talk to the due diligence, teaming, deal structure, how to measure the value of the home or its highest and best use you will take it to... defeat every objection. But start the process with. I am a fiduciary I represent your best interests (if you are their agent). If you don't buy this deal do you mind if me or one of my friends do?
@Bronson Simmons my issue starting out was I messed up the scope of my income centers as well as thinking too small. I just wanted to be a millionaire by the time I retired from the military. I was thinking about just the rental income from the homes. When in reality the journey is the homes, the homes cross collateralized for the apartment buildings (or 1031'd), then you selling your expertise for a piece of larger projects with no cash in the game, then your training and education monies as you help people get up to speed. The gratification from launching people to the moon. My first mentoree just sent me a thank you text. He had bought himself a jet as well as 36 million in real estate in Nov - Dec 2021. Every year or so he reaches out and does that... His net worth is well over 100 million now. Think big. With the digital world we live in it is easier than you think. Follow me for more tips.
Originally posted by @Brad Jacobson:Great question @Alicia Marks! I have two immediate thoughts:
1. Most new investors have an amazing opportunity to get into the real estate game by house-hacking. The best part of house-hacking is that any deal is better than no deal. If you're able to divide your housing costs at all, it's better than not doing it 100% of the time. Even if you can't find your perfect house-hack, buy one ASAP and start building that equity and savings rate.
2. In my local market (UT), analysis tools like the "1% rule" are impossible to achieve. Nevertheless, I continued to buy properties that didn't meet the standard criteria and found that all I had to do was invest from a position of strength (with good reserves) and sit on the properties for a year or two before they became incredible investments. Properties I bought prior have up to $800/door more cashflow now than when I bought them. They weren't money makers at first but have turned into the best financial decisions I've ever made.
In other words, don't wait to buy real estate, buy real estate and wait!
Good luck to all!
New investor here - could you explain how a property that doesn't meet the criteria becomes an incredible investment in just one year? How is that possible? Are you referring to the inflation-related increase in property prices?
Quote from @Nathan Crooker:
Hi all, super newbie here! Thanks for sharing your stories. I was curious what the best way to do an analysis is to get the most accurate results. Thanks! NC
Hi Nathan! I would say to use the online calculators we have here. Run lots of deals to get practice, even ones you'd never make an offer on just to see in writing exactly why it isn't a good deal.
Second I would say to confirm your numbers with a local expert. You can find one in local meetups, or even post your analysis to the forums and get feedback. There are lots of people willing to share their knowledge, and as you become more comfortable and find some success in building your portfolio you can pay it forward.
@Ockert Kruger sometimes conventional wisdom like a 40K house needs to bring in $400 a month in rent (1% rule). If the 40K house has been a single family home but it is a 3/1 near JOBS, bus line, and something touristy. Maybe one of the bedrooms has a private entrance and can be a suite unto itself. You lease our the home by the bedroom to contractors / workers and you AirBnB the suite you will surely get more than 400 a month in rent. In addition you get an immersive learning moment ... that immersion learning IS PURE GOLD. Once the creative mind captures the vision, the other hemisphere takes over to codify it into processes, checklists, and all of it comes together in a beautiful way as you walk, talk, and network differently constantly adding pieces and parts to your business model and expanding your base (people, awareness, biz models you gain ninja skills in, and more.....). Follow me for more tips... Trying to build the next generation of real estate investors that are thinking outside the box...
@Alicia Marks
For me I knew I wanted to be a landlord, I had the knowledge and all that was left to do was figure it out on the way. I think a lot of people don’t start because they’re afraid they’ll fail. I was fortunate to buy my first deal at a young age so I’m able to take risks and still bounce back. Every situation is different so I would say once you have that initial knowledge about how the business works, just pull the trigger. You might fail at little things along the way but most likely you won’t fail by losing your property.
I'm still analyzing...and saving up for my first deal
Take action. That is the best way to get over analysis paralysis and fear. They don't need to be huge action steps, but small, simple movements ahead will eventually build enough momentum to take larger steps.
Great information and as I continue to navigate through real estate investing, I look forward to learning and applying from all of your pointers. Prayfully, I will be positioned to help others move through this process.
