Suffering from Deal Paralysis for First Investment Property

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Suffering from Deal Paralysis for First Investment Property

Anna Marie Holland
New to Real Estate · Austin, TX · Member since 2021 · 6 posts · 7 votes

Hello!

I’m new to the investment world and have spent the last few months getting to know as much as I can about the current market and absorb as much information as I can find, but I had a few questions before I dip my feet in the water because the last thing I want to do is get locked up in a project that maybe I shouldn’t have. I am someone who prefers to be prepared as much as I can be and know as much as I can before jumping into anything- especially legally binding contracts.

My goal in real estate is to start with flips and eventually work my way into actually hanging onto some of those and turning them into Airbnb or rental properties/buy and holds. So my question to all the veterans is:

what did your first deal look like? How was that experience?

Did you use a private or hard money lender or both?

Did you put money down or did you use OPM?

Did you hang onto it and refinance through the bank?

If you flipped it, how was that process? Was it a light rehab that only took a few months, or a full gut that took most of a year?

I'm in the Austin TX area and I want to jump into this and I've really been doing everything I can to learn from people here, youtube, webinars, Facebook groups, and the local REIA(although I feel I don't learn much other than what bigdog has to offer), I'm just not sure how to get my feet to move and I'm hoping your stories will provide me with just a little more knowledge and inspiration to finally start making moves. Thank you!

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Zambricki Li
Real Estate Agent · Los Angeles CA + Lake Tahoe, NV and CA · Member since 2021 · 180 posts · 158 votes
5y

Keep in mind this is just your start. You don't need a dream situation. Make sure the numbers work, try and remain unemotional about the outcome. It's kind of hard to mess up real estate if you are serious about your numbers. Be creative- in what you buy- not just how you buy it. 

If it's not a hell yes, its a no. 

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  • Abbie Bejrowski
    Investor · Austin, TX · Member since 2021 · 18 posts · 20 votes
    5y

    Hi Anna, have you considered the BRRRR method for one of your first properties? Then you'd get the benefit of being able to pull most of your money back out while being able to hold the property and get the benefits of property ownership. I have one SFH and am closing on my first small multifamily this Thursday. I'm happy to chat with you about my experience so far. Also, I've met some great folks at the meetups. I've heard great things about InvestHER (for women REI) but have not yet been, and there is actually an in-person meet up tomorrow if you are interested. I am going to try to make it. Feel free to message me anytime, and I'm happy to look over any deal analysis you've done if you want a 2nd opinion on a property. -Abbie

    3Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    5y

    My first place was a condo I lived in and then I rented it out when I moved.  My own money for a down payment, bank mortgage and paid it off before selling about 20 years later.

    I've done rehabs-some were full kitchen and bathroom (took 2 months), others were painting and a bit of repairs (few weeks).

    0Reply
  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    5y

    The easiest thing to do in Austin is househack!

    [email protected]512-888-9122
    The Moorhead Team5140 Reviews
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    0Reply
  • Joseph Wright
    Member since 2021 · 2 posts · 0 votes
    5y

    Can you explain "did you use OPM?" 

    Also, good luck!

    0Reply
  • Zambricki Li
    Real Estate Agent · Los Angeles CA + Lake Tahoe, NV and CA · Member since 2021 · 180 posts · 158 votes
    5y

    Keep in mind this is just your start. You don't need a dream situation. Make sure the numbers work, try and remain unemotional about the outcome. It's kind of hard to mess up real estate if you are serious about your numbers. Be creative- in what you buy- not just how you buy it. 

    If it's not a hell yes, its a no. 

    3Reply
  • Michael K GallagherBusiness Member
    Real Estate Agent · Columbus OH · Member since 2018 · 1k+ posts · 1k+ votes
    5y

    @Anna Marie Holland my first deal was a house hack, the duplex was already flipped prior to us purchasing it so we were able to use an FHA loan. Really made the initial jump very low risk and let us learn as we go from the management side of things. Can't recommend it enough as a first step!

    [email protected]614-362-2231
    2Reply
  • Ryan KellyBusiness Member
    Real Estate Broker · Austin, TX · Member since 2018 · 1k+ posts · 1k+ votes
    5y

    @Anna Marie Holland I recommend looking at flip and hold strategies, then using the BRRRR method to pull cash back out for your next project. You pay huge taxes on flips AND you don't own an asset at the end. Also, don't plan on owning AirBnB properties inside the Austin city limits. They are basically outlawing AirBnB on any non-primary-owned homes. As @Jordan Moorhead stated, if you are young and can live with roommates, house hacking is one of the easiest strategies to start building up cash for projects. Feel free to reach out to anyone on the forums to connect and bounce ideas off of. We're all here to help!

