Need to change my thinking

General Real Estate Investing
1

I’ve read enough books to know what I want to do (SFR fix/flip at retail and later get into rentals) but I feel like I am standing on one side of a huge desert. On the other side is my first flip. I’m just not sure how to get moving to it. I know some of the things I need to do but I’m blocking myself worrying… what if the hard money isn’t there when I need it, can it really only be based on the arv?.. seems too easy. Will they really give me the money? Can I really get a good enough deal from a wholesaler so it comes in at the 70% arv including repairs? OK, those are some real questions I have, but I also have this looming negativity (what makes me think I can really do this… talk to all those people, find that deal, make some serious money. How can I kick my ass to get it moving? My foot will reach, but I can’t seem to get enough force into it (jk) I just feel like I am not sure what to do next. Theres no one holding my hand telling me what to do and I think I might be used to having that to some extent.

Theres LOTS more but Ok, you get the picture. I don’t want to be reading and analyzing forever and I know I sound really pathetic but I want this to work, so if I sound like a fool, so be it. I need a kick and am asking for it. Is there a book anyone could recommend that can help me to have more confidence in doing this, or in taking that first step forward? I feel stuck and know it’s just a way of thinking I need to change. I’ve read rich dad poor dad and about 10+ other books. They really helped in my thinking differently, but they weren’t quite what I needed to actually take action.

Thanks.

2

A little bit of fear is a good thing, it keeps you on your toes. The fear in your case is so overwhelming it’s causing you to freeze up.

Your going to make mistakes, that should be understood from the beginning so that you don’t panic when you run into what appear to be road blocks. Mistakes cost money, to hedge that factor, either have some reserves or some room for error in your deal. HMLs happily lend 65-70% of the ARV. Don’t forget about carrying costs, closing costs (2), miscellaneous costs (inspection fees, certificate of occupancy, permits, etc.) and realtor commissions. I wish the only expenses were just acquistion and repairs. Also if your using HM, there going to want their interest and fees. If it’s 15% and you extended the loan amount up to 70%, that’s 85% of the ARV. That leaves you with only 30k on a 200k property. When your favorite Uncle sticks his hand out, cut that 30k in half almost for your profit. Make sure it’s worth the stress and aggravation!

If I were you, I’d look for a deal where all of my costs didn’t exceed 50% of the ARV, these are quite a bit harder to find but will give you plenty of security and room for error. Even try to work out some seller financing which would allow a HML to give you above and beyond the amount of money you’d need to complete the project.

Don’t expect your kick to come from any external source, it’s not going to be in a book or any motivational words. All it will take is for you to want it bad enough. Then suddenly a dune buggy will appear in the desert. Your first deal is by far the most important one. It will give you money and confidence for your business if your successful. Or it will eat your money and you’ll be panic-stricken for a long time if you fail. Just make sure you don’t fail by working in a screw-up budget into the deal.

3

Danny is right, don’t over analyze everything. It sounds like you are afraid to fail, it is normal to feel that way. If you have confidence in the fact that you can learn how to do things you don’t know how to do from an experienced person, or hire out things that need to be done by a licensed person, you will do fine. Don’t be afraid to ask questions of those that have experience-you will learn so much just by watching and asking questions.

Take some small steps-don’t start out with your first deal being a huge fixup and don’t expect a huge profit.

Make an offer-make sure you have plenty of time to get it inspected, (I call a local plumber and electrician to give me an estimate of what needs to be fixed or replaced) it will cost you nothing and then you know what your repairs will be for that part. Call someone to give you an estimate on roofing and gutters to replace or repair. If you feel comfortable checking the foundation, basement for problems great otherwise get someone experienced in this area to give you an opinion on these things as to whether they think it is stable or not. Do measurements on exterior and interior to see how much paint you might need. If you need drywall or plaster repair get estimates. Some of this can be done before you close if the property is vacant, or even before you make an offer. Always get a pest inspection-this will cost a small amount but is a good idea. Make a list of what you think you need to do as far as repair or replacing other things like windows, damage to wood working, and other things you find necessary to repair or replace or update.

As far as the money, can you get a home equity line of credit? Can you you get pre-aproved for so much cash from your bank or credit cards? Do you have a partner that can foot the money if you do the work? Like Danny says see if the seller is flexible with the financing, it never hurts to ask. Figure that out and it will make you feel more at ease also.

If you really want to do rehabbing try it once and if you decide you would rather use it as a rental instead of flipping it do it. Enjoy what you are doing or it will not be fun.

4

The problem is that you “ain’t broke enough.” I sat on my butt–all fat, dumb, and happy–for years because we had plenty of income from our regular business.

Then we hit a bad patch and had AMEX calling every day, wanting their money. I knew something had to be done differently, and I decided to go after my first property.

That was in May. Since then, I’ve bought four houses, two of which have been sold at nice profits. A third is on the market and should sell well, and the fourth is being painted right now and will sell very quickly. Between the four deals, I’ll net $90,000, and that’s a true net number after ALL expenses.