@Brad Jacobson I hear a ton on the podcasts about putting offers in on 100 properties and actually buying 1. Making offers that are "laughable". Would you say this type of mentality is too limiting for a beginner? I do have concerns about the current market and the amount of people making offers well over asking (probably more so on single family properties). I am a bit intimidated by thought of finding a property and having an offer accepted when I have what a good deal is in mind rather than being emotionally invested in getting the property. This brings me to the thought of needing to find off market deals, which adds additional complexities and requires even more connections. Do you have advice on finding that first property and getting a good deal with limited connections starting off? I have started networking with investors I know personally and have also started the search for an investor friendly realtor.
Finding a good agent and mentor who can help you and assure you that your first deal is going to work is the best way to get through analysis paralysis. I probably walked 20-30 properties before I bought my first deal because I was convinced I could not make it work. Some of those deals were great deals! It is truly just taking action and putting one foot in front of another. Listen to your agent (as long as they have your best interests in mind) and your mentor. They will guide you through everything.
I definitely suffer from analysis paralysis. I am hoping, though, that getting my real estate agent's license will help mitigate some of it, because I really want to enter the world of REI, and after spending so many months learning about it, I believe in it. I believe everything experienced investors say to be true about REI. I have to say, though, something that helps me when I start to freak out is simply talking to someone else. My significant other, or my mom. I don't really have anyone in my life that is a real estate investor (that I know of), so I am trying to start opening up to more people about this new passion, because I realize I will never complete my first deal if the only people I share knowledge with are the voices in my head! Lol.
@Scott Winter That's a great way to put it! "Everyone will need their own catalyst." I think I am still looking for mine; wouldn't it be great if it was easier to find local investors? I feel like there's none in my area. How did you finally connect with people looking to get started as well?
"4) The impending sense of our life savings shrinking into nothing because of inflation." Funny but true! This motivates me as well.
@Joe Splitrock Thank you very much for that well written motivation!
These are always excellent threads to read through.
In case it hasn't already been mentioned, the price points for so many areas have now made "paralysis" a combination of fear, and downright inability to make deals work ( at least without HOPING for appreciation)
But if you hunt long enough and stick to numbers, it should work out. Of my 3 total properties, we overpaid for one, paid right at market value for the other, and got 50k undervalue for the 3rd. As others have mentioned, things to average out.
All I know, is when the year 2030 gets here, I will wish I had more homes. That's helping to motivate me.
Originally posted by @Victoria Imlach:@Brad Jacobson I hear a ton on the podcasts about putting offers in on 100 properties and actually buying 1. Making offers that are "laughable". Would you say this type of mentality is too limiting for a beginner? I do have concerns about the current market and the amount of people making offers well over asking (probably more so on single family properties). I am a bit intimidated by thought of finding a property and having an offer accepted when I have what a good deal is in mind rather than being emotionally invested in getting the property. This brings me to the thought of needing to find off market deals, which adds additional complexities and requires even more connections. Do you have advice on finding that first property and getting a good deal with limited connections starting off? I have started networking with investors I know personally and have also started the search for an investor friendly realtor.
Good questions.
You can never replace actual experience, and I only have a few years vs. 30+ years with other investors.
But yes there is low inventory out there and prices are high. It might depend on what your budget is / how much time and effort will you put into your first home.
Is there real estate or contractor experience in your family?
@James De Stefano my mom was a real estate agent growing up but just as a part time situation, otherwise no one in my family has experience with real estate or investing. I became friends with my landlord from college that I've started to connect with for advice.
"New investor" is a little too vague here. There are so many different ways to get money/experience in Real Estate.
What is your ideal outcome?
If you want to be a wholesaler, multifamily sydicator, agent, etc...there are many different road maps.
If you find yourself getting stuck, find someone to work with - so you do not have to do all of it.
OR
Get a coach/mentor. It will likely cost you money, but will save you a lot of time.
Either way, be prepared to add value. A potential mentee approached me once offering himself as "an amazing friend" in exchange for my time and expertise...it did not work.
When I suggested some ways he could potentially help me, by taking things off of my plate, he said he did not have time.
This might sound mean, but not everyone that WANTS to be in real estate is willing to do what it takes to be successful.
It is a lot easier to avoid failure if you never try.
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Real Estate Agent WASHINGTON (WA) (#95024)
- Sound Home Buyer
