The #1 Reason Newbies Never Land Their First Deal (That No One Talks About!)

by | BiggerPockets.com

I want to be frank with this article. It’s written to a very specific type of member on BP. We all started off like them, but some of us have grown past it. It bothers me so many people haven’t yet, and I’d like to address one of the main reasons why I think that is.

I’m referring to those who have been spending sizable amounts of time on BP and still haven’t bought your first property. If this is you, you know who you are. You are educated, you understand the process, you have the resources, and you know where to go to find the answers to the questions that will pop up. You are equipped for the journey, but you aren’t taking the plunge.

We have all heard the typical reasons why this is:

  • Analysis paralysis
  • Lack of mentors
  • Too hard to find a deal
  • Agents aren’t doing a good enough job
  • Interest rates are rising
  • Blah, blah, blah

I’d like to suggest there might be one reason that is bigger than all of these, and nobody is really talking about it.

Unreasonable expectations.

If you’re like the majority of BiggerPockets members, you’re getting a lot from this site. You check the blog weekly for new posts, you follow the webinars, you peruse the forums looking for new information or new questions. You read their books, engage with the community, and genuinely look for guidance. You’re doing everything you can to faithfully pursue this dream of financial freedom through real estate. You really believe it can happen. You know what to do, but you’re not doing it.

Why is that?

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Emotion vs. Logic

Let me start by taking a minute to step back to describe a phenomenon that affects our decision-making process. The concept is very simple. When I became a real estate agent and began representing people buying residential property, I did what any other human would do. I took what I already knew and applied it to a new setting. I approached my clients with the same approach I would use in my own previous experience investing.

This usually meant I would work hard to find them a property we could buy under market value, explain how we could rehab it to bring it up to date, and show them all the money they would save. No brainer for us investors, right? Problem is, my clients would sit there and nod their heads, proclaim how “smart” I was, and then say they needed to think about it. Needing to think about it never resulted in an offer being written. After a time, this became frustrating, and I reached out for advice. An experienced agent helped solve my problem. He told me:

“Information makes people think. Emotion makes them act.”

My problem was I incorrectly assumed my clients would have been just as emotionally excited about a great deal or the vision to bring it together as I was. In fact, they were not. It wasn’t until I learned how to find what made them excited that I learned how to find properties that would spur them to act. In the end, it became incredibly simple. People move quickly when they find something they really want. They stop and think about things when you bring them something that makes sense.

Once I learned this, I started to see it everywhere. Pretty much any decision we make can be traced back to some form of emotion being attached to it.

BRRRR-strategy-deal

Related: 5 Harsh Realities About Real Estate Investing Every Newbie Should Know

There are times we know we should eat, but won’t until we feel hungry. The hunger is the emotion that springs us to action. Good luck keeping us away from finding food then.

We know we should get in shape, but it’s not until that attractive person has caught our eye that we feel really motivated to go to the gym and look our best. It’s much easier to step away from Netflix and hit the gym when we know that special someone is going to be asking for a picture soon.

We know we should do our best at work, but it’s not until we know our boss is watching and feel that fear of him seeing us shirking our responsibilities that we really buckle down.

If you really think about it, this applies to everything. And real estate is included in everything. We don’t get very serious about real estate until something changes our emotions, and they become tied to this process of RE investing. Everyone knows they should save money, right? Well, it’s usually not until they come up with a really exciting reason to use that money that they really started saving it. RE investing can often be that reason.

Buying the First One

If you’re on this site for any significant period of time, you have heard time and time again the experienced investors repeat the same advice: “Just get out and buy your first property.” I hear this on almost every podcast and in tons of articles directed to newbies. While many of you will probably acknowledge this, your fears associated with failing often are greater than your excitement about succeeding. This imbalance prevents you from buying your first place but keeps you coming back for more information. You are emotionally interested enough to fill yourself with information (which makes you think), but not enough to take a risk and buy a property (that action).

Here’s what you can’t see from the side of the rift you, as a newbie, are on. Once you buy your first place, all the “what-ifs” that could go wrong suddenly become a lot less scary. Your subconscious telling you, “You could lose everything, you don’t know enough, you don’t have enough support, you’ll look like a fool,” etc. slowly dies away as you realize not very much really went wrong. As the process becomes real, you see that most of your fears weren’t based on reality. Your imagination was much scarier than this whole landlord thing, and now that you are based with your feet firmly planted in reality, those fears evaporating as the platform they were once based on disintegrates.

The second property comes much easier. The third even more so. By the fourth, you barely feel any nerves at all.

The benefit comes when your excitement at the thought of a new deal is significantly larger than your fear about what could go wrong. It is at this point that your emotions are now tied to the prospects of what could go right rather than to the fear of the unknown that could go wrong. Now your emotions are working to actually help you make progress as opposed to working against you to stifle it. Your excitement spurs you forward while your fears have less power to hold you back.

The investors who seem to be crushing it, who are hitting home runs and seem to string deal after deal together — they are doing this because it excites them. They like this stuff! It is fun, energizing, and addicting to take shots and connect. These investors have all the same fears you do, but they have learned to keep these fears in context. They know things can go wrong, and they have contingencies in place for when they do. This prevents their fears from paralyzing them, but also assists them in making sure they have plans in place for when things don’t go well. This is a healthy way to approach real estate. With each deal, it becomes more exciting and less scary.

