How do you overcome fear and have the courage to do your first deal? This is a question I get quite often and today I’m going to answer it. This episode is for everyone who has hesitated and missed deals – and for those who have hesitated and NEVER done a deal. I’m going to help you say yes to the right opportunity.
I understand the concern. I’ve been there – looking at a deal that looks ok, but nervous about the things that can go wrong. They call it the paralysis of analysis, but like most clever little slogans, there is often more to the story.
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News and Resources:
- Jorge, Atlanta, GA, “My fiancee and I spent $40,000 on a training program from (name deleted) that we watched on TV. We are in our first deal and we are over our heads. Can you help us?”
- Stan, Memphis, TN, “I see you have a group in Nashville, Knoxville, and even Johnson City. What do we have to do to get a Flipping America group in Memphis?”
- William, Tulsa, OK, “I’m looking at a couple of rental properties where the numbers look really good. They are occupied with renters paying less than market rates. 2 questions:
- The area is sketchy and may be going downhill. Would that give you pause?
- Would you raise the rents to market rate, raise them just a little? Or do nothing at all about the rents. The numbers work as-is, but of course raising the rents would mean more income.
- Charity, Little Rock, AR, “Would you buy one quadruplex or four single family homes?”
- Allison, Albuquerque, NM, “What are the emerging opportunities in single family investing for 2023.”
- Petra, Seattle, WA, “Is it possible to simply hire a house flipper to partner with them in some way? I think that my money combined with their skills could work well. And I don’t really want to do any of the work. I just want a return that’s safer and more consistent than the market.”
- Karen, Minneapolis, MN, “I’m brand new at this and I want to get started, but it seems with winter coming on maybe I should wait until springtime. What do you think?”
Topic: Just Do the Deal: Overcoming Fear in Investing by Understanding the Risks
Some years ago I finished up a two hour seminar and a gentleman came by to thank me for the information. He told me that he had spent a lot of money on seminars but mine was one of the most informative he had attended. I thanked him and asked how his business was going. I’ll never forget his response: “Well I haven’t actually bought my first deal yet.”
He shared with me that he had been attending seminars for two years and had spent more than $25,000 in his training so far but had not found the “right opportunity” yet. I was having trouble relating. You see, during that same two year span I had bought, repaired and sold more than 200 houses.
A month later I volunteered to take him house hunting. I had lined up several bank owned houses and HUD houses for us to visit. By the end of the day he still had not seen the “right opportunity” so I went ahead and bought two of them. It would be two more years before he would buy his first investment property.
I’ve seen the “paralysis of analysis” many times over the years. People are fearful of moving ahead with a deal and while thinking about it, someone else buys it. So I took some time to think about this to see if I could help move a few people off the bench and into the game.
Behind the paralysis is basically just fear. It’s not fun to contemplate or even to call out, but it is very real. Sometimes fear is irrational, but in many cases it can be well-founded. Paralysis can come from analysis, yes, as in over-thinking. But I say it’s impossible to over-think a deal if you maintain a bias toward action. Here are some other things that can create a pause:
- Recent mistake(s)
- Known unknowns
- Potential for huge unknowables.
I’m going to go through all the data points you need to check off in just a few minutes. But the data alone won’t be enough to get you to pull the trigger on a deal. If you listen to the end, I’m going to share with you the secrets to taking action.
There is no guarantee that approaching an irrational fear with rational thought will help. But I know that our actions are preceded by conscious thought which is often informed by our unconscious motivations and emotions. Perhaps we can choose to think correctly about the situation and let that embolden us to just do the deal already.
Trust me on this. Once you get past the first one or two, this won’t be as big an issue.
So What Is There to Fear?
To put it bluntly: A lot. Several things can go wrong. So it is helpful to approach this from a risk mitigation perspective. Begin by identifying all known risks, evaluating those risks in terms of probability and impact, and then constructing strategies for minimizing or eliminating them. In other words, let’s figure out all the ways this can go wrong, and deal with every one of them. There are two broad risk categories, Macroeconomic Factors and Deal Specific Factors. We will address the Macroeconomic Factors in a separate article, but the Deal Specific factors are listed below along with ways to address each one.
