By the end of 2011, I had completed nine years of real estate investment courses. Acquisition, cashflow, buy & hold, flipping, landlording, rent to own, taxation law… the list goes on and on.
Despite my educational knowledge, I still had not yet purchased a single investment property. Even though I had successfully run my own company for the previous fifteen years with positive cashflow in each and every year, I was still afraid to take the plunge.
I kept asking myself “How could I take so many calculated risks but be afraid to take this one?” I was stuck in a state of fear commonly coined as “analysis paralysis”. I would look for the perfect deal but before I would pull the trigger I’d make up excuses as to why each potential deal wouldn’t work. The truth is there’s no such thing as a perfect deal. The human mind can be our own worst enemy and I was battling against nobody other than myself. Trying to psyche myself into taking the next step, but for some reason I kept backing down, convincing myself as to why each opportunity wasn’t optimal.
In mid-2012 I booked vacation. I decided to stay home and relax. The previous two years’ vacation was spent repairing the house after extensive water damage which had nearly depleted all of my savings. It was early afternoon and I grabbed an ice cold Corona from the fridge and went to sit in the yard and do some reading. As I hunched down in my lounge chair I continued to read my latest real estate investment book. My attention was drifting in and out and I found myself reading and re-reading the materials. I felt frustration growing within me as I thought to myself “I know this s&%t. I’ve read it a hundred times in other books.” I stood up and blurted “That’s it! I’m going to buy a property or I’m going to stop reading about real estate investing.” That was the catalyst, the last nudge through the barrier of procrastination, the trigger required to break through my analysis paralysis.
That afternoon I started perusing the real estate listings, performing cashflow calculations on properties like I had so many other times. A few dozen cashflow calculations and I had found a property that generated cashflow of $9,000 / year. The analysis took into account both expenses and contingencies – financing, insurance, utilities, vacancy & repair allowance, property management fees, contingency allowance, etc. This was an amazing opportunity, but was it too good to be true? I started to convince myself once again, trying to urge myself back to a state of analysis paralysis. Before I could change my mind, I called the realtor and setup a viewing and obtained the paperwork to verify the numbers. The next day, after performing my due dilligence, I approached my business partner, Reid, and asked him if he was interested or if I should go at it alone. He sat down, reviewed the numbers and without the same analysis paralysis that I had endured over the last few years he proclaimed that he was in!
Less than 24 hours after viewing the property I was signing my first offer on an investment property. With very little negotiation the offer was accepted and we were to take possession in approximately a month. The capital for the down payment was taken from the home equity of Reid and myself and the deal was easier to close than I could’ve ever imagined. Our first property was acquired for $277K and required $55.4K for down payment and $10K in closing costs and contingencies; a total initial expense of roughly $65K. Having borrowed from our home equity we knew that it would cost us approximately $2,275 in financing costs per year (3.5% of interest for borrowing $65K from our home equities) or < $50 each per month. The $9,000 in positive cashflow would cover these costs and still leave us with a very comfortable safety net. On top of that, the property would appreciate at an average of 3-5% per year while the mortgage would be paid down by the tenants.
Even with my landlording courses, the first few months were a bit challenging and intimidating at times, getting used to communicating with tenants, dealing with rent collections, creating routines to handle everything. Within two months there was even a moment where I lay my head in sorrow and thought to myself “I’m a landlord now. This sucks.” But each and every month it got easier and I quickly discovered how easy real estate investing truly is.
Many of the fears in the back of my head turned out to be worrying for nothing. Oh sure, over the last 3 years I’ve had to evict two tenants and hire contractors to perform a few repairs (oh and I’ve been called at night precisely zero times to date!). But what’s the alternative? Work an additional 20 years to avoid a couple of challenges? Challenges that have brought me new skills and increased confidence no less? That would have been a costly mistake not overcoming my fears!
Within six months of owning investment properties the stress level was already amongst the lowest in any business I’ve run to date. Oh and the decisions that I need to make are trivial – Tenant doesn’t pay rent? Evict! Repair needed? Hire contractor. Vacancy? Advertise! There’s no grey area, it truly is an easy business to run!
From 2012 to present we’ve systematically leveraged our home & investment property equity along with our personal cashflow to acquire more properties. As we added a few more properties things got busy so we hired a property management company as well (which we already accounted for the cost when considering each property).
Fast forward to the present and in the last 2 years we’ve acquired a total of 18 units. Our real estate investment holdings exceeds $2.5 million and each and every month our net worth increases by $10,000 as a result of property appreciation, mortgage paydown, positive cashflow and taxation benefits.
Contrary to popular belief, this didn’t require huge sums of money to get started, only a fraction of our home equity. I did this with very little capital. The real obstacle was getting over my bad case of “analysis paralysis” and finally taking action.
Where do you want to be in 2, 5 or 10 years? What are your obstacles to getting there? Make a list and systematically knock them down! Don’t let inaction hold you back! Whether it’s fear, analysis paralysis or seemingly insurmountable challenges standing in your way. Push through them! Achieving your goals depends on the actions you take today.
Don’t make the same mistake that I did for so long. Go get ‘em tiger!