“Analysis Paralysis” with our first deal

[Mattison Chayhitz]

We are VERY new to the real estate community and are looking to purchase a multiunit to buy and hold.... attempt a BRRR.... just nervous to dive into a purchase that wont yield as a profitable investment.

Any advice to get out of this paralysis way of thinking and begin the process?!

[Marcus Auerbach]

Originally posted by @Mattison Chayhitz:

We are VERY new to the real estate community and are looking to purchase a multiunit to buy and hold.... attempt a BRRR.... just nervous to dive into a purchase that wont yield as a profitable investment.

Any advice to get out of this paralysis way of thinking and begin the process?!

 Yes, while there are usually no easy answers to most questions, there is one for this issue: 

Run your numbers first, then find the property. It's reverse of what most people are doing. We call that developing your financial model. You have to take into account all your local market factors like sales prices, rehab costs and rents. You will realize that some price ranges will work better than others. For example in Milwaukee SF properties around 150k work best. If you go up in price you'll see cash flow diminish, as rents don't grow with the purchase price. If you go down, you'll have issues with the rehab cost being too much in relation to the property value and you won't be able to creat enough equity spread. But every market is different, so you'll have to do some homework. Once you have found your sweet spot, go back and do a reality check: does the market support your purchase price (look at properties sold in the last 12 months, if you are well below what has been sold, your goal is unrealistic) and ARV (same idea, make sure properties are selling for what you expect).

Once you have a vetted financial mosel you pretty much know how your taget property looks like. You know how much you can pay, what condition you can accept and how much you are going to rent it for. Now all you need is the address. By doing this you get a clear pass/fail indication for every house you look at, and it either works or it doesn't.

With the traditional approach (find deal then run numbers) you will never know if the deal is good enough. You are looking at shades of grey, but you don't get a clear indication if you should pull the trigger. So you keep worndering if the next house is going to be better etc etc - there you have it: analysis paralysis.