- Investor experience (or lack thereof)
- Investor Ability
- Renovation plans
- Appropriate for project
- Cost estimates
- Quality of contractor
- Unknown or hidden repair needs
Risk Mitigation Strategies:
- CMA, trusted Realtor
- Desktop Review, various BPO sources
- Appraisal, including after repair value
- Operator both experience and ability. Get a Coach/Mentor. No matter what your training, you owe it to yourself to do your first few deals in some type of partnership with an experienced person.
- Renovation Plans
- Review. Your Coach/Mentor will help you here. There are many ways to spend too much on a rehab.
- Cost analysis from national database of labor rates
- Quality of Contractor. Hopefully you have some training that teaches you how to hire and vet contractors (we have a mini-course on this topic). This is yet another place your Coach/Mentor will be invaluable.
- Unknown or hidden repair needs. This is one of the larger risks simply because it is unknown. Every rehab budget needs at least a 10% contingency built in. Because the house you are repairing has been there for years, there could be unseen problems from deferred maintenance or even previously unknown problems waiting to be discovered when you move a wall or change the location of a light fixture. A good contractor will know potential gotchas, but no one can see through walls and inevitably you will encounter expenses you could not have foreseen. The contingency will protect you and if you don’t end up spending the money, it’s gravy!
It will take some time and eventually it will require you to simply summon the courage to say “yes” to your first deal. But if you arm yourself with knowledge of everything that could go wrong and a plan to deal with them, you have insulated yourself from much of the source of fear in investing.
Here is the secret sauce: An experienced partner. It can be a coach, a mentor, or just some person who has done this type of deal before. Having this person in place is probably more valuable than any classroom or online training. If you have someone with good experience saying, “let’s do it,” you have all you need to say yes to the opportunity.
Quote of the Day
In previous years I’ve used a series of quotes from Mr. Rogers and Dr. Seuss. Today we begin a series of quotes from Michael Scott of The Office, played by Steve Carrell.
“I learned a while back that if I do not text 911, people do not return my calls. Um, but people always return my calls because they think that something horrible has happened.” – Michael Scott
Expected Air Date: Monday 10/17/2022
[0:00] How do you overcome fear and have the courage to do your first deal.
This is a question I get quite often and today I’m gonna answer it. This episode is for everyone who is hesitated and miss deals and for those who have hesitated and never done a deal I’m gonna help you say yes.
[0:29] Show that teaches you how to make money in real estate wherever you are, whatever your situation, there is an opportunity for you. And now, here’s that flipping America guy, Roger Blankenship. Thank you, Kathy Curtis and hello, America.
It’s time to talk about real estate. This is a show called Flipping America. I’m your host Roger Blankenship.
Even though the name is flipping America we don’t encourage everyone to drop what you’re doing and start flipping houses like you see on TV we do encourage everyone to consider real estate as a part of a balanced investment portfolio,
Now today we’re gonna talk about,
Do the deal i understand the concern I’ve been there
Looking at a deal that sort of looks okay but nervous about the things that can go wrong.
They sometimes they call it the paralysis of analysis but like most clever little slogans there’s more to the story and I’m gonna,
Unpack all of this for us in just a few moments but first a little bit housekeeping how to contact us here at Lipping America Facebook.
[1:32] Come slash Flipping America Media, Twitter, and Instagram at Flipping America.
Like and subscribe and ring that bell so you can be notified we’re trying to create content it’s relatively new thing we only have a few 100 followers on YouTube so far
And give you something,
Every Monday morning at 9 AM. Pretty much every Monday morning. We’ve got a new video that’s posting
Some expert tells me I need to do it on a different schedule okay have you questions about real estate or real estate investing you could send them to questions at flipping America. Net,
Questions are flipping America. Net
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Take out your phone and enter the number 205.
[2:36] 3547, that’s (205) 858-3547,
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It has the week’s real estate and flipping American news and investing tip a joke and a blessing.