Now, what I want to say is, you shouldn’t expect to be in that place on your first deal.

succeed-vs-fail

Starting Any New Journey

Any time you start something new, it is usually really scary and not very fun. Haven’t been to the gym in awhile? I’ve got news for you — you won’t leave feeling buff. You will just leave feeling tired and will wake up super sore the next morning. The process sucks, bad. However, if you consistently keep going, it gets easier and easier until at a certain point, you don’t really hate it, and you actually start to crave it.

I remember when I first got to the point that it didn’t burn the whole time — when working out stopped hurting. It felt like I just lifted until my arms didn’t have anything left to give, and then I was done. Working out didn’t seem so miserable at that point, and it actually became kind of enjoyable. Think that might have had something to do with me wanting to be at the gym more?

The same was true for every job I’ve ever had. The first day is terrible. You don’t know where they keep things. You don’t know who’s gonna be nice to you. You don’t know how to use the software, when you’re allowed to take breaks, if it’s OK to check your phone. It’s nerve wracking and miserable. All of us have been there.

Related: 5 Steps That Took Me From Scared Newbie to Accomplished Investor

But let me ask you, did it stay that way? No way! If anyone’s job was as miserable several years in as it was that first day, they would have quit. Nobody can bear that anxiety forever. It would be overwhelming. We were made to feel that anxiety in the beginning because it keeps us honest. It prevents us from cutting corners and helps establish the habits we will keep with us throughout our time there.

It was like this when I was first a trainee with the police department. In the beginning, pure fear. I didn’t want to even get out of bed. With each day, it got more comfortable, and I hated it a little less. Eventually, I stopped hating it. Then I started to like it. Then, when I got good at it, I really liked it.

Everything works like this! Pretty much every job, sport, task, role, responsibility, anything I’ve done has been somewhat miserable in the beginning, then got better. If I thought it would always be that bad, I would never, ever start anything new. Sometimes, the only relief I had that helped me not to quit was the understanding the next day would be better.

If I had started the journey expecting to be as confident, carefree, and excited on day one as I was on day 300, I would have been sorely disappointed. Truthfully, I probably wouldn’t have started.

So What’s This Got To Do With Me?

Well I’m glad you asked. What concerns me is I hear many people who haven’t even bought their first property complaining that they aren’t finding home-run deals. The expectations for their first deal are grossly out of wack. Now, I’m not saying you should buy a “bad” deal just to buy something. Not at all. There are standards and terms that should be met, and you should stick to them. What I am saying is that maybe your definition of a good deal shouldn’t be the same as Brian Burke’s, or Ben Leybovich’s, or Brandon Turner’s.

The more experienced investors have resources working for them that you don’t. They have helpful, experienced, great contractors. They have networking connections to bring them hot, awesome deals. They have acquisition employees. They have top notch, experienced and connected real estate agents. Years of time in this business, and more importantly, multiple deals in this business, have left with them advantages you don’t have. They have helped make other people money. In turn, these people help make them money.

If you are new, this isn’t you. If you’re defining a good deal, or success by any other measure, in the same terms as these guys, you have wildly inappropriate expectations. I myself often buy properties I can purchase, rehab, then refinance and recover more than 100 percent of the capital I put in. I can do this for several reasons. My contractor is better than most, I can make all-cash offers, I have a better lender than most, my agents are better than yours, and I have a reputation that if I say I will close, I will close.

As a new investor, you don’t have that. That’s OK! You don’t need to. In time, if you stay committed to this, you will. But in the meantime, you shouldn’t be using my investment criteria for your goals. It’s OK if you aren’t getting the same deals as me. You don’t have my resources. When I first got started, I didn’t hit these goals either. It wasn’t until I did this for several years and slowly got better and better, that I was able to achieve this. Had I expected to do this well on my first house, I still wouldn’t have that first house.

What I’m trying to say here is that you may be passing up on several good deals because they aren’t as good as the deals you hear other people getting. When you read about the success stories on here, don’t get fooled into thinking this happens all the time. Success stories are important in the sense they encourage us all to keep going. They are not, however, good indicators of what to expect each time — especially on your first deal.

Expecting to nail a super deal on your very first buy is akin to expecting to perform just as well on your first day on the job as the company’s top employee. No reasonable person expects that. All of us know we need to give ourselves room to grow and freedom to make mistakes. Why is it that when it comes to RE investing we seem to lose this context?

Analysis paralysis happens when it becomes more enticing to think about a property than to act on buying one. This is the classic example of those who find comfort in the logic that makes people think as opposed to the emotion that makes them act. If you haven’t bought your first property yet, your emotions likely aren’t in line with the things that make investing easier. When you buy that first one, this all starts to change. This is why you keep hearing everyone tell you that you have to actually buy your first property! It’s like telling someone they need to show up for work on the first day. The worst is when you sit at home imagining everything that could go wrong. Once you’re there and see what the job actually entails, it all gets easier from there.