This year my goal is to do 10-12 retail deals at an average profit of $20,000 each.

If you think you need to talk to someone to overcome some of your fears and hesitation, you can call me. Message me, and I’ll give you my number. This business is so good that I want anyone who is interested in it to jump in and succeed.

5

Let me start by simply asking this…

How many times did you miss questions on tests in school? Yet here you are an adult and in the world moving forward.

How many times were you turned down to a dance or to go out on a date?

In order to succeed we must be willing to fail.

“Don’t be afraid to go out on a limb. That’s where the fruit lies” - H. Jackson Browne

6

Good advice. I’ve come to appreciate:

“To have something you have never had, you must do something you have never done.”

7

Thank you all for your suggestions!

DannyTheGreat - I agree in hedging the risks. That is one of the things that attracted me to RE, you are taking risks but most of them can be pretty calculated risks. For me, the more I feel like I have a firm understanding of the numbers etc, the more confidence I have. I have been thinking and that is probably it right there. I need to be sure I DO have a firm grasp of lenders, wholesalers, deals, etc, etc, etc.) I am taking one area at a time and just making sure I feel confident that I understand it (hmls, wholesalers etc) I think those things will help me get to the other side where my little flipper awaits. I am trying to keep it to 70% or less (including all lender, fix up, realtor, tax man costs) I’d like to walk away with 20k per deal or more. I am also a big believer in leaving a margin for messups. I know there will be some in the first deal but I want to minimize them as much as I can of course. I know only me can motivate myself but the input gives me something different to consider than what I typically think about.

graciez- I am afraid to fail entirely, but I am not afraid to make mistakes along the way. My thinking to myself is that this HAS to work. I need it to work, threfore I will make it work, but I want to be dang sure I have all my ducks lined up so I make as few newbie mistakes as possible. I probably could get a HELOC but I would really not like to use that if at all possible. My husband feels the same way on that. It isnt eliminated as an option but Id rather not do it.

mercuryartners- Congragulations on your quick successeses! That is the same path I want to be on. And believe me, Ive had that bad patch and have already been broke enough.:smiley: Part of my problem is that RE investing just seems too good to be true, even though I know it can and does work for a lot of people. Thanks for the offer of the phone chat. I just may give you a ring.

4R- I think it’s more, forget about the questions, how many tests did I miss altogether? LOL. I know, it is fear, but it’s really a fear of not being prepared I think.

Thank you all so much for your responses. Everyone has really helped me out a lot. Merry Christmas!

8

That is is EXACTLY! I am adding that to my list of motivational quotes. Thanks! So true. There are so many things you need to change about yourself to get there!

9

I always ask myself before a purchase…" will the worst case senario with this property hurt my family?" if the answer is yes, I don’t buy. If no, then I buy, prepared for the worst but expecting the best.
The one time I didn’t ask myself this, I really regreted it and as a matter of fact just sold that property yesterday. whew!!
You need to have an exit plan so that if plan A dosn’t work you move to plan B, without these considerations you will fall, it’s just a matter of time.
Not trying to scare you more just let you know that if a property could potentially hurt you or your family you need to pass by it, save more back up funds then take the plunge.

If you’ve made all these considerations, start small with a flip or sfh to get your feet wet. Then close your eyes and jump.
You’ll love the adrenaline rush!
Good Luck.

10

Holy Smokes!!!

11

I must say I just saw myself!! Everything that was said I can relate to I’m currently looking for my first deal after investing a lot of time reading about the game. all of the comments are dead on. us newbies have got to just jump in the water apparently is fine!!! thanks for the motivation and info.Happy Holidays

12

I’m sorry I think instead of motivating I scared you even more!!!
It’s really alot of fun, and yes, take the plunge!!!
Godd luck and let us know!
Wendy

13

RE Newbie here,

After finding out that I am losing my Job in January the fear of not
having any money in my bank account and my family suffering financially is real. I believe the fear we ALL HAVE can either control you to a point of no action or motivate you to great heights, (Similar to a previous post) It really comes down to WHAT YOU DO WITH THE FEAR THAT MATTERS Fear doesn’t go away so why not use it to your advantage?

14

“Jump right in, the water’s fine” and “Just Do It” are nice sayings if you’re going swimming or buying tennis shoes. They’re very poor advice if you’re planning to start a business. The truth is that the vast majority of new businesses fail. Everyone that tried thought they would succeed. However, the majority that failed did not have a realistic plan that would ensure success. Operating a successful business is not about motivation, fancy sayings, hoping, or following the latest fad. Running a successful business is all about establishing a plan for success and then following that plan. Your plan should all but ensure that you will be successful.

Mike

15

I agree to a point, but there’s no doubt that there are probably 100,000 people in the US sitting on a great idea that could change their lives, only they don’t have the courage or motivation (or whatever you want to call it) to actually do it.

