Am I Rushing?

Question

I began studying REI about a month ago. I really want to have a property under contract at the end of this month or by the middle of next month, Am I rushing things?? How long did you wait before your first investment?

Jenna Stonecipher · Answer

@Kelly Miller I spent 2 years studying real estate before I felt comfortable jumping in. One investor in my area likes to say, "When you make mistakes in REI, there are multiple 0's behind it." Keep that in mind. While 2 years may have been overkill, I KNEW without a doubt that the deal I landed was a good one.

I think the best thing you can do as a buyer is not put a time limit on your purchases. Just wait and be prepared for when something great comes along. Impulsive and emotion influenced decisions can be detrminental, and I'm sure you want to start off right :)

Will Barnard · Answer

Yes, you are rushing and will likely make mistakes. One month of education is hardly enough to start investing. Would you start nursing after one month of schooling or start building furniture with only one month of education? I certainly would not.

What do you know about purchase contracts in your State, about insurance, about operating costs, cap ex, demographics, market trends, etc.? Certainly you do not have a full knowledge of this within one month.

Chris Adams · Answer

@Kelly Miller

What percent of a tenants income do you think should be delegated towards paying rent?

When you go to the bank for a loan, what is the banks typical requirements for you to get a loan on an investment property?

What type of performance will the bank require from your property during underwriting.

Its 3am and the phone rings and your tenants w/heater just started leaking and the water has leaked out of the laundry room into the living room carpet. What do you do?

Rent is due on the 1st and grace period is 5 days, you tenant is late for the 3rd month in a row what do you do?

Kelly you tell me, are you rushing ? =))

Lynn McGeein · Answer

Kelly, do you have a written business plan?  Our first step was focusing on defining long term goals, then short term goals, then next few months' steps to get there.  Each year, we adjust our plan to what reality has shown for the previous year.  The SBA has a good template for business plans if you don't have one yet.  Time frames should always be flexible; otherwise, you tend to jump in and make costly mistakes just to make your timeline.  Other priorities like insuring you have the proper emergency funds in place, building your credit and relationships with loan officers, finding the right deal with the right cash flow, learning to be patient and passing up the ones that aren't right for you, should have much more priority over simply having a property under contract in x days.

Pam R. · Answer

Hi Kelly - To answer your question about how long before first investment...

My parents were landlords...my husband maintained hotels and apartments professionally for 20 years. I knew at some point I'd invest in real estate, and made a hobby of watching the local market, and reading all the articles in the paper about it.

I was 35 before I was in the position to really commit to my first rental purchase - we had the money, the skills, and time commitment that we felt we needed to take the plunge. We looked/bid/inspected for over a year before we actually made our first purchase - we waited for the deal that was the right price, the right amount of work, the right location, the right revenue. It was worth the wait.

It was 3 years before we decided to look for our next property - and that took about 3 months to uncover. I've been looking for my 3rd property now for nearly a year - I haven't found the right one yet.

Ironically - it took 1 day of house shopping, only looking at 4 houses total, to pick out the house we currently live in. It didn't have a furnace, duct-work, garage, fully operable windows, or, ahem, drinkable water - but it was THE house. I'm much more selective about the houses whose job is to make me money.

Scott Dixon · Answer

Hi @Kelly Miller

Similar to you I started off only focusing on education (books, podcasts, studying local market trends), all the while overlooking how important it was to grow my local network.  There are most likely plenty of people who are investing in the same market you are and might be able to help you avoid those mistakes with multiple 0’s which @Jenna Stonecipher  mentor was talking about.

In addition, a strong local network will most likely be the source of your first deal (agents, investors, or wholesalers).  A local network will be able to give you solid references for skilled labor and professional council.

So, keep the motivation and energy you have from your first month of education and use some of that energy and connect with local real estate investors.  You might find a good number right here on BP.

Best of Luck!

Andy Collins · Answer

Early in your RE career its easy to try and make things a deal, when after you have been educating yourself for awhile, you look at properties to see if they are a deal.

There is a balance between jumping too soon and not taking action,,,just slow down a little bit until you  feel knowledgable.

If you can find a mentor and run deals by them, then you will be closer to making a purchase,,but find a mentor in your area if you can, they know the market, which is a BIG deal.

Mark Ferguson · Answer

I think you are rushing a bit.  Unless you spent that entire month looking at houses and Doug homework to know what is a smoking deal ad you are only going to buy a smoking deal.

Steven J. · Answer

@Kelly Miller What are your goals besides getting a property under contract? What type of property? What price range? What market? What is your acquisition strategy? What is 2-3 exit strategies that you know you can employ if you needed to? Are you looking for cash flow, equity, fast cash, or rough lessons in real estate?

Am I Rushing?

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