Usually is about a 5 to 7 minute read with some optional links you have an opportunity to review the videos from last week and the shows from last week whatever it is we’ve done last week you’ve got a link to it right there.
[3:26] And we do get some comments back about the blessings. Look, I have a database of Irish blessings and I just
Basically pick one and copy and paste and you know some of them are funny and some of them are a little weird and but trust me i don’t put the weirdest ones
Jorge from that question. Jorge from Atlanta, Georgia. My fiance and I spent $40 thousand on a training program from and we’re not gonna name the name here because we don’t do that.
Before we watch them on TV we’re in our first deal and we’re over our heads can you help us the answer to that Jorge is yes and we’ve already been in touch and I’m already helping them we have a,
Program called the guru rescue program. I don’t say a whole lot about it but if you’ve spent at least $30 thousand with one of these national gurus didn’t get what you needed and
You still want some training or mentoring you can
Join our program
Head on over there and you can get the details and Jorge.
[4:36] Decided to take us up on this and,
Together stand memphis tennessee i see you have a group in nashville knoxville and even Johnson city what do we have to do to get a flipping America group in Memphis,
Now this answer is for Stan but it’s also for all of you who have been a little jealous that you don’t have a flipping America group in your town Stan
You can start your own.
There’s a way to do it. You just go to the flipping America Rhea. Com and.
Check out what’s involved in becoming a local leader and if you’re concerned, well, I don’t really know all that much. I’m not really an expert. I don’t know if I’m qualified delete. Look,
You don’t have to be a qualified expert I bring in the qualified experts to our meeting and you know I’m a little bit of qualified expert so.
[5:35] All you need to do is provide a little leadership for the group put the group together.
Each week or once a month up to you and then just to have a setup where you can tune in to the.
And we’re so looking forward to these groups getting started back up so stand go ahead and start your own group in Memphis Tennessee and I got another email today,
From someone else who wants to start a couple of groups and that’s just fine,
West Virginia to Honolulu and from Indianapolis Indiana to Jacksonville and all the way to Corpus Christi Texas,
And a lot of other points in between 35 groups and over 16 1000 members nationwide and we would love to have you.
Join as well. Hey, we provide complete training by the way.
[6:29] Everything that you need to do to run a local group and there is an opportunity for you to make money. I mean, I don’t know if you could make a living but you could come pretty close to it. If you did well, just selling flipping America products and services and,
Being sort of a local a brand evangelist for what flipping America has going on
So, thank you for that stand. William, Tulsa, Oklahoma, I’m looking at a couple of rental properties where the numbers look really good.
They’re occupied with renters paying less than the market rates I have two questions the area sketchy and maybe going downhill would that give you pause
The answer to that is yes
And thinking about buying in an area that’s going downhill because one of the things that I really evaluate when buying a rental property is what is the long term upside.
[7:33] And if there is no long term upsided I’m not necessarily ruling the deal out but I might wanna think about something different for example
A contract for deed where they’re actually buying the house
Type of arrangement. So, you’re not in it long term if it continues to go downhill. As far as the rinse are concerned, I would probably leave the rinse alone depending on how long they’ve been there. They’ve, if I’ve only been there like 6 months or so.
[8:05] Maybe when the lease is up raise them up a little bit but if they’ve been in there for a few years I leave them alone because I would much rather not have to turn that house over again,
Charity from Little Rock says would you buy one quadruplex or four single family homes I’d buy the quad duplex almost every time the reason is a quad duplex can be partially vacant and partially filled and the partially filled can
Pay the monthly mortgage but with single family home your gonna be either 100% vacant or 100% empty.
[8:39] Yeah it it’s a little bit easier to turn the units around in a quadrplex so you’re gonna have short-term people by definition but and there can be a compelling reason for the forcing single family homes they have a.
Alison from Albuquerque New Mexico says what are the emerging opportunities in single family investing for 2023 that is a fascinating question
It looks like the economy is heading south and we probably if we’re not already in recession we’re probably heading there
I would probably stay away from getting involved in any new VRBO or or Airbnb, you know, the short-term rentals. Why?
