Deal Analysis- Failure

[Henry Clark]

Mentoring someone in the "Post Deal ??" in this forum.  One of the key action items I just asked them to do is a Failure analysis.

To be successful you need:

A.  Idea

B.  Money- sometimes

C.  Jump off the cliff.

Most people can do deal analysis.  But then won't pull the trigger.  Not because of potential success, but "imagined" failure.

After reading so many posts, reading books, watching podcasts.  Your next avenue of learning is to actually do a deal. One that if you fail, doesn't take you out of the game. Might be new landscaping, replace flooring, paint inside outside. Don't do Foundations, moving walls, adding ADU's. Each of these by themselves might not be that bad, but once you open up a wall, life happens. Won't be a big money maker, but it got you to Jump off the Cliff and do your first deal.

Once you have your base line Deal Analysis done, do the following variations.  Always starting with your original analysis.  Don't put all of these failures together into one analysis.

1.  Price is $xx,xxx higher than you want.

2.  Debt- Interest is 1% point higher than you would like.

3.  Occupancy or rental rate is 10% less than you plan.

4.  A capex item of $15,000 comes up.

5.  Flip price is $20,000 lower than planned.

6.  Other.  Any other item you can imagine or worry about.  Replacing a faucet, broken window aren't major.

Now compare your successful Deal analysis benefits versus a true failure.  Do you want financial freedom?  Or don't move forward because of imagined failures.  And yes, you will fail along the way.

Start small and Make Your Big Mistakes Early.