Analysis Paralysis, Perhaps?

Question

Hello Bigger Pockets!! My wife and I are in our mid 40's and just getting started in investing. We are in Northern Palm Beach County, FL. We have worked EXTREMELY hard over the past 4 years and have paid off all debt including our primary residence. We have been able to stash away about $25K since March from our W2 jobs. I feel like I have a case of analysis paralysis now. I can't decide if I want to look for outside money to bump up my down payment or just be patient and save for another 6 months or so to have more for a down payment. Can anyone share any tips to getting over the initial fear and doubt? TIA

Lisa Araujo · Answer

Hi Michael,My husband and I are in the same boat. We live in Stuart, FL. Waiting to take the plunge on a second home. Just waiting for the right deal since prices are so high right now. We are new as well so can't give you too much advice but wanted to welcome you and let you know there is REI meet up in West Palm beach on the 1st Saturday of every month. Josh McAllister hosts it. Go to Networking>Events and enter Palm Beach. He will usually post at the end of the month the next location and time.

Matthew Irish-Jones · Answer

@Michael King be patient and use your own money. You don’t need the added stress of private lenders and over leveraging.

Jon Kelly · Answer

@Michael King I wouldn't blame it on analysis paralysis, you just need an opportunity. Don't even think about the need to look for outside money or save another 6 months. You need to start looking at opportunities within your market. Start looking at deals and running numbers. What makes a "good deal" for you? $300/mo in cash flow, 12% COC return, 10% IRR? Set these guidelines and go find your deal.

Ryan Kelly · Answer

@Michael King congrats on all your budgeting success and getting started. You are currently in a position called "equity rich and cash poor." You have a lot of equity built up in your primary residence not working for you. You may love having your home paid off and I'm not suggesting you sell it. For some, using your home equity towards investing is a strategy that can put that equity to work. For example, you could do a cash-out refinance and take out $100k with a low-interest rate. Because it's debt that has to be paid back, the money is tax-free. You can then use the $100k to invest in something that pays a much higher return like real estate. It's a mindset shift from the "all debt is bad" mentality, but if you are confident you will focus on purchasing assets, it financially makes a lot of sense. My wife and I view our home equity as simply the cheapest money we can borrow and we're comfortable using some of it towards investing. We purchased a duplex last year with $100k from a cash-out refinance. It was completely worth it to us and has paid off greatly. I just did another cash-out refinance on one of our rentals and the $50k we took out just covered the 25% down payment for of another rental. Again, if you are more comfortable having your home paid off, just stay that way. I wanted to show you ways to view your equity as an asset and not just a locked-up number on paper. Good luck and keep moving forward!

Achim Berras · Answer

Good Evening Michael,Congratulations on saving and taking the first steps to investing by openly expressing your interest! I would recommend going to local meet ups and to start making phone calls with lenders and getting pre-approved to understand your budget. I think it's important that you map out your real estate goals. Maybe you're interested in flips, BRRR, commercial, or single family? Do you want to invest in state or out of state? Try to understand your market by looking at comps and rent in your desired area. Narrowing how you want to invest should hopefully alleviate some stress. These are just a few suggestions which I hope will help you in your real estate endeavors. Good luck!

Michael King · Answer

@Lisa Araujo, Thank you for your response. I have replied to the REI Meetup thread to be notified of the October meetup. I will definitely be there if it happens.

Alexander Carr · Answer

I live in Stuart and do commercial building inspections for a living, things have definitely gotten pricey around here lately. I found good results searching a little outside my comfort zone and got a good BRRRR deal about an hour away. There’s still decent places to buy in WPB but don’t expect much cash flow in the short term. You’ll never find the perfect deal but the biggest part is just getting started. I made some mistakes with my first deal but I’m still glad I did it because it got me started in the right direction and learned a lot along the way :)

Kiera Underwood · Answer

@Michael King I'm referring to OKC. I know investing out of state is a huge leap, especially for a first-time investment. I'm happy to overview the market for you/tell you what I've seen and experienced as far as out-of-state investors coming here. Something to put in your toolbox! I'm not sure how transferrable it'll be to other markets, but I'm happy to overview what I know as far as Oklahoma City!

Alexander Carr · Answer

Take note this is good advice^Stress and mistakes will be made, getting creative to have lower overhead is key to allow some buffer for yourself.

Lisa Araujo · Answer

@Austin Palacios thank you!