"Paralysis by Analysis" Has a New Cousin... "The Rates Will Get Better"
Ahh, the quippy anecdote for new investors: "Paralysis by Analysis"
An investor finds a deal, they run the numbers, they run them again, they look at the comps, they build another spreadsheet, they talk themselves into it, than they talk themselves out of it, and eventually… they don't buy the property.
But I think there is a different version of this happening today, particularly among somewhat more seasoned investors.
I call it: “I'm waiting for rates to get better.” (The grass is greener)
And I understand the logic... to a certain extent
If you're sitting on equity (hello COVID-era rates), looking at a new project with today's interest rates, it's easy to think: “Why deploy the money today when I might be able to get a better rate for my equity six months from now?”
So you wait...
for rates to come down.
for the market to improve.
for financing to become more attractive.
But while you're waiting, you're watching deals come and go.
Here's the question I've been wrestling with:
At what point does waiting for better financing become more expensive than simply investing at today's financing costs?
I'm not suggesting investors should ignore interest rates or force a deal that doesn't work. Quite the opposite, the numbers still need to work.
But there is a difference between waiting for a better deal and waiting for the perfect environment.
I had a friend who used to say that you need to focus on hitting singles instead of trying to hit 'Home Runs' every time
There's also another piece that gets overlooked:
If rates fall significantly, you're not the only person who notices.
More buyers come off the sidelines.
Competition increases.
Property values move.
Sellers become less motivated.
And the deal you were waiting to buy at a lower borrowing cost could become a more expensive acquisition.
That's the part of the conversation I find fascinating.
You can be right about rates going down and still be wrong about waiting.
The goal is to identify opportunities where the fundamentals make sense today and where you have enough flexibility to improve your position tomorrow.
You can't improve a deal you never bought.
So I'm curious what everyone else is seeing, are you finding that investors are becoming overly cautious because they're waiting for rates to improve?