Give Yourself Permission to Make Mistakes

It’s OK if you make mistakes when you’re new at your job. It’s OK if you make mistakes on your first property. It’s OK if you have to go through several property managers, several contractors, several lenders, and several other vendors before you find the one that’s right for you. This doesn’t mean you failed. We all do this! In fact, it’s really only once you find a really good support crew that the opportunity to take on new projects starts to form.

Brandon Turner refers to this process like a construction worker getting more tools for his belt. In the beginning, all he has is a hammer. This means he can’t do anything but look for nails. Once he acquires a screwdriver, he has a new tool in his belt and can new look for screws. When he gets a saw, he can do even more. As he acquires more and more tools, his opportunities to do more jobs increase. With a whole truck full of tools, he has the confidence to take on any project.

This is a great analogy. The construction worker who eventually has all the tools is able to get the most projects. As he takes on more and more projects, his reputation begins to spread, and people start coming to him! The better his reputation, the more he can charge, and the better he will do.

It would be foolish to look at the construction guy with the truck full of every tool imaginable and expect to make the same as him when you just have your hammer and some work boots, right?

Don’t think that your first project needs to be building a skyscraper. It’s OK if you’re first one is closer to using your hammer to build a fence. Do your best job building that fence and watch what happens. You’ll meet other people when you’re building the fence that will help you. When others on BP hear about the fence you built, they will ask you to help build theirs. At some point, someone will ask you how to build a fence so well, and you can trade showing them for them showing you how to lay tile.

This is how the whole process works, but so many people never take those first steps to put themselves in a situation to succeed.

If your goal is to invest $20k into a cash flowing property within 30 minutes of where you live, start looking at all the options that meet that criteria, then buy the best one. If nothing around you cash flows, change your criteria and look somewhere else. If you won’t do that, consider flipping instead.

If you are that person who is always here on BP absorbing all the info there is, you are financially able to purchase an investment property, and you have decided to do so, you need to understand that no amount of knowledge you acquire is going to ease your fears. They don’t go away until you act on them. In this case, acting on them means buying your first place.

If you’re putting stress on yourself by looking for super great, brag-worthy deals, you may not be doing yourself any favors. Let me tell you something, friends — real estate is a get-rich-slow game. You could have way overpaid for something in 1962, and nobody would ever know the difference by today. You wouldn’t be upset that you bought it. Given enough time (and assuming your property cash flows correctly), just about any investment starts to make sense. It is the ultimate safety net in this industry and should help ease a lot of your fears about getting started.

productive-2017

Related: The Top 10 Reasons Newbies Say They’re Stuck (Per the BiggerPockets Forums)

Stop asking yourself if the deals you are finding sound as good as the deals the big boys are getting. They are playing a different hand of cards than you. If you go to the gym for the first time, find the buffest dude there and try to match what he’s lifting, and you’re just going to hurt yourself. If you think the weight he lifts should be the same standard you set for yourself on your first day, you’ll get discouraged and never go back. This is the worst thing you can do if your goal is to get in shape!

It’s OK to adjust your expectations to a reasonable level. The real value in purchasing your first property is in what you will learn and how much easier it makes buying the next ones. There is a lot of bragging that goes on in this industry, trust me. People fudge numbers to make themselves look better. Nobody wants to be the one to broadcast their mistakes, but trust me, it happens. Brandon Turner lost money on his first big flip. Big whoop. What he learned during that experience made him able to make tons of money on the next ones. You think he regrets that now?

Unreasonable expectations are stopping a lot of new investors from getting started, and this is hurting them in the long run. If this is you, stop and take a good, hard look at if you are expecting too much and if this is leading to your paralysis in moving forward. Babies don’t come out of the womb running, and it’s OK if you start off at a crawl! As long as you keep learning, keep improving, and keep striving to be your best, you will start to find how the big dogs are getting such great deals.

Please keep in mind RE investing is just like anything else. Nobody does great when they start, and you may benefit from easing some of that pressure off yourself as well.

Newbies: What do you think is holding you back from that first deal? Do you agree with this assessment?

Let’s talk in the comments section below!

About Author

David Greene

David is a real estate investor/agent/author/entrepreneur/police officer in the CA SF Bay Area. David's goal is to achieve total financial independence through real estate and to help as many others do so as possible. When not hunting bad guys, he hunts deals and loves talking real estate. To learn more about David, visit his website where you can also sign into his free investor's newsletter and follow along as he walks you through his deals and shares his latest projects.

85 Comments

  1. John C.

    It took my wife and me years of talking and reading about it. After we got really serious and had enough capital, it still took us nearly a year to pull the trigger. Lol.

    Looking back, we could’ve picked a property with our eyes closed back in 2011 and still made out like bandits.

    That first one was absolutely horrifying. But yes, it got easier each time. All you have to do is take that first step. It’ll be alright, as long as the numbers work in your favor. It doesn’t have to be the perfect deal.

  2. Jerry W.

    David,
    Great article. Thanks for taking the time to write and help out some of the folks wanting to invest but who are sitting on the sidelines. I would have never bought a house if I had decided it had to hit the 2% rule talked about here on BP.

