Analysis Paralysis

Have you been there? Afraid to pull the trigger?

Busy looking at numbers and figures over and over and wanting to be absolutely positively enthusiastically  unsubstantially hopefully right about making that purchase of your first rental property? Well surprise, you’re not alone.

But you want to know what separates you from the others? Actually pulling the trigger and doing what scares the others off. It’s a select few that actually make the change in their lives and make that first purchase. It’s even fewer that push past that and go for number two, three, four or even more.

Yet it’s that choice that can make the difference in your life and it’s where we all have to start.

During my career as a Real Estate investor I’ve seen it over and over. People who are sitting around gathering information, waiting until the time is right and just waiting until the opportune time. Well guess what, if they are waiting, they’ve already missed it as the best time is always now to do anything.

Ok, maybe I’m a little overzealous, but I’ve spent years trying to help people with their Real Estate and the majority of them are hoping for free information that they never apply anyway. It always comes back to the Pareto Principle.

20 percent of the people out there account for 80 percent of the results. Or one person in five that say they will do something, actually does it. The other four fall back to their old ways and talk about how foolish the one person is in dreaming so big when it’s certain to fail.

So, Are You The One?

Are you? Are you willing to take the chance? To make the decisions that can change your life? Remember, it’s easier being four out of five people.

Be forewarned, this is not for the feint of heart, you are dealing with tens if not hundreds of thousands of dollars. Buying an investment property poorly has set some people back dozens of years or more with their goals. Yet at the same time it has accelerated people forward so fast their minds spin.

You have to make the choice though, can you sleep at night with your future on the line?

As I look back, I remember how we would push the envelope. In our first six months we bought five properties. In the first five years almost fifty properties! We dreamt big and we took huge steps to get there.

We wanted to change our lives and get away from the nine to five lifestyle where we were working for someone else. The reality was we did escape the 9-5, but it became the 7am until 9pm. Our 45-50 hour work week exploded into 80 and 90 hour work weeks. The difference being, our work contributed directly to our success versus the companies that we previously worked for.

Was it easy? Hell no! We had weeks and months where we scraped by trying to cover all the payments, especially when you close on four properties in 30 days and have to cover closing costs, renovation costs and looming mortgage payments. Let’s not even talk about the economic downturn. OK, maybe a bit.

The Financial Crisis and Lessons Learned

When you lose almost 20% of the value of your properties in less than a year it can be frightening. When it’s 95% of your net worth it’s downright depressing, but there were lessons in there as there often is in life.

First, for those of you that are worried about me, much of that equity has come back, unfortunately we had to make decisions to sell off properties when they were much lower than we hoped. So although values are up close to 20%, that peak of net worth is currently far down the path. Lesson one, Real Estate does go down in value!

We had two years of incredible appreciation, we got greedy and moved from fundamentals (cash flow, good properties, good rental areas) into speculating (hoping to make money off appreciation versus the cold hard numbers). Lesson two, focus on cash flow for long term success.

Many of our early properties were providing great cash flow, but those ones purchased in the first six months of 2007 or just before the recession hit, were painful and bleeding any of the profits we were seeing from our early properties. Is there a lesson in this too? Of course. Lesson three, sticking to your systems pays off.

Those original properties generated cash flow from the beginning and even during the downturn they continued to make money. Locally our economy is now growing like crazy and it’s causing our cash flow to grow with it as well. We’re taking advantage of the strong economy to increase rents without being greedy about it, but also, not missing out on opportunity.

This has allowed us to build up our war chest in case things do fall apart again and it’s allowed us to pay off some of the debt we had accumulated during the survival years. Many other investors we know weren’t so lucky. They completely bailed once things went down hill, if they could have hung on, they may not have recovered everything, but they would still be in the game and on their way to recovery. Lesson four, Real Estate will reward you over time. Don’t give up to early

That First Step

Whether you want to create a massive portfolio of properties, or you simply want to own a single rental property to create a retirement nest egg, it all starts with that first step.  Having a boring methodical system to buy your rental property and then sticking to systems to advertise, screen, rent and maintain your property will reward you over time.

It’s not as sexy as stocks, but Real Estate does seem to make a nice long term investment.  You just have to be patient. And start somewhere.

So what’s my point after rambling on so long? We started with analysis paralysis, I talked about nearly losing it all in Real Estate and now I’m back to talking about taking that first step. Did I scare you off yet? Hopefully not.

Whether you’re just starting out or you already have a rental property or two under your belt you’ve already taken the step many others won’t. I’m just hoping my articles and tips can help you and other landlords make less of the mistakes I made and help turn your landlord business into a success.

Educating yourself before you start can help, but simply analyzing never gets you moving forward. It might be a rough trip along the way, but if you don’t start it, you can never finish it.