    [email protected]512-674-5478
    Ryan Kelly Group - Keller Williams5110 Reviews
    WebsiteView Page
    3Reply
  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    5y

    Just to clear some things up. I don't mean to come off as harsh but I would NEVER give a newbie my money (OPM) to invest. Also I do a lot of BRRR's. They work best when you have cash to buy the deal that can't be financed easily, rehab it with your cash and then refinance.

    Don't complicate this. Get a little uncomfortable for a while and househack. You only have to put 3-5% down! Don't have the money? Fix your finances and save up! Real estate is so much easier when you're in control of your finances and have a track record of doing deals. Every multi millionaire I know who got that way through real estate is frugal, did what they needed to do and got uncomfortable and showed people they could get the job done before they started asking for other peoples money. Rule #1 don't lose money, rule #2 see rule #1.

    @Joseph Wright OPM is other peoples money. 

    [email protected]512-888-9122
    The Moorhead Team5140 Reviews
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    2Reply
  • Robert TinkerPro Member
    Rental Property Investor · Round Rock, TX · Member since 2019 · 246 posts · 159 votes
    5y

    1st deal was an off-market Brrrr in Killeen. Used a little of my money and a hard money loan. Flooring, paint, and bathroom remodels. A few months, refinanced and rented out. Paid off hard money and left some of my cash in. Not a home run but a base hit. 2nd deal couple of months later was a condo in Corpus Christi, paint, new appliances and furniture and now doing STR Airbnb, VRBO. The first deal gave us the confidence to do the second. Gotta start somewhere. Start where your finances will allow. Run the numbers. Jump in.

    3Reply
  • Anna Marie Holland
    OP
    New to Real Estate · Austin, TX · Member since 2021 · 6 posts · 7 votes
    5y

    Thank you everyone so much for all of the advice!! I haven't owned a homestead so I can definitely still use an FHA with the 3-5% down. I think Texas also offers some sort of first time home buyers down payment assistance as well meaning I would have that little bit of extra help. I don't have a portfolio to show lenders so I can definitely agree with you all that I'm likely going to be seen as a risky investment on their part. I like the idea of house hacking. I currently rent out two of my rooms in my 4b home to roommates so maybe (if I can find one) a duplex or multiplex using an fha will be the way to go to start getting some experience.

    Thanks again everyone! 

    0Reply
  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    5y

    There is a lot of information in real estate. If you want to start by flipping, I suggest you focus all your attention on flips. Join meet up and network with someone that had done flips, or you can also partner up with someone. It will allow you to make fewer mistakes along the way. Good luck with everything, and most importantly, TAKE ACTION!!!

    [email protected]832-776-9582Podcast Guest on Show #469
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    0Reply
  • Stephen Brown
    Real Estate Broker · Huntsville, AL · Member since 2019 · 1k+ posts · 872 votes
    5y

    Remember that everyone's story in real estate is different. I was lucky enough to have a private money lender, my father, to help me purchase a property. Before getting overwhelmed, calm down, and realize that everyone has different stories. Do what you can, where you are, with what you have. Before you flip, ask yourself if you really have the time and energy for it and is it something you'll actually like doing. Try to find other investors to help you too.

    1Reply
  • Aaron Gordy
    Real Estate Broker · Austin, TX · Member since 2012 · 1k+ posts · 1k+ votes
    5y

    1st deal was a duplex owner occupy 0% down va loan in Austin while in school decades ago. Grand slam of a deal. 

    0Reply
  • Eric Gerakos
    Investor · Costa Mesa, CA · Member since 2016 · 1k+ posts · 1k+ votes
    5y

    Best of luck. I would advise against starting out trying to flip as it requires experience in a few areas. A buy and hold rental is a typical starting point.

    1Reply
  • Ryan KellyBusiness Member
    Real Estate Broker · Austin, TX · Member since 2018 · 1k+ posts · 1k+ votes
    5y

    @Anna Marie Holland househacking a duplex is a great option, especially in more expensive markets like Austin. I have several clients taking this route. A larger single-family home can work as well with 4+ bedrooms and ideally a few living areas. These can then be converted to rent-by-the-room properties once you move out. Either one can help you lower your personal housing expenses, which is the first step to accelerating your wealth.