  3. Bill Roberts

    What exactly would we absolutely need to have, on paper, in order to be more comfortable when starting to look for a first deal? I’m thinking I find a deal, get the loan, and then get sideswiped by a bad contractor during rehab, or something to that effect. Or find a good deal but don’t get the loan. Or something legal comes up and I don’t have an attorney. Would you recommend having a list of 2 of everything? GC’s, if u go that route, agents, loaners, plumbers, electricians, attorneys, etc etc??? I’m usually never comfortable about going into something new without a plan A and a plan B, and I guess I’m wondering if having a list like this is going to do the mental trick for me? Thank you!

    • Peter Crisp

      I didn’t see a reply, so I’ll give you some ideas. I won’t say that you are wrong to have a Plan B – backup contractors, etc. But don’t let that stop you from pouncing when you see a good deal. I just bought a tax sale property over the holidays. My first bid, which I could sort-of finance, was too low – I delivered this by hand in a blizzard BTW. I wanted it. So, I called a Commercial Mortgage broker who lives clear across the country, got a verbal OK to go ahead on a revised offer in 15 minutes because she ran the same comps I did, and I just did my first commercial deal. Paperwork to follow. And I don’t have a Plan B. I’ll make it work. I’m talking a property located 2500 km from home, in a flood zone with Al wiring, a couple of foundation cracks, no furnace and possibly some mould. (don’t have the keys yet). And coordinating the repairs from this distance. Seriously out there and I would NOT do a first deal like this. But my vision is in 6 months or less I’ll pocket $50,000, have it rented to nice tenants, and be the hero on the street for fixing it up. Furnace already ordered (eBay – great deal!, I’ve sourced a garage I’m going to move from 2 hours drive away to the lot, and I know exactly how to fix the place. I’d invest locally, but I’m in BC Canada where not much generates positive cash-flow. The article is bang-on. My vision for the property, and my desire for retirement income for me, my wife and kids, swamps any fears I have.

    • David Greene

      Hey Bill,

      Yes, that could work, but my guess is you would just find something else to worry about to cause apprehension.

      Real estate isn’t precise. It’s sloppy. We plan for the worst and hope for the best. The problem is, if you expect a flawless execution, you usually will be disappointed. If you expect a terrible experience and just try to mitigate it, you’ll probably end up pretty happy. Your expectations determine your experience and if you don’t have a good experience, you won’t end up happy enough to keep learning and growing.

      Most of the issues you mentioned a good realtor can help you with. Message me if you’d like more info about that. In general, a big mistake newbies make is thinking they need to do everything on their own. They don’t. You’re much better off getting referrals from someone with experience.

  4. Kevin Tornes

    I appreciate the article. I’m a newbie who has yet to buy a property. It seems new fears pop up daily. That being said, articles like this help to curb some of the anxiety. I am trying to be mindful of all of the excuses and recognize them if they arise in my own mind as I try to find a good deal. Thanks again for the article.

    • David Greene

      Thanks Kevin,

      I notice things that deter other investors don’t deter me. A large reason is expectations. I have no determined that I don’t expect any property I buy to make me any money at all for at least one year. The first year, I assume all the cash flow generated will go towards recovering closing costs and paying for repairs that the tenant finds once everything has been done. It just always happens.

      If you budget this way, you won’t be upset when things go wrong, but you’ll be really happy when they go right. Real estate is messy man. Some houses go great and never have issues, others have unexpected problems, bad tenants, etc. We can’t control beforehand what could go wrong so why let it cause us to lose confidence in ourselves?

      If you’ve got your home inspected, done your research, and things STILL went wrong, that’s not necessarily a reflection on you. This idea that every deal needs to work out perfectly is just not healthy nor realistic. If you adjust your expectations and EXPECT things to go wrong, you’ll be much happier when they don’t! The more experienced investors I run into, the more I see them adopting this mindset.

    • Gary Hartung, Simi Valley, Ca.
      David Greene’s article was the best one I have read for new real estate investors. I just started reading BP, and attending local real estate club meetings. If I had the money to buy local properties I would follow this advice.

  5. Cosmo Iannopollo

    The biggest thing to have is discipline. If you commit to things like tenant screenings, budgets, etc, you will find that most of your fears will go unrealized. It’s the people who eschew their plans that end up getting locked into expensive mistakes.

  6. Jonathon White

    Good article. Yes, I overpaid on the second property I bought (in 2011) — but my wife was happy the 6 months we lived in the house. The real estate agent I used really did not do anything — except cost me $$$. Most frustrating was when I was considering to sell it one year later, with the market up 5%, he refused to even come to visit me muttering that the house wasn’t worth what we paid for it!

    But, I have learned a lot through this experience, now the market has risen and the house has a positive cash flow. And a lot of my idealism is gone! Renting well below market rate does not ensure long term tenants: Tenants (2 in fact) saved enough to put a down payment on their own house and moved out in one year!

    • David Greene

      Hey Jonathon,

      Sounds like you learned some lessons the hard way! But, if you bought in 2011, I’m guessing the house has appreciated enough to make it all worthwhile. Even with everything that went wrong, you still ended up a winner!