Well if the economy is bad vacations are the first thing to go.
And if people aren’t taking vacations then those units might be sitting there vacant for a little while not producing the income.
In terms of no that’s something to not do.
[9:48] I believe this is a good time to be buying or looking for.
Single family rental properties you’re asking that single family opportunity single family rental properties.
As people are losing their homes a little bit but also,
Since for people to be in rental houses we’ve talked about that on another show,
If you’re gonna flip in the luxury market, yes, you’re gonna have less competition but you’re gonna start seeing significantly longer times on market
Already luxury homes are not selling for retail,
Buy flips in the starter level to move up level.
Invest in rental properties small rental properties in good solid school districts where,
Of course that’s that’s down strategy no matter what’s going on in the marketplace.
[11:07] Hold off on short-term rentals.
[11:14] Alright Petra from Seattle Washington is it possible.
To simply hire a house flipper to partner with them in some way i think my money combined with their skills could work well and I don’t really want to do any of the work.
I just want a return that’s safer and more consistent than the market.
So, yes, it is possible. In fact, we have a program similar than in fact, that’s mostly what we do when we flip houses here to our programs of flipping America.
We use investor money and partner with them. They put up the money. We do the work. We split the profit 50 50. Now,
I’m a part of a team that’s doing that and so I you know share our 50%.
So, Petra, I am sure that you will be able to find someone. Again, go to your local flipping America Ria Club
The fact is you can also reach out to us. You you may wanna talk with us. Go to Flipping America. Net, schedule a strategy call,
Yeah we’d be willing to talk with you about it.
[12:42] So, in a word, the answer to your question is.
[12:48] And we got this from Karen from Minneapolis Minnesota I’m Brand knew it this and I wanna get started but it seems with winter coming on maybe I should just wait until spring time what do you think well Karen it’s
Amazing to those of us who live in the deep south to think about winter coming on in October we don’t get much of a winter here it really doesn’t slow us down much but we do have a few days in January and February where it’s too cold outside,
To play golf.
Ride a motorcycle or paint the exterior of a house so I understand that and I had a house in North Dakota a few years ago and they the realtor there said don’t bother trying to paint this thing until March.
And so we held it through the winter without really doing anything to it.
And we actually tried to sell it as is during that time and didn’t get any takers it was next spring before we got it gone but I have talked to some other investors
In those areas, and yeah, it is a seasonal thing, but this is a good time to be looking at deals and stocking up on your inventory, particularly if you have cash,
You don’t wanna be locked into interest rates while the weather’s like this. Quick break.
Who read that?
My hands were literally shaky as I handed over the chicks for the purchase.
Fast forward 20 years and over 2000 single family homes and I’ve learned a thing or two.
[14:11] And I wanna help you fast track your success while at the same time avoiding some of the mistakes I’ve made along the way.
[14:19] I’ve put together a comprehensive course called Flipstarter which is designed to teach you everything you need to know about finding, funding, fixing, and flipping houses.
I don’t hold anything back I tell you everything you need and I sell this course normally for $999 but for a limited time,
It’s available to you for $147.
Flipping America. Net slash flip starter check it out sign up now for lifetime access but this is a limited time offer,
It could go away at any time. Flipping America, flipping America. Net slash flip starter.
[14:58] Some years ago i finished up a 2 hour seminar and a gentleman came by to thank me for the information.
He told me that he’d spent a lot of money on seminars but mine was one of the most informative he had ever attended.
Well, that was gratifying. So, I was interested in continuing the conversation. I thanked him and ask him how his business was going. I’ll never forget what he said to me.
Well I actually haven’t bought my first deal yet.
