You’re over-analyzing your deals; come back down to earth...

So. it's 1a.m. and you're still at the computer plugging in numbers...and you've been at this for six months...you have cash or a pre-approval, but simply can't settle on a deal...sound familiar?

We've all been there at some point early in our investing careers. We entered this industry for a reason, right?...we want to live our life on our terms and not anyone else's. It's not necessarily that we want to just trash the alarm clock and sleep in (well maybe for a couple weeks...) The premise is deeper than that...it's in our DNA. We wake up early and stay at it late for a reason that's bigger than ourselves. So, you have your purpose...why haven't you pulled the trigger?

I think I know the answer: it's the uncertainty of the outcome...it's the "what if I blow it" scenario...and the disappointment the folks closest to us will feel if we fail. I get it...you've taken time away from friends and family all for what...a busted deal?

OK, here is your wakeup call...it's all Bullshit. All of those things are not going to happen. And to expand on this, the only true way to learn in this industry is by failing...as a matter of fact, it's a necessity...it's a component that must happen to learn and grow. One important benefit of being an investor is learning from folks that have become successful by failing along the way and sharing their stories and guidance.

Here are a few tips for moving away from the endless chase for the perfect deal and pulling the trigger on your first investment property:

BE REALISTIC ABOUT YOUR MARKET AND YOUR CAPACITY

This is a pretty simple threshold to cross. The number one determining factor on you entering the market as an investor is your financial capacity; i.e. what you can afford. If after doing your market research you determine that your max offer is not anywhere close to the price points in the market, you will never do a deal. Move on and find a new market.

DEFINE YOUR ASSET CLASS
This is what type of property you want to invest in, including the build, design, structure, location, condition, tenant class, risk, returns, and hassle. So, that's a mouthful...Let's simplify by making an asset class statement as an example:

I WANT TO INVEST IN AN OCCUPIED, MODERATE RISK C-CLASS VALUE-ADD 2-4 UNIT PROPERTY THAT HAS REASONABLE DEFERRED MAINTENANCE, GENERATES $750/UNIT PER MONTH IN RENTS, AND IS IN A NEIGHBORHOOD THAT HAS PROVEN APPRECIATION....

You get the point, right...you can get super specific with this exercise, but we're trying to break "analysis-paralysis," not worsen it. Keep it fairly high-level but specific enough to include the deals that come close to your criteria. When you link up with a great agent, you can tell them exactly what you are after and work on getting the deals you want to see in your inbox.

STOP FOCUSING ON FINANCIAL RETURNS
What!...but I spent all winter building my deal analyzer...I know, I know...and it was good practice for your future...do you need to rely on it entirely?...no, you need to get a solid deal under your belt so you can start to call yourself an investor. I'm not condoning buying any random property...I am saying that if you stick to your asset class filters, most of the other stuff falls into place. And remember, you're working with a great agent, so they'll keep you out of trouble.

Here is a tip: If you are investing in single family residential (SFR) properties or multifamily with less than 5-units, you want a loose handle on return on investment (ROI); however, your ROI has very little to do with the actual value of the property. You can realistically abandon your deal analyzer if you focus on value...meaning the relationship between the purchase price, current value, and future value trumps any financial calculation.

Let’s extend this to focus on 2 metrics...and these are the only 2 metrics that serve as a constant baseline to determine value;

• Price per square foot
• Price per unit

GET PRE-APPROVED AND HAVE YOUR "FINANCIAL HOUSE" IN ORDER
Unless you are buying with cash, you'll need the services of a lender...and even if you are buying for cash, this section still applies. If you're working with a lender, it's important to have a transparent and honest assessment of your financial capacity...if you're working at Burger King, you can still make this work, but you're not going to be qualified for a $500k loan.

One additional point to consider here is that working with an agent requires a pre-approval. You need to be ready to pull the trigger on a deal before buying in the market. Good real estate agents are busy...for a reason. You can get an MLS auto-feed established and do your own research...but don't expect to get a walk-thru on every single property you like unless you are submitting qualified offers.

FIND A GREAT AGENT
There have been undertones of this throughout this post because it matters. If you're shopping Zillow or plan on finding a smiling agent from the local park bench, I can almost guarantee they do not specialize in working with investors. Your job is to interview agents to find a great agent. Have your questions prepared before calling...and it does not have to be a long conversation. You can eliminate 99% of agents with just a few questions:

Mrs. Agent:

1-What type of property do you own and how does it perform?

2-Can you explain what technology you will use to keep us connected when researching and offering on deals?

3-How do you calculate cash-on-cash returns?

#3 will cause the “deer in the headlights effect”...just chuckle when they start to stutter...and politely move on.

PULL THE TRIGGER WHEN YOUR INVESTMENT CRITERIA ARE MET
So, you have your criteria, you have your funding, and you have guidance from a great agent. It's time to jump.

From here it's a piece of cake...a real estate transaction is very process-oriented and there are a lot of moving parts. (Click HERE to see an example of how we cover due diligence on an investment property) There are many things to be aware of when buying investment property, so make sure you are well informed on how the transaction will work and what will be required of you during the process.

Still have questions??? Drop us a line We can help wade through some of the issues that are holding you back from pulling the trigger.