![](https://biggerpockets.s3.amazonaws.com/assets/member-blog-image.jpg)
![](https://biggerpockets.s3.amazonaws.com/assets/logo@3x.png)
The Art of Decision Making – fighting off analysis paralysis.
The Art of Decision Making – fighting off analysis paralysis.
Time and time again, I run into students who simply can’t make a decision. At my weekly mentor sessions I have a table full of engineers, IT professionals, and the occasional lawyer, who, by training, are programmed to overanalyze every deal. They suffer from analysis paralysis. The good news is that with year of shock therapy or a few weeks with me, they can be cured.
I am not exaggerating when I tell you that I have seen new investors show up with five page spread sheets in an attempt to analyze a deal. There is nothing more priceless in my world than the look on their face when I ask them the status of that deal, and they reply with something like “someone else has it under contract now.” While the student was busy looking at the deal from every conceivable angle, and a few angles that no sane person would consider, some sane person bought that house. YAY!
Now don’t get me wrong due diligence is important, but not before you make your offer. As real estate investors we get paid to make offers. If you think about it the crux of our income comes from making offers that get accepted. If you spend your entire week analyzing a deal that you never make an offer on, how many offers did you make? Answer? Zero. Zero offers makes you exactly zero dollars. Making zero dollars for a weeks worth of effort just plain sucks.
So what should your decision making process look like and why should it look that way?
Let’s start with the why and work backwards. The sexiest thing about real estate is the obscene amounts of money that you can make as a real estate investor. The reason that you can make staggering amounts of money is because our market is asymmetric, meaning that not everyone is dealing with the same bits of information. Compared to the stock market where anyone with an internet connection can tell you what the price of a stock is and how that value compares to other similar stock shares. Seriously a guy in a cave in Afghanistan can gather this information. In contrast if I stumble upon a divorcing couple that just want out of a house and they are willing to walk away from big equity just to be rid of each other, nobody other than me will ever see that deal. I will own it before that first conversation ends.
This leads me to the decision making process. As real estate investors we need to ask one question and only one. That question is “will I make money on this deal?” If the answer is yes, then I want the deal. If the answer is no then I walk away. It really is that simple.
Now I expect the “what if” crowd to be all over me on this last statement but I am ready for them. This is not my first rodeo with them.
“What if I don’t have the money to close the deal?” Then you wholesale to someone else and you make money.
“What if my rehab estimate was too low and the deal doesn’t work as a flip” Then you lease option it to a work for equity buyer and you make money.
“What if my title search finds a problem with title” Then you make the seller cure the title or you walk away, so in this case you either make money or you walk away, no harm no foul.
“What if I find a better deal later?” Then you buy that one also and you make money twice. In the world of real estate investing, you can use other people’s money, or you can flip the contract to another buyer if you don’t have the money.
“What if the economy collapses?” That one is coming our way. Here is the good news, people will still need a place to live. You stock portfolio can drop to zero value. Real estate will always have some value and as long as you can rent it at a number that at least breaks even, it’s resale value is irrelevant. You just have to hold it for a few more years till the market recovers.
“What if I buy the property as a buy and hold and I turn out to be a really bad property manager?” Then you sell the house to a tenant buyer and make them responsible for all maintenance, taxes, and repairs.
The “what if” crowd will ask all sorts of insane questions. Those questions are just fear based on a lack of experience. You do not need to worry about a lack real estate education. Luckily for you, you have plugged into a network of real estate investors which can answer every question you can dream up.
Now your task is not to dream up new and bizarre “what if” questions. You goal is to break each deal down quickly into a stop or go sort of answer, and then move forward with cobra like quickness.
I hope this helps
Josh
Comments