[15:21] He shared with me that he had been attending seminars for 2 years and it’s been more than $25 thousand in his training so far but it not yet found the,
I’m using air quotes here right opportunity,
Yet. I was having trouble relating to this. You see, during that same 2 years span, I had bought, repaired, and sold,
A month later I volunteered to take him house hunting I had lined up several bank owned houses and hood houses for us to visit by the end of this back in the day when you could still do that by the end of the day he had still not seen the quote right opportunity,
Make sure it’s okay with him but I went ahead and bought two of them. It would be two more years before I would see him again when he had his first opportunity and even then that wasn’t much of a deal. I’ve seen the paralysis of analysis many times over the years.
People are fearful of moving ahead with a deal and while thinking about it, someone else buys it.
Move a few people off the bench and into the game and if you’re on the bench and still thinking about it and pondering your first deal I hope that something I say today can prompt you to take the plunge now.
[16:37] Take the plunge into a good deal don’t jump into a deal just for the sake of doing one.
It’s not fun to complicate contemplate.
But in many cases it can be well founded.
[17:07] Paralysis can come from analysis yes as in overthinking but i say if you have a bias toward action it’s almost impossible to overthink a deal.
[17:21] So there are some other things that can create a pause and maybe they should,
These are all big ones for me cuz they’ve happened to me. Recent mistakes. If you’ve made a mistake recently on a property that it’s gonna give you a pause and you’re gonna be a little,
Another thing that can cause you to kind of.
In other words there are some things about this property that you don’t know.
That little situation over there or to do that little thing and you haven’t been able to get the cost breakdown on it and the time is running out. Do you gotta make an offer or walk away?
To be paralyzed.
[18:21] Keep working.
[18:27] What I need to know about the previously unknown.
You know, you can’t really know the unknowable. You can’t know what you don’t know. You can’t know what you don’t know that you don’t know.
[18:47] Until you open up that wall.
To replace that shower valve you couldn’t possibly have known that it was full of black mold because the existing valve had been leaking for years.
[18:59] There are other things that.
But you don’t realize until you’re in it and,
1500 houses in or so when I bought this house on a lake that had four ceiling windows and a lot of the rooms but it was an older house and we were making it beautiful and we really made it a beautiful house but we didn’t realize until we were almost finished with the project that none of those windows had tempered glass because it wasn’t even
Invented when those windows were installed but since they went all the way down to the floor and many places throughout the house we had a huge.
Glass budget that we had not counted on. Should we have known? Yeah, we should have. Could we have seen it?
Yeah, we could have. We just didn’t even think about it because.
[19:54] That is one of those things where you kinda kick yourself in the fanny and you say, well, I should’ve known. But there are other times when you’re looking at a deal and there are things that you don’t know and,
You don’t know,
A crack and a foundation.
A foundation repair company out there.
You maybe you can convert that from a known unknown and to something that you do know so you get the estimate from the foundation repair company but what’s that going to do,
To the walls inside the house as you move and shift the foundation it’s gonna move those walls and so there is a potential for huge unknowables from something like that,
All I want you to do is to acknowledge that there are some valid reasons for paralysis and then,
Let’s think about what we have to do.
[21:05] Act on them by not pulling the trigger on the deal. I’m gonna go through all the data points that you need to check off but the data alone is not gonna be enough to get you to the trigger. To pull the trigger on a deal. If you listen to the end of the show today, i’m gonna give you I think
The biggest secret to taking action.
[21:24] So just hang on.
But I know that our actions are preceded by conscious thought which is often informed by our unconscious motivations and emotions,
We can choose to think correctly about the situation and that will embolden us to just do the deal already i just engaged in a little bit of that by trying to convert no unknowns into something that you do know and if you can do that you’re on the path,
Now trust me on this I want you get past the first one or two this won’t be as big of an issue.
So, what is there to fear? I want to put a bluntly a lot. Several things can go wrong.
It’s helpful to approach this from a risk mitigation perspective. So, we’ve already talked about this. You identify the known risk and evaluate those risk in terms of probability and impact and then you construct strategies for minimizing or eliminating them
In other words, let’s figure out all the ways this thing can go wrong and deal with everyone of them. There are two broad risk
Factors are risk categories macro economic factors and deals specific factors we will address the macro economic factors in a separate
On December show maybe but the deal specific factors are listed here and I’ve I’ve got a little list I’m going to give you along with the ways to address each one.
