“You gain strength, courage and confidence by every experience in which you really stop to look fear in the face. […] You must do the thing you think you cannot do.” — Eleanor Roosevelt, You Learn by Living: Eleven Keys for a More Fulfilling Life
In reading through the BiggerPockets Forums, I’m often struck by how many people would love to get a start building their real estate portfolio — but something is holding them back.
I don’t have the funds.
I’m afraid of losing it all.
Who would want to partner with someone who doesn’t have experience?
If those thoughts sound familiar, know that any successful, experienced investor started where you are now. In order to help those of you who want to get that first deal under your belt but just can’t pull the trigger, I decided to ask our bloggers:
What specific fear or stumbling block held you back from jumping into that very first deal? What did you do to overcome it?
Let’s jump right in.
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One of the biggest struggles that many new investors have is in coming up with the money to purchase their first real estate properties. Well, BiggerPockets can help with that too. The Book on Investing in Real Estate with No (and Low) Money Down can give you the tools you need to get started in real estate, even if you don’t have tons of cash lying around.
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21 Reasons Newbies Struggle to Close Their First Deal (& How to Overcome Them!)
1. Pride (and the infamous fear of looking dumb)
“PRIDE! The fear of being wrong not just with the deal itself, but with calculating ARV and making sure I did not get ridiculed by savvy investors with tons of experience.
Solution: I networked with a lot of the major players in PHX and used them as sounding boards and presented to them all of my questions. This was done at real estate investor meet ups. This is why I am a strong advocate of birddogging and networking.”
2. Too naive to be afraid
“I wasn’t so afraid then ’cause I was young, stupid, and it just didn’t occur to me that I should be afraid. I became more afraid with every deal, as I learned all of the countless things that can and do go wrong.
This is why I don’t enjoy real estate — it’s dangerous as all hell! But:
What I did to overcome it? Well, the alternative is much worse, is it not?!
All of this is simple math, really. He who cannot overcome fear simply doesn’t need this bad enough.”
3. Fear of looking completely clueless
“The greatest fear I had was really just looking stupid and like I was either 1) trying to rip somebody off or 2) didn’t know what I was doing. As they say, if you’re not embarrassed by your first offer, you are offering too much. Well, it was hard to get that first offer to leave my lips.
But after time, you see the wildly varying answers different people give to the same question or request, and you start to realize real estate is a numbers game.”
4. “Fear, what’s that?”
“I did not have fear because when I started I was young and VP of the world. I watched all the flipping house TV shows and knew all the characters’ name by heart. That skill alone qualified me to have a PhD in real estate in my head.
So after completing that deal and losing $7,000 a piece (my partner and I), I was still young and stupid and did not gain the skill of fear yet. I did not gain fear until 26 years old, when I gave up my position of VP of the world.”
Related: How to Use a Fear of Failure to Empower Action (in 4 Simple Steps!)
5. Fear of the great unknown
“My fear was of the unknown — what if I lost all my money? What will happen in the worse case scenario? Being a numbers person, I basically had to use the numbers to prove my logic in making the investment decision (i.e. if rents decreased by 15% or vacancies increased by 25%, etc., would this deal still make sense for me?). Once I saw that the numbers made sense in ‘my’ worse case scenario, I felt a lot better about taking the plunge.”
6. Fear of going broke
“My biggest fear starting out was that I would run out of money because my first property was a train wreck. Did you ever see the movie The Money Pit? Fortunately for me, it ended up working out, and I fixed it over time. In fact, that was almost 30 years ago, and I’m still fixing the place today! But I’ve learned more than you could ever read in any book by doing it.”
7. “I sought guidance to mitigate fear”
“I’m with some of the others who’ve said: ‘Fear? What’s that?’
To be honest, I was fortunate that for my first deal, I had the guidance of my mom (who is also a licensed broker). I should have had more fear, maybe. But I didn’t know what I didn’t know, and since I was only 21 at the time, I was kind of used to that feeling of being the youngest and ‘dumbest’ in the room. House hacking seemed like a good idea at the time — and it turns out it was.”
8. “I let a lack of funds hold me back — at first”
“My initial stumbling block was the limiting belief that you have to have substantial capital to start in this industry. When making big decisions, I always keep the end in mind, which is I will someday no longer be in existence, so why not go for it (thought process to minimize fear)! How I made it through my limiting belief on my first acquisition was bringing a great deal to someone who did have substantial capital and partnering on the deal for equity.”
“I wouldn’t say I had fear going into my first deal. I’m analytical and as realistic as possible, so once I realized my first deal made sense via my financial models, I went for it.
I suppose what holds me back is simply the number of different routes one can take as a real estate investor and not knowing where I should focus my attention. Every day I run into new investors who are doing something completely different and unique. I attempt to overcome this by writing down each day how I’ve worked toward achieving each of my goals with a special emphasis on my most important goal — surviving tax season.”
10. A fear of jumping into the less-than-ideal deal
“Having the guts to jump in on my first deal even when it wasn’t ‘ideal.’ Nothing will ever be perfect — I realized this — but the opportunity to close my first deal was probably more complex and had more moving parts, so to speak, than most. But prior to this point, I had done all of the research and due diligence I possibly could have done; the only way to learn more was to dive in and to start getting my hands dirty.”
11. “I obsessed over ‘what-if’ scenarios”
“My first deal was a ‘house hack
‘ — my primary residence. I would say that what fear held me back was the ‘what ifs’ — What if my friends didn’t want to move to the house with me? What if the roof started to leak? What if the furnace broke?