      This is the lesson I wish people would learn. There are no guarantees everything is going to go great. If there were, so many people would invest in RE that there would be no deals left, and we would all complain about that instead!

      I’m also sorry you had a bad agent. Unfortunately there are a lot out there. If you ever need or want a good one, message me and I’ll put you in touch with one. Bad agents create bad experiences, and we all lose.

  7. Yes, we have been wholesaling for five years and we do everything that you’ve suggested throughout these years however, I spend $8000. in Advertising and still am seeking a good deal in Colorado. If anyone as a new idea, please let us know. Thank you, [email protected] #720-222-4787
    Post cards, Realtors, bandit signs in a 250 mile radius, on shirts, on cars, at RE meetings, etc

  8. Erez Friedlander on

    David, thank you!
    One of the best and most motivating articles I have read and I have read a ton (I am one of the guys you wrote the article about). You have just brought me soooo mich closer to close on my first deal and it will happen.
    Thanks

  9. Dardi Fuller

    I am a newbie, and I can relate to this article. Not so much comparing to the big dogs but just the fear of making a financial mistake that could have long time effects. I know I just have to do it!! Thanks for the encouragement!

  10. Mark Hutchinson

    I loved this David!

    I think you really nailed down what most of us fear before buying our first investment property. No matter how good the deal may be, we can always manage to see the problems that might occur. Once we finally buy the first place, we find that things really aren’t all that bad. I’m currently working on buying my 3rd property, but the motivation this time is a job relocation. After running the numbers on my current home, it made sense to keep it and rent it out. I haven’t even put it up for rent yet and have had several parties inquire about it. The next place will be my own home, but I’m not afraid to get a fixer-upper and roll with it. There’s so much to learn, but it’s exhilarating when you tackle something new and succeed at it. (Even when it’s the 2nd or 3rd attempt at it!)

    Thank you for the great article!

    • David Greene

      That’s so great to hear Mark. What’s exciting for me to see is I can tell you don’t know yet how close you are to really turning a corner and going big. You’ll find that your confidence slowly grows with each of these and at a certain point you realize you can handle much more than you’ve been taking on.

      The value is in what we learn, and you’re learning a lot. Keep doing what you’re doing and sharing with the rest of us how it goes!

  11. Thank you so much for this. I actually hit a home run on my first deal (buy & hold) without having to do much of anything, and I’ve been trapped in this paralysis ever since because nothing I’ve found lived up to that first one. This was so helpful in approaching the situation from a different perspective.

    • David Greene

      That’s what I was hoping for Amy! I swear, no one ever told us we were entitled to hitting home runs every at bat but for some reason we can end up walking away expecting that and anything less feels like a failure.

      The irony is, the more at-bat’s we get, the better of a hitter we become. Refusing to take our swings because we might not hit a home run only hurts us and our success in the end.

      Very glad to hear this article helped!

  12. What if you don’t have the money and your paycheck after taxes at your full time job is less than $1000 every other week, and you have massive debt and your credit score is less than 500? Can you still get a halfway decent deal then? If so with what money? Btw, I’m a licensed Realtor, but currently can’t afford to practice real estate. Can’t afford the MRIS, or lockbox fees. Any suggestions???

    • David Greene

      Hey Jayla,

      It would take a lot of time to comfortable answer that question. The short answer is, yes, you can get a deal regardless of your personal situation, but you might not be in the best position to capitalize on it.

      If that’s the case with you, my advice would be to have a deep, honest conversation with yourself about why you aren’t making more money. For the vast majority of us, we are in some way getting in our own way. It can be lots of things-fear that we will fail, lack of confidence to put ourselves out there to try something new, lack of ambition to have more, etc.

      If you went through the process of passing the state test, you’re obviously driven and smart enough to succeed.

      What’s going on with you that would cause you to hold yourself back?

      Feel free to PM me if you’d like to talk more.

  13. I am new to BP but have been researching properties for about 8 years now. My biggest fear is finding contractors who will do the job right the first time. This article has called me out of the shadows, thanks!

  14. Courtney Sorrell

    David,
    If I could add, we definitely need permission to make mistakes, and also don’t beat yourself up over missed deals! I struggle with this sometimes- there are definitely houses I pass that make me cringe a little when I think of the sales price I passed on. 🙂

    • David Greene

      Oh yes! That’s because we are so scared to make a mistake or “pay too much” that we cut off our nose to spite our face.

      I wanted to write this to let people know that sometimes, having too high of expectations can actually hurt you.

  15. Dan Heuschele

    I am not a newbie but the article is valid for not newbies as well. I have passed up a lot of purchases waiting for better purchases. I know that I have limited money to invest in RE and was always looking for a better investment than I was finding. As a result it has been over 2 years since my last purchase. Prices have gone up and recently interest rates have risen. Looking back any of the properties I considered for purchase would have been great purchases.

    Very good article. Maybe it will embolden me to make a purchase early this year.

    • David Greene

      Thanks Dan,

      I feel you brother! We all so often forget that if you’re looking to get rich quick, real estate is the wrong place for you anyway. If you train yourself to evaluate deals over a 20-30 year time frame, it starts to look really silly to haggle or lose a deal over 5k!

