Analysis Paralysis - Advice for Next Steps

[Justin R.]

Hey everyone,

I believe I am in a bit of analysis paralysis and am seeking advice about where to go from here. I have listened to the BP podcast for a little over two years and I usually listen to an episode a day.

I like the investment method of purchasing multi-family properties via buy-and-hold BRRR in secondary markets. I had narrowed a starting idea down to buying a duplex to a quadplex with a purchase price of no more than $100,000, but to me, this plan may be unrealistic right now, given the state of the housing market. I am motivated and open to other suggestions, but I feel stuck.

I had created a RE Business Plan several months ago, and it is as follows:

Mission Statement

• Just a man trying to make his way in the universe by striving to deliver affordable rentals to those in need while applying honesty, humility, and servant leadership.

Goals

Daily Goals

• Engage with like-minded positive people focused on success.
• Listen to an episode of BP every day.
• Listen to an inspirational or motivational speech every day from a successful person.

Short Term

• Own one positive cash-flowing rental property by the end of this year.
• Acquire an affordable or organic RE mentor for guidance and continued mentorship.
• Read one real estate and one business book a month.
• Continue to pay down bad debt and increase savings for investment.

Long Term

• Financial independence with a monthly passive income of $50,000.
• To own a diverse and profitable real estate investment portfolio that will continue to generate generational wealth.
• Break free from the 9 to 5 workflow.

Timeline

Ultimate Timeline

• Retire in 10 years.
• Financially free from the 9 to 5 workflow

Reasonable Timeline

• This year
• Buy and own one positive cash-flowing rental property by the end of this year.
• Next year
• Buy and own three favorable cash-flowing rental properties.
• three years
• Buy and own ten diverse and positive cash-flowing rental properties.
• five years
• Buy and own 20 diverse and positive cash-flowing rental properties.

Market

Low-Income, Secondary Market (Outside of Metropolitan Centers)

Criteria

Solo Investing

• Loan to Value = 80% to avoid MPI
• Max Purchase = $75,000
• Cash-Flow = $1,000 to $2,000
• Rehab Cost = Less than 70 % ARV
• Timeline = 3 to 6 months BRRRR

Partner Investing

• Loan to Value = 80% to avoid MPI
• Max Purchase = $100,000
• Cash-Flow = $1,000 to $2,000
• Rehab Cost = Less than 70% ARV
• Timeline = 3 to 6 months BRRRR

Flexibility

• I know the most about BRRRR, and so do my partners; thus, it is the primary method of investing I and we have considered.

Marketing

• Create online marketing tools via websites and social media. Direct mail is also appealing.

Financing

• Currently, conventional loans are the primary choice, with the most experience acquiring them for two personal homes.

Dealing

• Ideally, following BRRRR steps will allow for maximum profitability. The goal is to hold on to these properties and rent them out, but should their expenses or vacancy continue to outweigh their profitability, selling to breakeven or for profit would be a potential exit strategy.

Team

• Mentor
• CPA
• RE Attorney
• Marketing Specialist
• Property Manager
• Contractor

Financials

• 9 to 5 Income = $150,000 Gross
• Credit Card = $20,000 credit limit
• Equity = $10,000 Cash
• Credit Score = 700

[Travis Timmons]

Jesus, Justin...my first thought is too much brains, not enough _____ and _____. Some of the best advice that i ever received was in regards to starting a business...a mentor of mine told me to just go get a customer. Don't draft a business plan, create forecasts, and a bunch of other nonsense - just go make $1 of revenue and figure it out from there. 

You know way more than you necessary to get started. You also don't need a RE attorney or marketing specialist. You need to actually go do something and quit confusing activity with being productive. Go get pre-approved and make an offer. Also, I don't know your market well, but a $75,000 property is either going to be in a war zone or in need of a major overhaul. Both are really hard. Same goes for a BRRRR - they are far easier said than done - especially for your first deal. It's a trendy topic, but once you step inside the dump of a property to start work, it's going to be stressful, overwhelming, and expensive.

Sorry if that was a bit harsh. Feel free to shoot me a message if you think that I can be a good resource.

[Justin R.]

That is not harsh at all, I know I am overanalytical, and this tends to clog the gears of motion. I have wrapped my head around these lower investment markets because of the appeal of the low price-point and I suppose feeling of security that the investments would be "easy" to get out of should things go very wrong. At this point, I am tired of feeling like I am idle and not doing actually producing anything. Always happy to learn and talk more from others. 

[Eric Greenberg]

I agree with the above. I dont think you want to deal with the repercussions of owning a $100k 2-4 unit in Philadelphia. 