[22:48] Those wrists include valuation to handle valuation.
A CMA from a trusted realtor you can pay someone
Get an appraisal to protect their interests and they will probably do what’s known as an ARV appraisal so they have an idea based on your plans scope of work,
Some peace of mind because.
[23:24] They have the experience in knowing this and also may help you say no to a deal that’s marginal or not a deal at all. Another risk includes your experience. Are you jumping into something new that you haven’t done before?
Well, that’s where you go get a partner and I’m kinda getting headed myself here with the.
[23:47] Spoiler alert there it was.
To look them over to make sure that they are appropriate for the project and you have good accurate cost estimates.
When I was looking at the AC wondering if we were gonna need to replace it I did some research on that the size of the unit know all of that based on the highly competitive pricing that we have here in Atlanta
And when it turns out that we did indeed need to replace the AC.
The pricing is not as competitive in Dothan Alabama and we actually paid more by a couple of $1000.
Then, we would have paid if I had bought that same unit here in Atlanta. So, where it goes.
What you need to do there is just make sure that someone on the project has enough
Your contractor is of equality that knows what to look for there are signs a lot of times of damage that maybe hiding right beneath the surface when it all comes down to,
Is experience and this my friends is the secret,
I wanted to share with you about pulling the trigger. If you’re sitting there right now and you’re wondering if you if you could ever pull the trigger on doing a deal then
Here’s what you do go to your local rea meeting and just listen go to two or three meetings and just listen because there are some people there that are fluffy
You know what I mean by fluffy? What they hand out our baloney sandwiches? You know what I mean by baloney sandwiches? We’ll just think of the initials and this is a G-rated show
Who are all talk and no action but you will also find some people there who are for real and those are the people you want to align with
Now, here is a great thing. If you have the money or the credit worthiness to get this deal done.
[26:05] You may be able to find an experienced partner at one of those rea meetings that you can bring into your life and offer them a piece of the profit in exchange for
Making sure that everything
Gets done that needs to be done and the risks are mitigated and you know the checklists are all checked off and everything happens in the way that should that it should I’m I’m gonna let you know a little secret.
This is the best way to learn how to flip houses the best way to learn how to flip houses is
To just go flip houses and if you don’t have any experience, you don’t have any skills and you don’t really know where to start. Hopefully, you have some money because you need to put up the money, you need to bring something to the table and if you can
The resources to fund the deal.
I know that many many experienced investors will jump at the chance to be involved in some profit without deploying any of their own capital,
That’s what we do.
And eventually it will.
If you arm yourself with knowledge of everything that could go wrong.
Can you have a plan to deal with them you will have insulated yourself from much of the source of fear in investing.
[27:32] And again
It can also be a coach it could be a mentor or it can just be some person who has done this type of deal before here’s another little secret the flipping America guy has done thousands of real estate deals but i will not
Do something new.
Hi. I’ve done a lot of those and some of them went fine but some of them went horribly wrong.
Every time I buy a different asset class or attempt to different type of renovation I bring in someone that I can find or that I have met.
Who has done just that type of thing and i partner with them at least on the first one,
A hotel a golf course,
If you have someone.
[28:52] You have everything you need to say yes to the opportunity.
[28:56] I know we covered a lot of ground today and some of that you may need to listen to again but that’s okay that’s what you got the podcast for.
That we’ve been using quotes from Doctor Rod.
[29:09] We’ve been using codes lately from Michael Scott of the office and a couple of people have objected to this and I’m just gonna say look we’re not endorsing him and his behavior.
And or if any they were making fun of this fictional character by quoting his idiotic things, okay? So, take a chill pill. It’s all humor.
And it’s okay to have a little fun ever once in a while so here’s the Michael Scott quote for today.
[29:35] That’s what she said.
[29:41] You’ve been listening to flipping America real estate investing for everyone listen three times a week on stations across the country or on the flipping America app free in the app store
Find and follow us on Twitter and Instagram and keep your eyes open.