  16. Michael Lee

    Not everybody has the physical ability to do that yet. I have learned that most sales are accomplished as emotional pitches that are givin and succeed through the Internet and people who are trying to get into real estate are the victims. I think emotion is the major problem with most people. Your article points out many excuses that people go through and never by their first deal. Too many of the successful people that are into real estate investing are brave enough to make things go their way. Bravery is one of the factors that should be explained and people have to realize that many of the investors have that bravery. People that are successful investors are braver than some and know how to deal with people that are looking. Some of them are just lucky and got in at the right time of the real estate cycle.

    • David Greene

      Hey Michael,

      One of the points I hoped to make in the article is that with each deal, as you become more and more comfortable, it becomes less and less scary and therefor less bravery is needed.

      The first deal is really scary, and takes a lot of courage. Once you’ve done it a few times it doesn’t take much courage at all and becomes a lot more comfortable. Investors aren’t necessarily super brave, they are just motivated by what could go right just as much as they are scared of what could go wrong.

    • David Greene

      and furthermore, I got into real estate and I definitely didn’t become a victim.

      Keep learning about it and you won’t feel the pressure to rely on the advice or trust of a smooth talking salesman. I bet that helps your confidence quite a bit.

  17. linda m.

    Not only is this true for newbies ,because I have two Properties and it’s 6 years since buying the last one, and I know I want another one but have yet to make the move,,, as far as, going for the financing,,making the offer,etc,, but I do plenty of reading and researching and visiting all the real estate sites ,,,but have yet to follow thru. Thanks for this article, need the boost

  18. Kevin Farris

    last year i stumbled on to Bigger Pockets #157 with Hal Elrod got motivated i Have been a BP member for almost a year now listen to almost every pod cast got demotivated after divorce just want to say thanks David for the artical it is just what i needed to read to move me forward

  19. Paul F

    Thanks for the encouragement! Looking in the Vancouver BC area and finding nothing that cash flows so am quite discouraged, but I can handle everything else. Should I just jump in with a bigger down payment, eg 30% to break even cash flow wise, learn from my first deal, then work on property number 2? I’m stuck looking at negative cash flowing property after another right now. Upping my down payment seems like my only option.

    • John C.

      30% just to break even is a hard pill to swallow. It’s the same here in NYC, where the good areas demand 50% down just to break even.

      If I were to buy like that, I’d be betting on appreciation only. That’s a tough game to play.

      If the real estate market only continues at a typical 3% growth from here on, I’d be bleeding cash for years to come.

    • John C.

      I don’t think David is pushing for newbies to buy properties that don’t make money.

      Don’t just buy a rental property to say you have rental property.

      If the numbers work out, you should just go for it. If they don’t, it makes no sense for anybody to buy, especially newbies.

    • David Greene

      Hey Paul,

      Thank you for sharing your situation. This problem gets brought up a lot.

      The issue is you are facing a brick wall and asking “Do I pound my head into it, or just sit back and do nothing?”

      The answer is, you look for a way around the brick wall.

      I have the exact same issue where I live. The solution is I started investing out of state. I’m writing a book about how I do that now. In the meantime, ask yourself why you wouldn’t want to do that. I’d dare you, or anyone else, to give me reasons why they can’t invest out of state. there are answers to every single objection.

      You don’t live in a good area to invest right now. Same as me. I would’t plant crops in an area that wasn’t going to grow them well. In the same way, I don’t buy rentals in areas with conditions like you’re describing.

  20. Tiara Stewart-Cannon

    There were so many amazing tidbits in this article! The biggest takeaway for me was “…you need to understand that no amount of knowledge you acquire is going to ease your fears.” If I’m completely honest and transparent, I’ve been procrastinating with the “justification” that I don’t know enough. Of course there’s so much left to learn (there’s always something new to learn), but taking the leap of purchasing the first property is definitely my next step in the learning and REI process. Thanks for such an honest article David!

    • David Greene

      Thank you very much Tiara, and props for successfully using “tidbit” in a comment. You currently hold the crown for best use of a word in a BP comment!

      The BEST way to handle your situation is to buy something small, and easy. Learn the fundamentals and get comfortable with them. I’m talking, low risk low reward type property.

      Like a boxer starts off with hand selected opponents so he doesn’t get hurt, or a little kid learns to ride a bike with training wheels first-lower your expectations and focus instead on building your confidence. There is no reason to think you need to do a huge flip on your first buy, or drop 250k into a project!

  21. james moore

    As real estate mogul and BP’s podcast 108 guest Grant Cardone said, “you need to starve the fear and feed the obsession and take massive action!” Check out Grant’s book The 10X Rule.

    David mentioned the great analogy from Brandon Turner about having tools as the construction worker. In reality and in order to save massively, you need to buy the tools and learn to become your own contractor on 70% of the reapairs. In doing so, your confidence as an RE investor will soar and change how you see a potential property.

