So what's holding you back?

[Frank Patalano]

When I help new investors with buying their first property I often want to know what is holding them back from pulling the trigger.

So I'll ask here. What is holding you back?

[Jacob Gelinas]

Having just recently bought my first property, I know for myself what was holding me back was the fear that I would overpay, especially in this type of a market. I would get analysis paralysis and basically talk myself out of every property I looked at.

[Frank Patalano]

Thanks Jacob. So time to buy another?

[Kris L.]

For me I’m in the middle of a career change.  Until I know what city my next job will be in, I’m planning to wait/educate myself.  I tried long distance a few years ago and wasn’t a fan.  I want to be local to maintain better control.

[Frank Patalano]

@Kris L. I completely understand. I have partners that won't invest more than 1 hour away because they have been burned before. 

Education is super important. This won't help with control but if you don't want to manage but still want to invest, perhaps you should think about crowdfunding, buying a REIT, or passively investing in a syndication. Then you can at least have some of your money working for you.

[Mark Bommarito]

Hi Frank,  I have since the beginning of the new year gotten more active in reading and getting familiar with out of state investing.  I live in Los Angeles and need to look out of state if i want to get started with rental properties.  My biggest struggle is nailing down which particular city/ state to invest in.  I have looked into GA, TX, AZ but it seems for the price (150K) or less i can afford, that most areas either have higher crime than desirable or bad school districts.  It seems to me if you have a rental property, good school districts and low crime would be best but im not finding such areas in my price budget.  Any thoughts or am I being too picky for my first rental property?

[Frank Patalano]

@Mark Bommarito

Are you looking for a Single family rental?

[Frank Patalano]

@Mark Bommarito low crime is more important than school districts. I am not saying that schools are not important. Just rember that you are not living there. Many people are not having kids and some districts get a bad rap because private schools have filtered out many top performers. My school district is in the lower 3rd in the state but we send all 3 of our kids to public schools and they are all doing well.

[Vinay H.]

@Frank Patalano My spouse and friends think I am crazy and the market will turn down soon and crush any and all real estate investment

[Frank Patalano]

@Vinay H. It is an important factor to consider. No one can time the market. We had billionaires wrong in the last cycle. Also the cycle could last years longer than we expect. I would say keep educating yourself. Also make sure that if you are going to buy, you're buying for cash flow and not for appreciation. Make sure you buy something that will make you money from day one.

[Frank Patalano]

@Vinay H. I just saw that you are from Cambridge. Yeah be extra careful. Many Massachusetts markets are overheated. I talked to Boston investors on a weekly basis. Many of them are now investing in Rhode Island and New Hampshire because Boston is too hot. Still each house is an individual transaction. If you can conservatively figure out a way for it the cash flow, it could still be a good deal. For example a partner and I Boston off Market 9 unit last year.

[Anthony Thompson]

@Vinay H. your spouse and friends are right that it will turn down... at some point. Markets move in cycles, so someone who predicts a downturn will always be right - eventually. The question is when.

Based on prices I'm seeing and most #s not working for most properties I'm seeing, I think we're getting close to a top, but we could plateau here for a few more years, especially with the Fed backing off and rates starting to come down again. So I don't know if we're equivalent to 2004 right now or 2006.

So I'd agree with @Frank Patalano that you just need to be careful and scrutinize every deal. I'd also say, if on the vast majority of the deals you look at, the numbers don't work, it's not you - the rest of us are seeing that too. So don't think your analysis method is necessarily flawed, it's probably fine and the market is just overheated.

If you only analyze a lot of properties and don't end up buying anything, or even if you find one that does cash flow but are buying close to a market top, there's still a lot of value in the education/experience of that, of simply "getting started".