For this deal, I ended up having to make a decision and choose a house. I moved forward, and yes, things did come up. What I found out through that experience is that I cannot predict all the potential issues that may arise. All I can do is collect data and make a decision based on that data. Challenges will arise, but I have learned to have faith in action and commitment to get me past these things.”
Related: How Top Entrepreneurs Overcome the Dreaded Fear of Failure
12. “I had no fear — and my first property almost cost me my life”
“To be honest, when I first started, I was too young and dumb to actually know what ‘fear’ is. I also made the big mistake of investing for quantity and for the purpose of being able to call myself a ‘real estate investor’ or ‘entrepreneur’ instead of focusing on how real estate could actually serve me. The first property I bought, rehabbed and later sold almost cost me my life, as I had a very bad car accident driving back home after seven full days of renovating the house myself. Those experience opened up my eyes to being more patient, investing with a better purpose, and hiring others to do the work.”
13. The fear of losing (your parents’) money
“My biggest fear when we bought our first real estate investment was losing my parents’ money. My parents loaned $30,000 to my then-fiance and I to close on our first investment, which was a duplex.
I moved through this fear by finding a contractor who had a ton of experience. Since we did not have any experience in renovating properties or real estate investing, we mitigated our risk by hiring a very seasoned contractor who also owned a ton of rental properties.”
14. “I don’t think fear is a bad thing — and I didn’t have enough of it”
“Unfortunately, my first deal was made when I was young and eager. If I could go back in time, I would instill a little more fear in that 27-year-old kid — and perhaps ask him to take a closer examination at the motives of the real estate agent who told him it was a ‘good deal’ or the loan officer who gave him a no-money-down loan on a $383,000 house.
Rather than rejecting fear, I think it’s more important to learn how to harness your fear and overcome it with education and wise judgment.”
15. “My first 12-unit apartment building was completely overwhelming”
“When I bought my first 12-unit apartment building, I was completely overwhelmed by the thought. But it was something I WANTED to get started with.
I had invested in my education, looked at about 100 deals, and felt like I was ready. Boy, how I was wrong. I missed my projections for the first years by a mile, but I bumbled through it. Now the property is stable, cash flowing, and about doubled in value.
Fear is always there, but its cause is different. In the beginning, it might be motivated more by the unknown, and later on, we are fearful because we know what could happen. The difference is how we handle fear. Do we let it paralyze us or do we figure out a way to take action nevertheless?”
16. “Life is too short to let fear stop you”
“I have to join the majority on this one. For me there were no fears early on because there was no true risk of failure in my inexperienced, naive mind.
As you see with the other blogger’s answers to this question, it takes that ‘I’ll make it happen no matter what’ spirit to get going sometimes. It is important to plan for as much as possible, but for a newbie investor, it takes real life experience to be successful. When planning and due diligence span over months and years, it becomes a huge cost of opportunity. Life is short but becomes even shorter if you are not doing what you want to be doing every single day of your life.”
17. Fear of botching the numbers
“I was afraid that I had somehow missed something in looking over my numbers — either because I had forgotten to ask for a very important piece of information or because I simply was too ignorant to know what to properly ask for.
How did I get over it? I looked at the numbers again and again, and for lack of a better explanation, simply said, ‘Screw it’ — and pulled the trigger. Thankfully, it worked out, I survived, and I still own the property to this day.”
18. Fear of being scammed
“Luckily, I had read a enough books (especially the Robert Kiyosaki books for this particular topic) to know that failure is almost a prerequisite to success.
But interestingly enough, despite that mentality, my biggest fear going into it was that I was getting completely scammed. But I mitigated that by drilling hard into the contract for the property. I showed up with the entire thing outlined in red with red-inked questions all over the place. Once I got those questions answered, and knowing that some big named investors were buying into the same project, I dove right in.”
Related: Entrepreneurship Forced Me to Face My Worst Fear (& Overcome It): Here’s How
19. “I didn’t see it as scary; I saw it as a challenge”
“I love challenges, so I’m a bad example for this, as I just jumped in and figured it out.
I head our local real estate club chapter, so I have seen a lot of newbies never gather the courage to do something.
So, I’ll have some fun and say this:
‘Knowledge is empowering,
but the bliss of ignorance
hides the option of failure.
The help of friends can get you by.'”
20. “Fear made me lose money — now I know better”
“It was during my second deal, the one where I was aware that I was making an investment in real estate, that my true fear popped up.
I advertised, received the lead, and had a buyer, and then completely froze. I overcame the fear by bringing in an experienced investor to do all of the talking for me. They negotiated the whole deal with me present from purchase to the sale and handled the paperwork and the closing. For that, I gave them 50% of the profit and learned a valuable lesson. All they had that I lacked on that deal was confidence — nothing more. I knew how to do everything they did; they simply had no fear, and I did!”
21. A fear of not being taken seriously
“I started investing right out of college, so my biggest fear was that I was too young and that no one would take me seriously. I had plenty of enthusiasm, a desire to learn, and I could hustle, but I had never even owned my own residence!
I compensated by studying my craft extremely hard. I also tried to dress nicely and make a good first impression on people. I asked for reference letters and testimonials from people who knew me well. I took pictures with each seller of a property at closing. I shared all of this information in a small credibility packet at the beginning of each appointment and on my website.
I think these steps made a positive impression on other people, but most importantly, they gave me the confidence I needed to make offers and successfully close deals.”
Investors: Weigh in!
- If you haven’t completed a deal yet, what’s holding you back? (Anything we can do to encourage you?)
- If you’re an experienced investor, what was that first deal like?
Leave your comments below — and let us know what you’d like covered next!