    Most successful RE investors learn to have a contractor’s eye, where a rough dog looks much sweeter to them, because they can see and understand how to rehab the property when everyone else wants to walk away. Hoping and waiting for the cherries or low hanging fruit will likely keep you on the sidelines and in this business you got to be ready to take the plunge and go all in. Look at your first property as being the one to take on the learning curve and don’t be afraid to make a mistake but rather take it on as a opportunity to learn.

    Buying the property is only the first step. If you are afraid of doing that, then rehabing it is going to be a real grind. You just have to make the commitment as in the analogies David presented here. Everyone has to at some point exercise and build their RE investing muscle before its becomes easy.

    • David Greene

      These are really good points James.

      While not everyone has the skill set needed to manage a rehab, anyone can learn how to look at one.

      The very first time I spent 6 hours and 3 trips to Home Depot in order to change a doorknob I realized this was not a good use of my time…

      What is beneficial for people to understand is real estate isn’t any different than anything else in life. We don’t need to be experts in executing things in order to understand them. Do we hesitate in monday morning quarterbacking athletes?

      Do we need to know how to repair a car in order to let the mechanic fix it?

      Do we need to be expert chef’s in order to be a good waiter?

      The list goes on and on. We can all recognize skill and proficiency in others, and appreciate it, even if we can’t replicate it.

      I dont’ do ANYTHING in construction. I’m not a lender. I have never even one time managed my own property (except the very first time that was a complete disaster), etc. I don’t need to do any of these things. I just need to be able to tell if someone else can. That’s all it takes.

    • Marelyn Valdes

      I agree with the rough dog properties. What I look for is an ugly property with good bones – something other people don’t want to buy because it’s dirty, full of trash, added to by the former owner who didn’t know anything about construction so is a tear down addition, etc. I have a handyman who is not only very talented at construction, but comes up with ideas to save me money. I look for bargains on cabinets, vanities, oops paint, tile and other items when I am putting in an offer on a property and use my home equity line to make a cash offer to close immediately. I buy any materials at Home Depot or Lowes and take advantage of no interest promos and post on a local Facebook rental page and have multiple tenants waiting for the house to be available so my cash flow starts as soon as possible. I am only up to 7 rentals (all fully paid for), but all are rented and I do the management myself so save any management fees. Most tenants stay past their lease on a month to month basis and if anyone is more than 15 days late I start the eviction process and start lining up new tenants who usually move in within a couple of days of getting the old tenant removed. Last year I bought 2 rentals and had only planned to purchase one, but when a great deal comes along you have to jump on it. I am lucky to be in Ocala, FL, which has a very strong rental market and people begging for rentals under $1,000 a month.

  22. Jessica d'Amour on

    Great article! I especially loved “no amount of knowledge you acquire is going to ease your fears. They don’t go away until you act on them.” – brilliant and so true! I still fall into the category of people this article was aimed toward, even though my husband and I bought our first investment property (owner occupied) a year and a half ago, and just made an offer on our second property yesterday! I just have to remember something I heard on one of the recent podcast episodes- if I loose money on a deal, just think of it as paying tuition for an education!

    • David Greene

      Yes! It’s a misconception that you are a failure if you lose money or make mistakes. It doesnt’ really matter how many mistakes you make as long as you keep going and eventually make up for them. The value is more in the skill set you develop and the things you learn than in the first property itself!

  23. Henry R.

    Hi David,

    The points you make on as I called them “the heavy hitters” makes a lot of sense. It has taken me 2.5 years to get my first 3 family, it does not cash flow like a Brandon Turner house, but it’s in a nice neighborhood and I got it for 35% lower than the banks asking price and I am now rehabbing it. We will self manage because it’s a 3 unit and would not make good sense to go with a property manager for a small place like this. But the goal for the next one is to make sure the bldg will stand on it’s own all the way around.
    You’re right I was looking to get that “home run” although I was making offers I was loosing out to all but one before the 3 unit I have now. I backed out of the first one we could have bought because of the inspection report and area. I was glad I did, I didn’t let the fact of earning more money “now” blind me to what was coming up in the way of needed repairs and the area problems.
    I’m learning first hand about contractors the good and the bad. I kept at it and have 1 very good contractor at this time.
    Great blog, thanks!

  24. Jennifer Benson

    Thanks so much for this! It really helps to reinforce that every successful “big dog” had to buy their first property once, and not all of them went well. Hubs and I have talked about RE investing for about 3 years now, and we are finally in a place financially and socially (2 cross country moves in 2 years doesn’t lend itself to learning about local markets) where we are ready to get serious and buy a place. Looking to buy within 2017, which is terrifying! But all new experience are like that, you just gotta jump in and do it! Thanks again.

    • David Greene

      Glad to hear Jennifer! I’ve personally adopted this same mindset. Whenever I try to learn something new, I just expect to fail miserably. As long as I learn, I’m happy. Luckily, it never ends up as bad as I feared, but lowering my expectations keeps me much more motivated and easy to jump in.

  25. Jack Orthman

    Hello! I am new on this forum and hope to learn and share knowledge and experiences.

    I have been in the plumbing repair business and purchase real estate since 1965 I have extensive experience with sales and regarding the reasons why people freeze up when offered a terrific deal. My take is that just about every person on this planet is always super hungry to pull the trigger, so the motivation is always there.