Sure, you might overpay a bit for a property compared to maybe 5 years from now when properties will be cheaper on a per-unit basis, but on the other hand, you'll have 5 years of (maybe meager) cash flow if you buy and right, and even more importantly, you'll have 5 years of landlording & ownership experience, so that you'll be a lot more prepared when the next downturn comes. You'll have already gotten over what's holding you back :)

[Nick Rutkowski]

@Frank Patalano

I bought two multifamily properties, one cash flows and the other is a work in progress. What’s holding me back is money and man power.

[Mike Dymski]

Fear and comfort are what hold us back from anything new (regarding finance, work, relationships, health, fitness, family).

[Pawel Cwierz]

I think I got myself into the analysis paralysis state. Fear of market turning, doing a bad deal and losing money keeps me from moving forward. The funny thing is, when I bought my first two properties I barely analyzed them. Mainly because I didn’t know what I was doing. Both cash flowing since day one.

I guess the more I educated myself the more fearful I became. Stupid huh?

[Jeffrey Grieshop]

I would not say anything is holding me back per se but I do not have an investment property yet. I am learning a lot and gaining confidence and determination. Narrowing my criteria has been a little difficult lately though. I was set on a single-family home as my 1st property, with simple plans of renting it out. I talked to two investors lately, well three, because the one chat was with two partners at once, and they both simply kind of shunned it. One party, a recent triplex owner (I believe it is a home divided into three spaces, he said ~$1,700 in rent and a $700 mtg so it's cash flowing nicely. I did not know what was all included in that mtg expense, there could be some other monthly fees), called the SFH investment strategy "a grind" and deemed it to be slow. The other party of two, kind of shook their heads, and jogged down a small list of why they don't like them. They had some experience with them, but these two guys are duplex owners for many years, decades in fact. They said single-family homes are much bigger and basically more maintenance. They talked of pets and children to be much more common, meaning damage. They were real sticklers on the whole pet thing, cats and dogs, which I was a bit surprised by. I guess, thinking about how some people care for their pets though, I am not so surprised now. Anyway, narrowing my criteria is now more concerning than originally thought. This is also good because I never had a real reason for SHF units other than that it is what was talked about a lot in Keller's Millionaire Real Estate Investor which I listened to a few times. I figured SFH's appreciate pretty well and if I keep it filled with tenants and don't even get the "1% rental rate" I would probably still make money. Of course, I would run the numbers across many properties to get a better sense for this, which I am yet to do in a lot of detail.

I reside in a small rural town in OH. There is rural area around me. My surrounding area has solid schools, many rank very high among the state. Crime is low and the small communities in the area are friendly and tight nit. Overall, I would label it as steady and consistent. That label, I believe, applies to my areas schools, athletics, and local businesses. Some kids relocate back toward their hometowns after college because we don't have big universities within a 70-90 minute drive from me in particular. My brother who has one investment property touched on that fact. Simply, there are young adults consistently relocating back home, many of who will look to rent or buy. The guy with the newly acquired triplex (I am eager to see how it goes), said he had 120 responses on Facebook Messenger in about a 4-day span when he originally posted his "for rent" ad on the FB Marketplace. The demand was there in that instance. That triplex is in one of the bigger towns in my area though, about 10,400 people there. 

So, I tried to give you a little bit of a background on where I currently am. Some of it may have almost no bearing on my potential investment property. I just wanted to give you some background. Do I target a duplex/triplex or a SFH?

I have a lot more questions and I wrote a whole story to ask one :). It's ok though. I accept that I am still in the learning and absorbing phase. My actual pursuit of a deal has not happened.    

[Frank Patalano]

@Nick Rutkowski

Money and manpower?

On the money side, you just bought 2 deals. Your doing fine. Perhaps you can partner on deal #3. You bring experience, they bring the money.

Man power. I'm not sure if you mean time, or workers. If it's time, you might have to work on your systems. If it's needing more workers, you just might need to reach out to your network. Someone might have extra help available.

[Isaac Pyle]

Just thought I would throw in my 2 cents here:

I am 19, and going to be a sophomore in college next fall. To top that off, the market I am in does not have duplexes (the only property I would invest in so I could home-hack) for less than $300,000 (That would probably be a dump).