I know a guy who runs real estate training seminars, and without a doubt the reason that most students end up doing nothing afterwards is that they are just afraid. They have all of the knowledge in the world, but there’s “something” out there that is holding them back. Fear of success, fear of failure, feeling of no self-worth (many people subconsciously feel they have no right to be happy!), etc…

I don’t think you need what I would a full-tilt “business plan” at the early stage, at least not for real estate. You have to find that one property that will get you started and do with it whatever you plan to do (birddog, wholesale, retail, whatever). You just have to get that first deal under your belt!

When my real estate training friend said he was going to offer a year’s worth of full-time, 100% access mentoring to four of his students at a cost of $25,000 each, I told him he was crazy. But you know what? He sold all four slots in a week. People are just that in need of some hand-holding to assure them that, “Yes, there really is a business here, and yes, you can do it!”

My $0.02.

16

Most aspiring entrepreneurs can plan forever in complete safety. There comes a point when you have done enough planning, studying, etc. and you have to just do it. I always suggest when planning a business to run the plan past the most pessimistic person you know. Hopefully that will bring the overly optimistic picture of yourself sleeping on top of a pile of cash back to reality.

I have been an angel investor to a few start-ups and the most common thing I come across is business plans that don’t have a realistic plan of completing the goals. A lot of business plans or models have things like “Generate $XXXXXXX in annual sales revenue by 2007” or “To open 5 locations across the region in 3 years”. A lot of goals, with no plan of getting there.

One of the aspiring entrepreneurs who came to me was a 20 year old who wanted to own a car dealership. He had a lot of those empty goals written down, I politely handed the plan back and told him to go read a book on writting a comprehensive business plan. In 6 months, he came back with one of the best written, concise business/marketing plans I’ve ever seen that was supported by a little thing called reality and actual market data. Now he is 21 and owns a newly built, profitable car dealership with over 40 full time employees. He has intentions of opening another one in an adjacent city next year.

He had no money, experience, or related formal education. I know he spent 6 solid months studying the operations of a dealership, market shares of his competitors and what he would realistically start with and grow to based on factual evidence, successful marketing, unsuccessful marketing, vehicle financing, management, sales, and every other facet of a dealership. Therefore, I was comfortable funding 100% of this business.

The reason lenders don’t readily lend 100% of the appraised value of real estate investments is because they don’t make sure you know your stuff before giving you money. They give you enough slack to hang yourself with and ensure safety for themselves when your dead.

Objective planning is vital for a successful business. If you’d rather skip that step because it’s boring or “too hard” to gather the relevant data and information, you’ll fail. No large, profitable company just “wings-it”.

At the same time, once you’ve done your preparation, you’ll still be nervous and hesitant to take action. You’ve got to know the proper time to take the first step (or leap). This is why running your plan passed the pessimistic person helps. They’ll say, “Well what if this happens?” or “How is that going to work?”, if you don’t have an immediate answer, go back to planning. Make a smart, pessimistic person become optimistic about your business before you dive in.

17
"To have something you have never had, you must do something you have never done."

Great thread. Hope it keeps going.
Thanks to everyone for their insights.

18

hanatal-
You’re not scaring me more, you’re reminding me of very important things not to forget about (the exit strategies) I feel nervous when I don’t have enough information but am wanting to get going. I absolutely am doing it. It has to work and because of that I need to make dang sure it does work. Merry Christmas!

propertymanager -
I agree about the business plan. I have my goals written down am and trying to work them backward from where I want to be in 3 years (to be sure the cash flow and numbers will work) Then again, I’m such a planner/researcher type. I just like to have all my duckies lined up before I go swimming.

mercurypartners -
That 100% access hand holding sounds great! Too bad I could never part with the cash for “something I can do myself” Not that I wouldn’t pay for classes/books or even a mentors time but 25k, WOW. And my god, I think I have all those fears. But I am so willing and working on changing myself to get over them because I do have the power to change my own self and my life. That sure is a nice thought.

Dannythegreat- Ok, so if I come up with a rock solid business plan will you finance me 100% too? :wink: I have my goals written down and I think they are realistic and achievable. However, your example got me to think about just how much that guy learned during the writing of his super detailed business plan. It does help me to write things down as well. Maybe I should go get yet another book… on writing a business plan. Now, let’s see, where I should put that on the priority list (of getting a very firm grasp of the ins and outs of hard money, of which entity to choose, finding wholesalers, researching todays deals so I know what to look for when I am ready for one, figuring out how to approach sellers…) Really though, I do think it would help me in getting where I am going. ;D

Holy cow guys/gals, great points to think about. Merry Christmas.

19

Most small REI businesses don’t need a formal business plan. It’s a mixture of a business and an investment, unlike any other business. You don’t need to know every intricate detail before starting because every product is treated as it’s own individual business.

If you did enough research and gained enough knowledge to write a REAL business plan, I’d gladly finance your project 100%. If you did take the time to write out a plan, you’d know all about hard money, where and how the best ways to find the deals, which entity was best for you, locating wholesalers, etc. Business plans aren’t just road maps to a goal. They force you to do A LOT of research about every facet of your company, the industry, and yourself.