Is there a such thing as TOO conservative?

Question

Is there a such thing as TOO conservative when analyzing properties?

Rich Bultema · Answer

Yes, when it translates into no deals made. If you raise the bar high enough, no property will ever pass muster.

Kenneth Garrett · Answer

@Reginald A. Shelby II

It takes guts to invest.  What’s the most common question “Is this a good deal”.  It depends on the individual.  Some would say cash flow of a $100 is good while others would say $500.  Some pay cash while others use leverage.  Don’t rush into investing in a bad deal.  Study until your ready.  Trust your due diligence.  When I started I always got out bid.  Was I being to conservative maybe.  I made an adjustment on my numbers based on the market that I studied and analyzed.  So I wasn’t going to cash flow $650, but $400-$500 still made sense.   I survived my first BRRRR.  I didn’t have a heart attack or go broke.  At some point you have to take the plunge, but make sure it’s an educated plunge.

Joanne Eriaku · Answer

LOL, absolutely, yes, life always has extremes. In the case of investing, I'd say that's taking an extreme view on everything going oh so wrong, hence what @Stephanie Simmons has pointed about being too paralyzed(read conservative) to invest at all

Will Scherman · Answer

@Reginald A. Shelby II

If you trust your due diligence on a deal, are realistic with schedule and have answers for how to handle the worst case scenarios then there's really no reason to not try and move forward.  I think the key really is to make sure your estimations are conservative and based upon historical/present data. @Stephanie Simmons hit the nail on the head...as the old saying goes "scared money don't make money!"

David Martin · Answer

@Reginald A. Shelby II According to the thousands of references to this search term on BP... going to say yes.

https://www.biggerpockets.com/search?utf8=%E2%9C%93&term=%22analysis+paralysis%22

Stephanie Simmons · Answer

@Reginald A. Shelby II

Yes - but I do make decisions on the reasonably certain worst case scenario. Such things are - unseen repairs - vacancies - tenants that don’t pay. Then figure out how you are going to proactively protect your self (really good inspection, additional cash on hand, round up in repairs, get solid contractor quotes,strict tenant screens guidelines, treat tenants well so they want to stay, etc).

If you never invest - you will never get a return. Too conservative would be that...

Mary M. · Answer

What do you mean by "too conservative"?

Underwriting should use well known metrics using a best, average and worst case scenarios...

Also you can be conservative with debt and purchase with all cash.

So to answer I need more info :)

Kiera Underwood · Answer

@Reginald A. Shelby II of course! I feel like a big part of what I do is help people understand what's actually reasonable to factor for this market!

Corby Goade · Answer

By now, the answer is obviously yes. One of the challenges with new investors starting here on BP is that there is a ton of very loud chatter about what makes a "good" deal. You have to get a 1% deal or 12% CoC or an 8 cap. A new investor arbitrarily decides that those criteria are vital before they buy something....and they never buy anything because they can't find one of those deals.

We are in a sellers market- the great deals, if there are any, are sold off market to cash buyers before a newbie ever knows that it existed. There's a very high likelihood that your first deal won't be a grand slam, it'll probably be a single or a double- and that's fine. I don't think I've bought a grand slam deal in my life, but I'm doing just fine. It's about getting in the game, learning and being patient while your investments grow.

Don't be scared- find a decent deal and jump in!

Lesley Resnick · Answer

It is really easy to talk yourself out of a good property.  Double counting is a common mistake people make.

They renovate a property, then assume huge capital expenses, reserves, repairs and cost to turn the property with high vacancy.  The problem is none of these are real numbers, they are estimates and guesses.

I am more concerned with the numbers I know PITI and rent.  Does the property need renovation?

I can assure that no one has ever lost money by the end of paying off a 30 year note.  If you bought the house in 1990 and kept it rented, it was profitable.  The short term is anyones guess.

Is there a such thing as TOO conservative?

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