    Why do people tell you they need more time to think about a deal and why won’t they pull the trigger. The answer is;; these people are telling you the truth when they say they need time to think about the deal. Why? Because regardless of how many times you explain to these people they are not as educated as you and they truly don’t understand.

    I have a philosophy! Never ever invest one penny when you are not absolutely positive. Only get involved with a deal when you have absolutely no doubt that you will be a winner. The way I use this philosophy is:

    Look at more than 100 properties before making a purchase.

    Listen to others, but never do something based on another person’s advice. Trust me!!! I lost millions based on other people’s professional advice and I am talking about advice from attorneys, lawyers and professional real estate people.

    Listen only to yourself and when you have done enough research and have looked at enough properties you will know the killer deal that is for you. Trust me again!!! One broker friend was angry with me when I wanted to purchase a 28-unit building for $2,250,000. My broker told me the building was too large for me. I told him to offer $1.9 million for the building and he said that he would not write the offer because it was too low. I went to another broker offered $1.9 million and the buyer came back with $1,950,000. I saved $300,000 by not listening to my first broker. Then, I got back another $50,000 for repairs. Since then, that building has appreciation to $5.6 million.

    I am not saying that sales people are bad people. I am saying that people trying to sell newbies on investing may not have given the newbie enough good information to convince the newbie that he is doing the right thing.

    Suppose, you think you have a goldmine on your property. You call me and ask me to invest in mining equipment. You tell me all the reasons and facts you collected. Then, I tell you that I have to think about it. I have to think because you did not convince me. I don’t know one thing about the gold business and I have to trust you and I cannot do business based on speculation, numbers I know nothing about and trust.

    Ignorance makes me want to stop and think. I need to see the gold. You can show me the numbers a thousand times and maybe I still don’t understand them.

    Only invest you are 100% positive and never rely on the advice of others. I already did that and lost a $million a few times.

  26. Cortney Jones

    David,
    Excellent article and sums up the fear behind most people never taking action. I know 20+ years ago I had a similar issue, and thank God I was able to take action and buy that first house.

    I agree that so many people are concerned about making a mistake or not having every single answer. They need to trust in themselves and their resourcefulness to get things done and overcome obstacles. The first few probably won’t run smoothly, make huge amounts of money or come in under budget and time, but taking that first step to action is the KEY!

    I will be sure to reference this article on my training blog. I know a lot of my readers will benefit from this. Thank you again!

    Best,
    Cortney

  27. Leo Martinez

    Hey man thanks for this great post! I love the examples used. However, this really makes me think on how a college student graduating soon can get into the world of real estate investing.

    Is using an FHA loan the only way? Or wholesaling for initial capital? Or maybe use a partner with an established home and credit?

  28. Patrick Civello

    Hi David,

    I just found BP about a month ago. I’ve been attending the webinars, reading the top 20 books, reading forum posts, etc. I am also in the Bay Area (Alameda) and have been getting a little discouraged by the prices here and the neighborhoods my wife and I would have to move to so we could use my VA loan to house hack. Any advice on getting started in this formidable market without losing my shirt?

    • David Greene

      Hey Patrick,

      A few words of advice.

      1. Don’t buy anything that doesn’t cash flow.
      2. Don’t get stuck on using your VA loan to house hack. VA loans are intended to help veterans get primary residences for no money down, they aren’t really designed for investing purposes.
      3. I live in the Bay Area and I’m not touching anything out here unless it’s a flip. This is a red hot market and these properties don’t cash flow. If you want to find a good rental, you have to go to where the good rental markets are.
      4. Don’t be discouraged. Real estate investing is a numbers game and you follow the numbers, not the market. If you can’t buy anything right now either wait until you can or go somewhere else where you can.

  29. Patrick Civello

    Thanks so much, David.

    So for good rental markets nearby, where would you suggest? Maybe Sacramento or Pleasant Hill?

    Also, is it that difficult to get into out-of-state investing? I was approached by this company based out of Tennessee who specialize in turnkey properties.

    • David Greene

      Hey Patrick,

      I would stay away from CA right now. I myself invest out of state and that’s all I do primarily, BUT I do NOT buy turnkey and I would caution all but the wealthiest or busiest individuals to avoid it as well. Send me a PM and I’ll give you some more info.

  30. Angela liu

    David,
    Still working on that book about investing out of state? =) [Also, joining the swarm of BP-ers here to laud your well-written article.]

    In the meantime, ask yourself why you wouldn’t want to do that.” <– A lot of folks say start out by investing in something local. Learn more in one way when the property is within driving reach, I suppose. I'd imagine seasoned investors being more likely to pick up out of state properties. So, I found your comment interesting.

    San Antonio is relatively affordable (coming from the DC metro to this area was like finding myself in a candy shop..initially). Still not one of those 1% or 2% rule markets. Its 2.2+% property taxes, possible inflated prices is making the cash flow look tough. So, I've been side-eying that out of state solution.

    Turnkey – saw one of your comments to beware. Since turnkeys are tricky and to be vetted carefully, do you feel they are better left to an investor after he's gained some experience?

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