3 Reasons Aspiring Investors Never Land a First Deal

by | BiggerPockets.com

Recently, I wrote an article about junior investors who get a little ahead of themselves when they reach out to others about wanting to invest. They are missing some of the hallmarks of good investing: reading at least one investment book (and that’s a very light education at best), knowing their metrics, knowing their finances, talking to a lender, and having realistic expectations for their market.

Now it’s time to talk about some of the reasons investors are held back and don’t move forward when they should.

1. Being Too Particular with Metrics

With investors, we call it “metrics” and with house buyers, we call it “wishes”—but either way, you see people incapable of moving forward because of their quest for perfection. It’s important you feel comfortable with your numbers and that you like your home, but honestly, being overly picky on your metrics or wishes is a disservice only to you. Be smart, but don’t be ridiculous. And keep this in mind because I honestly believe it: The biggest deterrent to investing (and, possibly life) is letting fear hold you back from getting in the game at all. Get in the game! Ninety-five percent of the time you’ll be fine, and 100 percent of the time you’ll learn a ton.)

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Related: 20 Must-Have Team Members for Real Estate Investing Newbies

2. Being Afraid

I see people make poor financial decisions all the time based on their fear. (This is particularly true for leveraging a HELOC.) And I’m sympathetic because I also had those fears when we started. Buying any property requires a lot of money and a sustained commitment for at least a month or two. It can be hard for me to continue to make a big or hard decision for a sustained amount of time, even when the financials make a ton of sense.

Investing requires that sustained effort: You have to decide you want to make an investment, contact a lender, start to look, go to your inspection, get through your appraisal, and go through tons of tedious paperwork. And every step, you have to remain confident that it’s something you want to do and that it makes financial sense. There’s no two ways around it: Your first investment might be a mentally taxing and draining situation, but it’s absolutely worth it for the financial gains that open up to you.  

3. Being Female

The numbers don’t lie. And anecdotally, I know most I see in the BiggerPockets forums and at meet ups predominantly have Adam’s apples.

My own investing path mirrored this as well: James was ready and I was not. The risk seemed too high. Real estate investing seemed like something other people did. It felt like a very expensive hobby that could go wrong. And, honestly, every time we talk to an excited male investor, I want to know pretty quickly if they are married and if I can get their wife on the phone.

Related: The 7-Step Motivated Newbie’s Guide to Finding a High-Quality Mentor

Here’s why: Women make up to 85% of household purchasing decisions (I know this because my entire grad school thesis was about this). If it’s true that men are less averse to risk, it’s also true that a lot of the time, the bottom line comes down to their female companions.

Women can (and do) get on board with investing, but they have a higher threshold for making that decision. In other words, they like to be informed.

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Conclusion

I don’t know if anyone else feels this way, but I was never really educated to think about real estate as a vehicle for wealth. I was told it was dumb to spend money on rent and that growing up meant buying a place, but no one really talked to me about how leveraging real estate could lead to very fast financial gains. And I bet that’s true for a lot of people reading this and absolutely true for the majority of the public. If you want to learn more about this, please feel free to reach out to me. I love helping people understand investing and what to look for.

Anything you’d add to this list? What’s holding YOU back from that first investment?

Weigh in below!

About Author

Erin Spradlin

Erin Spradlin co-owns James Carlson Real Estate. She loves working with first-time homebuyers for their enthusiasm and excitement, and loves working with investors because she’s a fellow spreadsheet nerd. She and her husband own three properties in metro Denver and are currently in the process of acquiring a duplex in Colorado Springs. You can find Erin’s blogs here: https://www.biggerpockets.com/renewsblog/author/erinspradlin/ and her airbnb video series here: https://www.youtube.com/playlist?list=PLgSUZKLPRI9tK3Vd-qpH3Sk2Rh-_pIrNN.

5 Comments

  1. Rob Cook

    Erin, this is a hugely important topic which gets way too little air. It is kind of the 500-pound elephant in the room.

    I am launching a coaching business centered around this very issue, the impediments to actually getting started. Most of the focus in the forums and available information assumes that a person is already a real estate investor. When the reality (my guess anyway), is that the vast majority of Bigger Pockets readers are aspiring real estate entrepreneurs, NOT yet investors.

    I coined a phrase, Serial Skillers, to describe the situation which most “gurus” create and perpetuate. A condition in which beginner and aspiring real estate entrepreneurs are brainwashed into believing 1) that they need yet more education and courses before taking the leap and 2) they can somehow magically avoid risk if they just buy more training and courses before they actually buy an investment property. This can be a never-ending spiral of inaction for most people, systematically mislead into analysis paralysis.

    At some point, a fledgling must leave the nest. And an aspiring real estate investor must buy a property. And THEN, the real education begins. Less learning-More earning is the prescription for Serial Skillers.

  2. Cedric van Duyn

    Hey Erin,

    I was wondering if you wouldn’t mind amplifying your comment about fear in relation to HELOC’s… as I have been using a HELOC on my Primary Residence for Down Payments on Cash Flowing SFH’s. The handbrake is obvious… concern about being able to pay the HELOC back and ending up “over leveraged,” especially if there were to be vacancies.

    I now have 2 SFH’s in Kansas City, MO and the monthly Cash Flow is more than 3 times the HELOC repayment, but I still feel very cautious to go deeper in (my HELOC is ~50% used at this point).

    Any input would be helpful, thanks!!

    • Erin Spradlin

      Well, I think the fact that you’ve used your HELOC at all speaks to the fact that you are more comfortable with it than most. You’ve at least used some of that equity to leverage additional properties to make you more money, and it sounds like it’s working out.
      I try not to be flippant about this- but the bottom line is, if that second (or third or fourth) properties don’t work out and for some reason your primary is at risk, you can sell the investment that is tanking and get your HELOC back to where it needs to be.
      That said, I’m not advocating that you spend a certain portion of your HELOC. You have to do what’s comfortable for you; I just think that a lot of people could be further ahead with their investments if they felt comfortable utilizing their HELOC.

  3. Casey Culver

    I disagreed with the 3rd topic until I read your description…then I thought about my own wife…and I agree lol.

    Here’s my example…I had plenty of cash to start, and I wanted to buy multiple properties or perhaps a multi-family and leverage money that way. The lovely wife, however, was nervous, had never dealt with tenants, and just didn’t know if she wanted to do this or not. Therefore, she preferred using cash at auctions, in my area those get better deals and of course 100% equity means you can sell at any time.

    So we buy our first investment home…turns out it’s not that hard or stressful (I took care of almost everything), and once she saw that $1300 per month in rent coming in, she’s all in and wants more now, we’re on the same page looking for our next property or 2.

    As you described, one of the biggest road blocks to landing my first deal was the wife. The home boss, if you will 🙂

    • Erin Spradlin

      Haha. I’d like to steal the title of “Home Boss” but things might get weird if I just start referring to myself as that around the house. 🙂
      Sounds like you and your wife figured out how to move forward with investments. We did as well, and my husband is now, also, the best business partner I’ve ever had. I think that in both marriage and business, the key is knowing where you are strong/weak and then having complimentary skill sets. Anyway, that’s my take. Thanks for the note!

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