That is the main thing holding me back right now.

[Frank Patalano]

@Mike Dymski

Fears a tough one overcome. I will tell you that everyone has fear even if they don't admit it. Robert Kiyosaki says that he still shakes a little bit at the closing table when he buys a property. One way to help overcome fears for knowledge. Another way is through experience. It's easier to buy property number 6 than to buy property number one.

I lost money on my first deal and I'm still doing it. Remember that risks are what make life memorable. Do you really want to play it safe your entire life? Think of the regrets.

You have to commit yourself to goals. Pick one goal even if it's fearful in each section of your life. I'm not saying to go skydiving or anything but perhaps just to go to a monthly real estate meaning. Look at one property a week. Make an offer on one property a month. It doesn't matter how low the offer is. If you get accepted than you were not low enough.

At the beginning of the year I set out with six goals and so far I've been pretty successful at five of them.

[Frank Patalano]

@Pawel Cwierz

Yeah some millionaires that I know hate taking more risk. They fear losing any money. Even though they were crazy risky in the beginning their philosophy must have switched from the jar being half-full to dog eat dog.

Sometimes I have a similar problem to you only because the 1st deals that we got were such no-brainers that I hate overspending for property.

[Frank Patalano]

@Jeffrey Grieshop

I know what you're going through. I have many properties. A few single families, a few duplexes, a few triplexes, and some bigger multifamily and Commercial properties.

I find that single families are harder to make monthly cash flow but are easier to manage. If I were you, I would buy a Triplex as my first property. Do you plan on living in one of the units? I find that triplexes are easier to cash flow and will help you build experience. Don't get me wrong I own quite a few single families that I love. And the tenants are awesome too but typically they do not generate as much cash as I hope.

[Frank Patalano]

@Isaac Pyle

I understand. Colorado is a hot Market. Perhaps you can invest your money into Real Estate another way. If you have a few dollars you could crowdfunding a property, buy some shares of a Reit, or even partner and buy a duplex with two or three friends. You guys could share one unit and rent out the other. Building cash flow would be the goal but going experience in property management and maintenance is super important. Nothing wrong with continually educating yourself as well. Join a local Real Estate Group then you will hear things and get experience in other ways.

[Anthony Wick]

I'm not a new investor, but I am trying to step up from duplexes to 4-8 plexes. What is holding me back is other "investors" overpaying. I've been outbid a few times, and I can't figure out how the winning bid is making any money! I'm guessing they have deeper pockets than me and are counting on improvements, appreciation, and much higher rents in the future, so they can take a loss in the short term. 

[Jeffrey Grieshop]

Originally posted by @Frank Patalano:

@Jeffrey Grieshop

 Do you plan on living in one of the units?

No. I own a home that I reside in with my family and we have no plans of moving. Thanks for the advice, it was assuring. If I take the right steps to find good deals, I will find one. I too agree that the approach does not have to be toward a specific property type. Find the deals and buy right. I will be looking for cash flow and I think I will target a triplex or duplex. Hell, I may even build one. Thanks

[Frank Patalano]

@Anthony Wick

I know exactly what you mean. I'm thinking most of the time they're buying all cash or they are just willing to own the property at a lower cap rate in the hopes of Greater appreciation. I'm not sure how you are finding your deals but remember the best deals are off Market. We picked up a 9 unit last year and bought it at a nice discount. It was an off-market property that had never been listed. They called us from a mailer.

[Alex Verdugo]

I have been educating myself for the last couple years. Reading books, doing comps, driving around and looking at properties, going to REI meet ups, etc. I've also been working on getting my credit score up. I was doing really well with improving my score but then some medical expenses and student loan issues dragged it back down. I think I've gotten as far as I can and now it's time to pull the trigger and just purchase some thing, even if it's the wrong thing. I have the feeling that if I don't purchase a property soon, I'll get stuck in either the analysis paralysis or just become obsessed with finding the "perfect propety".