    [email protected]512-674-5478
    Ryan Kelly Group - Keller Williams5110 Reviews
    WebsiteView Page
    2Reply
  • Craig McLaughlin
    Rental Property Investor · Robins, IA · Member since 2015 · 45 posts · 18 votes
    5y

    @Anna Marie Holland

    I was very much in the same boat as you. Trying to learn as much as possible to make the safest decision possible. Finally I just went for it. Found an almost gut job. I got bids for the foundation fix and tree removals. The other stuff to fix can mostly be priced at Lowes. Purchased for 75k. I had a budget of 25k and 3 months with an arv of 125k. Seems like all my planning meant absolutely nothing. I ended up spending 35k on rehab and it took 9 months. I did a lot of the work myself and learned a ton. Even if I would have lost money the education was better than any 4 year degree in my opinion. Got it rented for 1200/mo and appraised for 147k. Refinanced back out 105k. So the end result is out of pocket 5k, lost 9 months of watching crap on tv, and am cash flowing 450/mo with 40k if built in equity. All that to say, you’ll never be completely comfortable. Just learn what you can and ask questions when you need to. Go for it. Good luck.

    1Reply
  • Lindsey BuxtonPro Member
    Denver, CO · Member since 2020 · 110 posts · 97 votes
    5y

    Hi Anna Marie! There's a lot to take in when getting started! Wanted to share that BiggerPockets is launching a pro-exclusive 12 week Rookie Bootcamp in late August, with Ashley Kehr leading the way. It's a mix of on demand videos, live Q&A sessions, and a step-by-step curriculum to help you get your next deal. Sharing in case it would be helpful to get the wheels turning and potentially shortcut the learning curve! You can learn more here.

    [email protected]
    BiggerPockets
    0Reply
  • Account Closed
    Real Estate Agent · San Antonio, TX · Member since 2016 · 67 posts · 58 votes
    5y

    @Anna Marie Holland

    From what you're mentioning, my advice would be that you may want to rethink your first purchase/investment being a flip or BRRRR. Those strategies are great in concept. However, not only are they advanced, the cost of materials currently has made those a bit more of a challenge to pull off. Not saying it can't be done, but again, for a first purchase it's not where I'd focus personally. For example, I have a client that wanted to add a new building (casita) unit bc her property is zoned for it. The cost difference between another client doing this exact same strategy just last year vs the subject client's bid was nearly $45k.

    My first purchase was a 4-plex + househack as an owner/occupant @ 5% down payment. I purchased in a growing neighborhood and added value over time: extra AC units, ceiling fans, area rugs, gutters, flowerbeds, a secure package delivery system, etc. This would be the sort of purchase that I'd suggest you look into vs. a major rehab/flip, etc. 

    Read, listen to podcasts, run rental comps in neighborhoods you're targeting and get a good investor-friendly agent that can help you. Rest assured - analysis paralysis is common! Best advice I can give is to learn to be comfortable not being completely comfortable. Trust in your decision-making prowess bc at the end of the day that's all any of us have. 

    Best of luck!

     

    0Reply
  • Jim KalishPro Member
    Real Estate Investor · Matthews, NC · Member since 2017 · 219 posts · 173 votes
    5y

    @Anna Marie Holland Its really great hearing from someone who is putting in the effort to educated and being prepared. Kudos! As for my first deal, I wasn't any of those things. My son and his friend were dabbling in real estate by being bird dogs for a couple of other investors. But the ran across this duplex in a neighborhood that the other guys didn't want. It was all boarded up and needed a lot of cosmetic work. But it was solid. So I just got a cash advance on a credit card and bought it. That was in 08. I paid something like 25 for it. Its now worth about 200k and brings in $1,800/month. And we paid it off already so its once of our cash cows. Then the place next door to that, also boarded up, was the next deal. We tracked down the owner and made a low ball offer. This one we used hard money. 16% and 3 points. Hey, what did I know. We fixed it up, rented it and refied it. We were doing BRRRR without knowing it. so we basically stumbled into 5 houses just before the crash in 08. But we had bought them in neighborhoods that other investors weren't going into. We figured everyone needs a decent place to live and if we could buy an eyesore and fix it up, it would help the entire neighborhood. In those days we judged how tough a neighborhood it was by the caliber of the ammo we found in the floor boards. But even in these areas where other investors wouldn't go, we found great neighbors and great tenants. Those 5 homes, with 9 doors, now have about 1 mil in equity.

    So with all that said look into buying and holding. BP has some great books on the entire process. There are books on how to find deals, on how to calculate rehab costs, on the BRRRR method. But regardless of your exit strategy just be sure to run the numbers and don't chase any deals. Use the BP calculators and stick to them. So if you have to use hard money or private money just role that into the holding costs. If the numbers work it really doesn't matter where the money comes from. The old saying, you make your money when you buy, is the golden rule. Know what you make on a deal before making an offer.

    Best of luck.  Let us know about your first deal.  I'm sure it will be a huge success. 

    1Reply
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