Real Estate Articles

Overcoming Analysis Paralysis | By: Vena Jones Cox

Q: I've recently started going to meetings of my local Real Estate Investor's Association, and I think they're great. The problem is, there's SO much information that I don't know what to pay attention to! Every month, there's another speaker with another opinion on the "best" strategy for this or that. I'm overwhelmed, and can't seem to get out and actually do anything. Please recommend a course of study that will help a new investor make a nice, simple deal. ~A.G, St. Louis
 
A: I'll go you one better than that; I'll tell you the ABSOLUTE BEST strategy for buying and selling property...
 
New investors who attend real estate association meetings often come away with the same "paralysis of analysis" that you describe. There's SO MUCH information available, and so much of it appears to be contradictory (buy foreclosures...don't bother with foreclosures...buy to hold...buy and sell) that one wonders how anyone ever figures it all out. And adding to the problem, every successful investor is willing to defend to the death THEIR strategy as the BEST strategy. Although they're trying to be helpful, they often add to the confusion experienced by newbies trying to make sense of it all.
 
In my experience, new investors that don't start making offers in the first 2-3 months never get around to doing it at all. The fear of doing deals only fades with the actual doing of deals; no amount of "book-learnin" will ever give you the confidence you want. So stop trying to learn everything, and focus on what you need to make the first offers. Those things are:
 
1) What do you want real estate to do for you? In other words, in the short term, do you need quick cash? More retirement income? More passive cash flow? Pinpoint this, and your exit strategy will become clear; know  your exit strategy, and the type, condition, areas, and price range of properties you should be looking for will pretty much define themselves. People who need quick cash generally need to wholesale or retail; people who need to wholesale need single family junker properties in rental or bread and butter areas with motivated sellers. See how easy that was?
 
2) A working knowledge of how your ONE exit strategy works. Building on the last example, once you know that wholesale deals are sold to cash buyers for 60%-70% of as-is value, you know a) how to calculate an offer and b) that you need to start finding buyers NOW.
 
3) Two or three strategies for finding the types of properties you want. Whatever your chosen strategy, finding the good deals is the “work” of the real estate business right now. It takes 20 suspects (sellers you THINK might be motivated) to find an actual prospect; a lead isn’t even a SUSPECT until they’ve contacted you; thus, you’ll have to reach out to a lot of possible leads to get a deal. So try 2-3 methods (direct mail, bandit signs, driving for dollars, etc) all at once for a few weeks. Discard those that fail and amplify those that work, but always use more than one way at a time.
 
4) The ability to evaluate the properties you're viewing. In the case of junkers, you'll need to know how to find the after-repaired value and the cost of the repairs. Don't worry about figuring out what the property will rent for; it's not important to your plan. Any basic course on these exit strategies will teach you in detail how to decide on a “maximum allowable offer”; without that information, you just don’t know enough to make smart offers, period.
 
5) A team and a contract that will keep you out of trouble. Why do you need to know how to do a title search when there are folks who do it for a living? Sure, it might be good to know later, but it isn't crucial for you to know right now. And if you have a well-written purchase contract that allows you to get out of a bad deal before it closes and an experienced mentor that will help you through your first few deals, how can you lose?
 
You mentioned that you attend your local Real Estate Investors Association meetings; if it’s a good group, you can largely build your team from recommendations of other members, association vendors, and the experts they bring in to teach you. The Milwaukee REIA has a Dream Team book of preferred vendors they work with that can enhance your team.
 
Just take it one step at a time. Learn the basics, then go do. Learn more, then do more. Both are crucial to your ultimate success; you get the knowledge you need in the classroom, and the experience you need by applying that knowledge in the real world. Your mentors and community are your safety net, so lean on them as needed.
 
Remember, many people have trodden this path before you. Follow what’s worked for others, and you’ll be fine.
 
Vena was the featured speaker at our March 14th, 2017 meeting. She’ll be talking about her favorite exit strategy—wholesaling for a quick cash profit. Check your "My Downloads" area of your account to get the audio from that meeting.

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