You have a healthy gross salary, why not up the budget and start with something easier to learn with?

[Scott Crowley]

@Justin R. My initial thought when going through all of this information you laid out was "this guy is just like I was not long ago." By that I mean, as recent as last year I would catch myself being immensely unproductive drawing up business plans and forecasted goals, etc. All just to never get the wheel turning in the first place. You're not alone, but it is time to roll!

I have 3 things:

1) I love to study real estate in any way I can, network, and set goals...However, action is the best teacher. I've learned more by just stepping over the edge of my comfort level in the last year than I had in any book or podcast beforehand. Part of growing is pushing yourself to that edge, especially when you have big goals.

2) I think your target price point is way way way too low, and for the wrong reasons. There is nothing 'safer' or easier about getting out of lower income properties if the worse case happens. I know they may seem like they provide you with a sense of being risk-averse, but don't let the lower capital investment deceive you. Even if everything goes smooth after acquisition, a buy & hold in these areas could be a headache and turn you off from wanting to invest again.

3) Not saying it couldn't be done, but BRRRR deals and conventional financing aren't exactly a match made in heaven. Most conventional lenders won't give you the time of day for the kind of properties that it may take to complete a successful BRRRR. Since you mentioned this type of financing is your primary choice(only because it is the only type you have ever dealt with so it is within your comfort zone I'm assuming), I would step out of the comfort box and explore other ways to pursue this.

It seems apparent you have the intelligence to make something for yourself in the industry, especially with a solid day job to catapult your financial resources with. You can do this...TAKE ACTION!

[Michael Paling]

you need to flip the switch in your head. I was in your position last year, but after meeting with local investors once or twice, that switch was flipped and I knew I was ready. YOU ARE READY! It seems that you've thought this out well and if you've analyzed enough deals to know how the numbers work, then get started on offers. I've heard Brandon Turner ask in a video "How many offers have you submitted this week?" and if the answer is none, then why? You can't get started without submitting an offer and that simple task alone is a great learning experience. 

And I have to somewhat disagree with the others that say your $100K is too low. It's totally market dependent, and each area is a different market. There are duplexes around the area that I live (very rural, like a population of 1,500 in the nearest town) for around $100k. It is a C class neighborhood, but screening very thoroughly can get you good tenants. Many of them do need some cosmetic work, but they also don't seem to stay on the market long when they're priced right. Again, this is all market dependent, so if you're looking to invest in a bigger city, I'll bet you'll see a very different scenario and a $100k duplex could be a much bigger headache for a newbie. 

Now.... Go get pre-approved and submit some offers!

[Matt N.]

@Justin R.

Check out my post from a little while back. https://www.biggerpockets.com/...

It's just my short story on how I got started. Without disagreeing 100% ... I want to caution you on listening to the "Just jump in" guys. You have a good plan. Some of your numbers are not perfect but that's ok. Philly is the cheapest BIG city and you can find deals in all price ranges. This might be lost on some of the commentors. Also, there is nothing wrong with BRRRRing a single family home. I find my best and most reliable tenants are in single family houses. The reason the podcasts and books all talk about multi-units is because they do not live in a place like Philadelphia where you can get into a single family with $900 PITI and rent it for $1600/month. We can here! (look up PITI).

You do need to take action, do something. @Eric Greenberg is the only other Philly guy commenting, and I agree with him. Your salary will help you through the first few deals and give you some freedom to buy better investments right away. 

If you want to reach out I would be happy to help!

[Alan Asriants]

IMO Owning a Duplex and House Hacking in NE Phila/Bucks/Montco is a great way to get started. You can find a decent home with a nice layout in each unit, possibly something build after 1970s, central air, and good/stable tenant base.  

[Mark Munson]

Hi @Justin R.

I appreciate the well thought out post. I'm not going to reiterate everything that people above have said, but I suggest reaching out to someone in the lending space to walk through the intricacies to successfully BRRRR a property. There are seasoning periods to be aware of and a myriad of other things. I don't think there is a single source out there that fully articulates it properly. I have originated numerous BRRRR loans over the years and work with people across the country that attempt to do them, both successfully and unsuccessfully, and most are misguided on how to do it right, IMO. Feel free to reach out, I'd be happy to give you my advice.

[Asif Gill]

Justin, I agree with all the previous replies; every strategy will work to some extent, but the real strategy will present itself to you once you begin the action taking part. The market will show you more about itself than any other type of learning will. Too much information is a thing, and it can make you blind to some opportunities, in addition to binding you in analysis paralysis. Feel free to reach out if you need any help, like analyzing a deal or getting a second opinion on something.