Gaining Great Experience or Great Returns on First Property

[Austin Petrie]

Hey all,

I hear a lot of people say to not get stuck in analysis paralysis and that the greatest value you get from your first deal is the experience, not necessarily the financial returns. What is your opinion on that and what lower amount of return do you think would be an acceptable amount as a tradeoff for this gained experience?

The reason I'm asking this is because I know most markets are heavily saturated at this point and properties are expensive, but I don't want to wait potentially years before getting my first property just because prices will eventually go down. I'd much rather get something with marginal returns right now so that when prices do go down, I have the experience to purchase many great deals. So to reiterate my question, what are the "marginal returns" that I should be ok with when taking into account how valuable this experience will be?

[Matt K.]

You need to learn value and what you it means to you.... This goes past the numbers/math that can be made to tell any story you want.

Example could be: Rough area, difficult tenants, eviction, very "hands on".... but you get 600/mo for your 30k house. This could work if you A) grew up in that area and understood the culture B) Had multiple and again able to spread the costs/problems... This could be worth it and you'd place high value on Low Price/High return.

Flip side of that: Nice area, good schools, good tenant pool, typically long term renter..... buy you're looking at 1100/mo for a 120-130k house. They'll probably stay a few years or longer,probably won't trash the house when they leave, maybe you hire a prop manager and outside of an emergency you don't do that much. The value here is the quality and time it frees up. You're making only little per mo (200-300/mo) anything that goes wrong wipes that out... but you're paying down the mortgage and maybe get little appreciation.

Neither example is right or wrong, but the value place on each one will always be different for everyone. Investing goes beyond just numbers, there's a human element to it. Plenty people will try to tell you otherwise and plenty will agree... but whatever route you take, you'll find out how the answer applies.