How To Avoid Paralysis By Analysis
By Paul Esajian on October 16, 2015
There is a fine line between confidently jumping into a deal and tiptoeing around it until you are certain it will be a success. As much as you may feel confident about a situation in real estate, there truly is no guarantee it will yield the results you expect. If you look at a property or a deal long enough, you will eventually find enough holes to cast doubts about it. This leads investors, old and new, to walk away from many profitable situations. If you are confident in your due diligence and feel strongly about a situation, don’t overthink it. Overthinking a deal can be more harmful than being under prepared. It is natural to be apprehensive, but you can’t let these control your business. If you are having trouble taking a stand, here are some tips to avoid paralysis by analysis:
“I’m scared to make the wrong decision”
There is no better educator than getting your hands dirty in a real life situation. You can read all the articles or books you want but nothing replaces action. Even the most seasoned investors take missteps from time to time. In most cases these will serve more as learning tools than anything else. Wrong decisions are part of the business. You may not turn every deal into a home run but it is also takes a lot to lose money on a deal as well. The point is that taking a wrong step or two will not be the end of your business. In fact when you are just starting out you will make more of these than the alternative. Never be afraid to make mistakes. This is the best way to learn the business.
“I don’t want to risk losing money”
There is no such thing as a risk free real estate investment. Before you get started in the business you need to accept that you can lose money. That being said there is a difference between losing money and not making as much as you anticipated. Making a reduced profit happens from time to time. To lose money you would need to totally misread the market or have a series of major unexpected items pop up with the property. Can these happen? Sure, they can but the odds are very slim. People get into car accidents all the time. Does that mean you are going to stop driving? Like anything else as long as you are cautious and do your homework you should feel comfortable with the risks associated. In the case of real estate the rewards usually far exceed whatever the risks are.
“I don’t really know what I am doing”
You will never be as prepared as you want to or need to be when just starting out. As long as you have a solid base of education the rest you can learn during the course of the deal. If you are still not prepared to act you should lean on the team around you. Between your realtor, attorney, mortgage broker and fellow investors you have plenty of resources to make you feel comfortable. Your realtor can help walk you through the contract and your attorney will guide you through the closing. Your mortgage broker will explain the process while a friendly investor will fill in any holes they may have missed. Even experienced investors will get stumped from time to time. You don’t need to know everything to make an offer or proceed with a deal.
“What if the returns are less than I anticipate”
There will always be hidden expenses and items that throw you for a loop. As shocking as it may sound to new investors not every deal will be a home run. In fact almost all the deals you get involved in will be more singles than anything else. You should have a firm grasp of all expenses, costs and payments before you get going. As long as you are aware of the costs you should be comfortable with the returns. Real estate investing can be stressful at times but you won’t spend 40 hours a week at a desk thinking about it. For the amount of time you spend the returns usually are higher than most any other job you can do.
“I know there is something I am missing”
It is easy to talk yourself out of a good deal. While it is true that if a deal looks too good it usually is this may not always be the case. There are only so many times that you can evaluate a deal. After three or four you need to give it a rest and trust what you see. If you need to get a second opinion that is fine but understand that not every opinion you get will be accurate. Take a break and go back at it from another direction. If you still feel like you are missing something it may just be that you are gun shy in taking action. The odds are that you aren’t missing anything. There are many horror stories out there from investors who got burned on deals. What you don’t hear is how they went in without knowledge of the market or the property. Don’t let these stories keep you from acting. If you feel that you did your homework you probably didn’t miss a thing.
Taking the step from analyzing to doing is important step for your business. Conquering the fear of taking action will take your business to new and exciting levels.