How many deals should a newbie analyze prior to investing?

Question

I am a newbie real estate investor, and I have been educating myself for the last couple of months. Listening to podcasts daily, reading real estate related articles every day, real estate books, connecting and networking with local investors, the works.

It has been mentioned dozens of times on the Bigger Pockets Podcasts and through my research that new investors should analyze and practice running the numbers on potential real estate properties before jumping into your first investment.

I am curious to see approximately how many deals that more experienced investors analyzed and crunched the numbers on, prior to your first deal. Or, about how long did you educate yourself before starting out on your first deal?

I plan on getting into my first deal within the current calendar year, but this info would definitely give me a good idea on where I currently stand as compared to the more seasoned and successful investors.

Thank you in advance for your responses!

Joe Villeneuve · Answer

Answer to Q#1:  Practice with as many deals as it takes to get comfortable with it.  There is no magic number.  Also, while you are practicing, you are trying to find the correct market to invest in based on your goals (having your 1st deal within a year is NOT a goal), your team's abilities, the strategies you know and can execute, and the available funds.  The funds must include the cost (if any) from the source(s) too.

Answer to Q# 2:  How much education I had before I did my first deal is immaterial.  The fact is, I/you will never stop learning.

Answer to Q# 3:  You stand way in the back of the line in relationship to other REI.  That wasn't meant as a criticism of you, just a statement of fact...but you knew that.

Based on your Questions, what I'm reading into this isn't that you are nervous, but you are scared.  That means you are not ready...yet.  The most important word there is "yet".

Also, NEVER give a timeline like "within a year for my first deal".  REI buys are NOT based on that.  They are based on deals...not Properties.  Thinking like that will cause you to make decisions to buy based on "this is the best deal I've come up with", instead of, "this is a great deal".

REI is all about the numbers...the ones with "$$$$$" in front...not "dates" behind.

Daniel Akerman · Answer

My own personal guideline: run the numbers enough that I can feel confident teaching it to someone else.

But that's just for gaining technical proficiency.

Just as important as "running" the numbers is GETTING good numbers -- from your buying agent, from online data sources, from property managers, from contractors. "Running" the numbers in a theoretical way is one thing. Doing the research on a community or asset class to the point you feel confident on the data is arguably the more difficult and more important task.

Equally important: being sure about your criteria, which are another set of numbers. Matching your criteria to an area where you can find the right deals is the real challenge of real estate investing.

I can easily calculate income, expenses, debt service, net operating income, capitalization rates, etc etc given any set of numbers, because it's just an equation. What's more important is understanding what you need out of the property and what you need those numbers to be in order to achieve your goals. Once you've done that, it's simply a matter of finding the deals that fit the numbers (which is simple but not easy).

Alina Trigub · Answer

@Dustin Rhodes Congratulations on taking the first step towards building your wealth and educating yourself. You've got a ton of valuable feedback/responses to your questions, especially from @Joe Villeneuve . One other important aspect I want to mention is to stick to one thing in your RE journey until you learn it inside out. In other words, until you get fully comfortable with your analysis of small multi's, don't rush into other areas of real estate until you learn this one. If you're having hard time concentrating, I suggest you read "One thing" by famous Gary Keller (of KW).

Best!

Joe Villeneuve · Answer

Starting with buy/holds will take forever to get where you want to be.  As you do more "practice" you'll realize how long that will take.  The faster way would be to flip your cash (or cash like substances) into larger cash, then use the profits (after you've grown your seed money) ONLY to buy your hold properties.  This way, the larger seed money/cash will continue to generate flip profits...and will be the source for all your buy/holds

Dustin Rhodes · Answer

Thank you all for the quick responses!

I suppose a little more specificity on what I am planning on investing in would have cleared up things better.

I am primarily looking into investing into buy and hold rental properties to begin with, which includes SFRs and small multifamily properties, such as duplexes. Gradually building up monthly cash flow to eventually match, and surpass my regular day to day career.

Jim K. · Answer

I analyzed zero deals. I got very lucky. Before I bought my second investment property, I looked at 1800-2000 deals and made 20 failed offers. This took over 10 months. I was looking at foreclosed SFH at the time, running through about 200 properties a month. Foreclosures are great for this kind of practice, along with government REOs.

Omar Khan · Answer

@Dustin Rhodes Technically, you only need to analyze 1 right deal. But @Joe Villeneuve raises good points.

It would help if you pointed out what type of properties you're looking to analyze - SFRs, MF (how many units?), office, industrial? Each has its own set of peculiarities.

Calvin Lipscomb · Answer

Congratulations on taking the first step.  What is your real estate plan?

How many deals should a newbie analyze prior to investing?

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