Analysis paralysis...need help!

[Herminia Ojeda]

I recently sold a property and made a little bit of money, and I would like to redeploy the proceeds into buying more real estate. However, I am experiencing analysis paralysis of which way to go. The property I sold was more of a lucky buy two years ago, a hint from a family member. I’ve never been a landlord and the area I live in California is super expensive, so the numbers just don’t work. I was looking at out of state like Ohio or Pittsburg, PA but that causes some trepidation since I don’t know anything about those markets of know anyone there. I was also looking at the outskirts of San Bernadino County, like Joshua Tree or 29 Palm. I’m using the BP tools to analyze properties, but I feel like I am somewhat throwing darts at the wall. For those seasoned investors, if you had my dilemma what steps would you take? Thanks!

[Nathan Gesner]

I recommend you stop what you are doing and read some books to really understand how real estate investing works. I bet dollars to donuts you will look back in 10 - 20 years and wish you had kept that home.

Why did you sell? What would happen if you held onto this property for another 10 - 15 years? It would likely double in value, rents would go up, and you would have twice what you are holding right now. Instead, you killed the goose that lays the golden eggs. The next property you buy may not perform nearly as well as the one you already had.

When you buy property, hold it forever. The only time you should sell is when you know the money can be invested in something that will produce a much better return or when you need to move the money to bring you closer to your personal goals. The only way you will know it's the right time to sell is if you educate yourself about what makes a good investment and how to compare the return of one investment against the return of another.

1. Start with BiggerPockets Ultimate Beginners Guide (free). It will familiarize you with the basic terminology and benefits. Then you can read a more in-depth book like The Book On Rental Property Investing by Brandon Turner or The Unofficial Guide to Real Estate Investing by Spencer Strauss.

2. Get your finances in order. Get rid of debt, build a budget, and save. The idea that you can build wealth without putting any money into it is a recipe for disaster and the sales pitch of gurus trying to steal your money. A wise investor will not try to get rich quick with shortcuts. If you can't keep control of your personal finances, you are highly unlikely to succeed in real estate investing. Check out my personal favorite, Set For Life by Scott Trench , or The Total Money Makeover by Dave Ramsey.

3. As you read these books, watch the BiggerPockets podcasts. This will clarify and reinforce what you are reading. You can hear real-world examples of how others have built their investment portfolio and (hopefully) learn to avoid their mistakes.

4. NETWORK!!! Get out of your comfort zone. Stop hanging out with your deadbeat buddies that spend all day drinking, talking sports, and otherwise wasting away. Go to BUILD YOUR TEAM at the top of the screen and look for local investors or meetups in your area. You can also find real estate investing groups through meetup.com, facebook, or a Google search. Birds of a feather flock together!

5. Now you need to figure out how to find deals and pay for them. Again, the BiggerPockets store has some books for this or you can learn by watching podcasts, reading blogs, and interacting on the forum. A handy search bar in the upper right makes it easy to find previous discussions, blogs, podcasts, and other resources. BiggerPockets also has a calculator you can use to analyze deals and I highly recommend you start this as soon as possible, even if you are not ready to buy. If you consistently analyze properties, recognizing a good deal will be much easier when it shows up. Find Brandon's videos on YouTube for the "four square" method of analyzing homes and practice. It doesn't take long to learn how to spot a good deal.

6. Study the market. You can learn to do this independently or get a rockstar REALTOR to lead the way. I highly recommend a well-qualified REALTOR who works with investors and knows how to help you best.

7. Jump in! Far too many get stuck in the "paralysis by analysis" stage, thinking they just don't know enough to get started. You could read 100 books and still not know enough because certain things must be learned through trial and error. You don't need to know everything to get started; you need a foundation to build on and the rest will come through experience and then refining your education.

You can build a basic understanding of investing in 3-6 months. How long it takes to be financially ready is different for everyone. Once you're ready, create a goal (e.g. "I will buy at least one single-family home, duplex, triplex, or fourplex before the end of 2019") and then do it. Real estate investing is a forgiving world; the average person can still make money even with some big mistakes.