Analysis Paralysis

[Dustin Oaks]

I've been trying to find great house to invest and flip for passive income for the last couple of months seriously. I have always been interested in land but my wife wants to solely focus on renovating homes for resale. My issue is the analysis paralysis in trying to get past the initial ordeal and pulling the trigger to get the deal done. My question is how long did most of you analyze the numbers before pulling the trigger? I am anxious to get moving but this paralysis is really killing me.

[Ray Ellen]

More and more lovely Arkansans are connecting on BP! Love it!

Welcome @Dustin Oaks !

I'd like to respond to a few things mentioned:

The OP: Analysis Paralysis: It isn't "fool proof" but I would encourage you to more clearly identify your investment goals and criteria. Also, who is on your team? 

GOALS

• Fix & flip? Fix and rent? or Buy and hold? What are you looking to do? 
• What target return/ROI? 1% a month with no repairs necessary? 20% annually with maintenance and repairs? 15K every 60 days from flips? Identify a strategy or combination of strategies to meet your investment goals up front.

CRITERIA 

• Property type: Commercial? Residential? Multi fam? Duplex? Single fam? What do you feel most comfortable with?
• Location: What county? city? part of city? neighborhoods? streets? How specific you can get will depend somewhat on your overall geographical play. If you are only looking in Greenwood, you might have to settle for a wider location criteria.
• Condition: What are you willing to do or hire out?
• Deal type: Do you want to play foreclosures & short sales? Because that is totally different than off market or on MLS properties.
• Price: Meet with a  few lenders just to hear the investment options they have for investors. Do you know a portfolio lender? What would you qualify for for a 20% down conventional loan? What about private money lenders? Will you be using them? If so, what type of business plan, return, and timeline will they require?
• Timeframe: Set a clear "contract to close" timeline and include all of the steps you need to take once your offer is accepted to get the deal CLOSED. How soon would you be able to start that timeline? Any vacations or family getaways planned in the future? Schedule your real estate deals around them if you are doing all the work yourself.
• "UH OH / OOPS!" -- Worst case scenario criteria: What if you have a job change and move away? Will your investment strategy cause you to loose your shirt? Or will you be able to liquidate or hire a property manager? Build that cushion in on the front end.

TEAM:

• Are you going at this alone or will you be hiring help? Some team members might include:
  • Lender
  • Realtor
  • Accountant
  • Attorney
  • Contractor
  • Property Manager
  • Inspector

If you have all of the above stuff written down and are focused on your goals, criteria, and team, then the time it takes to analyze a potential property is very short.

Example:

Goals: Buy/hold - 10% ROI with less than 5K in repairs per property in a specific neighborhood

Property: List price would yield 7% ROI and has 6K in repairs necessary and is in the best location in the neighborhood.

What do you do? To me the answer is obvious: Make an offer that puts your ROI in range and takes into account the extra repair cost. If they counter and are close to your ROI, let them know that they are "so close" but its a "no" because they are about $__ off from your sweet spot. You will be surprised at the number of people who may say "OK". If they don't, they you have avoided an investment that does not help you achieve your goals. No harm in that at all. With all of this, keep in mind that with some criteria it is ok to "flex" a little. Don't be too ridged or specific, but use your criteria and goals as a guide. Trust them and trust what you are comfortable with.

Secondly, working with a Realtor

There are some Realtors out there who are not worth their salt. Just like any industry. There are some plumbers, electricians, lawyers, and even investors who are not the best in the industry. Do your homework. I strongly encourage you to work with a Realtor, but find an excellent one who works with investors and knows the market. Find a realtor familiar with your type of property, the type of deal, etc.

If I were to obtain your list of criteria, I would look ON the market first to see what we could find. We would find some and chances are we would put in a few offers and might get you started with a few properties. And then my REAL work starts. I search for OFF MARKET properties on behalf of my investors. I look at match their criteria and when no properties are on the market that match, I do whatever it takes to contact off market sellers. I door knock, send mailers, cold call, etc etc until I find sellers willing to sell. Not all agents go to that extend, but I encourage you to search the areas you are interested in purchasing for the "go getters". Most deals are MADE not found, so find a Realtor who knows how to make a deal work. You will find a few in every market who are passionate about serving investors and representing you.

Keep in mind, in Arkansas, when you call a Realtor on a sign, that realtor represents the SELLER, not you. Their fiduciary  responsibility is to their SELLER, not you. That means that they will ask you a few seemingly "harmless" questions and you might wind up paying a higher price for the property if you answer those questions incorrectly. Most of the time, the cost to you to use a Realtor is paid for by the seller's broker. That is why, in Arkansas, it is most likely in your best interest to find a Realtor who will represent YOU and keep YOUR best interest in mind (they will ask you to sign a buyers rep agreement so they can do this legally). This is completely different in other states that still abide by the "buyer beware" rules. In Arkansas, this is very serious and if an agent starts to act in their own interest or NOT in the best interest of their client, they can lose their license and pay a hefty fine. SO when you find a property you like, forward it to your realtor and get them to start the research. Don't call the selling agent thinking you can smooth talk and find out more info and then give it to your agent. We are professionals. We do this every single day. I have had other agents clients try that and I get the best price for my seller, every time. :) Find an agent willing to work for YOU and put them to work for you! When they bring you a property that matches or can match your investment strategy and goals at the right price, condition, and location, make an offer and you are off to a fantastic start!

Good luck in your investment endeavors. I look forward to connecting with you and I hope this helps you to take the next step and be confident in your investment strategy.