Paralysis by Analysis


I was at a local real estate investment club meeting a few nights ago. Several of the active investors were comparing notes on various deals they were working on and issues with the transactions that they were working out. However the majority of the attendees were whining to each other about bad the market was. The conversations were about how it’s impossible to do a deal in this environment, there are no buyers, you can’t get financing, and so on down the line. These people were calling themselves investors but they couldn’t pull the trigger on a deal.

I discussed this with the meeting facilitator and asked him what he thought the problem was. A few minutes later he started the meeting and polled the attendees. He asked them if they had completed any deals in the last 30 days and a few of the active investors raised their hands. He then asked the same question for deals done in 60 or 90 days and again only a few active investors had done deals. He then asked how many of them had done deals at all and almost no one raised their hands.

Deals are everywhere and there seems to be a motivated seller under every rock. Foreclosures are at all-time highs in many areas and banks are taking back houses faster than they can get rid of them. REO departments are struggling to keep pace and are showing a willingness to deal. Lenders are looking at short sales to keep from having even more houses in their inventory. Baron Rothschild famously stated that the time to buy is when “the blood is running in the streets”, well a river of blood is flowing. So why can’t these people act?

It seems there is a fear of making a bad deal or having the market go down even further. They are out looking at property and analyzing everything to death but nothing is ever good enough. Everyone wants to buy at the absolute bottom but the truth is that by the time a bottom is recognized the market has already started moving up. When a department store has a big sale there are people lining up in the morning waiting for the doors to open, they’re not sitting at home waiting for prices to go lower.

It has been said that fear is nothing more than False Evidence Appearing Real. You can look at all of the statistics and conclude that this is a market to avoid, or you can realize that the buyer has more control than at any time in recent memory. When the markets were overheated and rising like mad people couldn’t get in fast enough, now that there are real bargains theses same people want nothing to do with them.

All investment has some degree of risk even something perceived as safe, such as CDs and money market funds, are subject to loss of purchasing power due to inflation. While risk can’t be avoided, it can be managed. You need to develop a plan, which defines what you are trying to do. Are you looking for rental properties? Rehabs? What is your exit strategy? How much can you invest? When you define these things you will have a better shot a recognizing a deal that works. Knowledge is the antidote to fear.

Pulling the Trigger
The hardest thing to do in any new venture is to get started. At some point you need to follow the advice of the Nike commercial: Just Do It! You need to decide if you are an investor or a talker. There are so many possibilities in this market, what are you waiting for?

I never worry about action, but only inaction.
Winston Churchill

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  1. Excellent observation. This is the perfect time to buy. Sellers are dying to get buyers to look at their homes and definitely want to negotiate. If you want to find a deal buy now. Yes, there is a chance that the market is going to be down for a little while but if you can afford to hold onto a home or even a few homes and then sell them when the market goes back up, I think you will be surprised the turn around that you are going to get.

  2. If you are new to the property market then do your homework before you decide to invest . Having a clear idea of what you are going to do when you find a property and how you are going to extricate yourself if and when things don’t go as planned is an important criteria for everyone.

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