Thornhill Wealth Forum
The Perfect REI Does Not Exist
The "Perfect" Investment Does Not Exist.
If there is one thing I have learned in RE investing, it is that there is NO such thing as a perfect deal. The perfect deal exists in our minds and in our dreams.
You will never find it no matter how long and hard you search. Every home has something wrong with it.
I have never seen a home inspection that comes back in a one-pager that consists of a smiley-face, a thumbs-up, or a quick note saying, “Nothing to see here, folks!” Consider your own house or condo for a moment, and be honest: Isn’t there something wrong with it?
Sure, there are always catastrophic problems and red flags just waiting to sink you deep into the money pit, but then there are hundreds of little things that the average buyer need not fear.
If you find the "perfect" house, the price will not be "perfect" and vice versa!
If you insist on looking for the “perfect” deal or the “perfect” property, then real estate investing is just not for you. Investing is not about perfection, it is about finding a property that will make good rental sense, produce positive cash flow, and hopefully appreciate over time.
Some general guidelines to consider:
Location: Is it in a generally well maintained middle income neighborhood? Is it close to good schools? Is it convenient for shopping?
Is it close to the job market? Does it produce positive cash flow after all costs?
Remember, this is not a place where you are going to live yourself, so it does not have to have all the amenities your primary residence does.
Over-analysis leads to “Analysis Paralysis,” and will keep you from building wealth in real estate.
Real life story: a first-time investor knew he wanted to buy an investment property. He preferred to invest in Windsor. He got
pre-qualified for a mortgage. However, his list of requirements was so long that he never found the multi-plex house that had them all.
3 years have passed and the market in Windsor has appreciated and deals are are hard to come by. He lost out on over $20,000 of appreciation due to “Analysis Paralysis”. He fixated on small things and completely lost sight of the big picture.
A seasoned real estate investor I know gave me some advice. You will always runs into little things here and there.
There are times where you pass on an opportunity, but most of the time do your diligence and move forward and take the plunge. As with
any sport or activity in life, we become better and better each time we go through the process. The best way to sharpen your skills is
through experience and applying those experiences to future investments.
The bottom line here is "Do NOT sweat the small stuff". Stay focused on the “bottom line” and don’t lose sight of WHY you are investing in real estate to begin with.
Take the emotion out of the deal and ask yourself if the investment meets the following minimum criteria:
1. Cash flow positive even after contingencies (vacancy and repair allowance)
2. Can deal with mortgage rate fluctuation and a degree of risk
3. Attracts and maintains lower risk, lower maintenance tenants
Life doesn't require that we be the best, only that we try our best. Strive for excellence, not perfection.
If there is one thing I have learned in RE investing, it is that there is NO such thing as a perfect deal. The perfect deal exists in our minds and in our dreams.
You will never find it no matter how long and hard you search. Every home has something wrong with it.
I have never seen a home inspection that comes back in a one-pager that consists of a smiley-face, a thumbs-up, or a quick note saying, “Nothing to see here, folks!” Consider your own house or condo for a moment, and be honest: Isn’t there something wrong with it?
Sure, there are always catastrophic problems and red flags just waiting to sink you deep into the money pit, but then there are hundreds of little things that the average buyer need not fear.
If you find the "perfect" house, the price will not be "perfect" and vice versa!
If you insist on looking for the “perfect” deal or the “perfect” property, then real estate investing is just not for you. Investing is not about perfection, it is about finding a property that will make good rental sense, produce positive cash flow, and hopefully appreciate over time.
Some general guidelines to consider:
Location: Is it in a generally well maintained middle income neighborhood? Is it close to good schools? Is it convenient for shopping?
Is it close to the job market? Does it produce positive cash flow after all costs?
Remember, this is not a place where you are going to live yourself, so it does not have to have all the amenities your primary residence does.
Over-analysis leads to “Analysis Paralysis,” and will keep you from building wealth in real estate.
Real life story: a first-time investor knew he wanted to buy an investment property. He preferred to invest in Windsor. He got
pre-qualified for a mortgage. However, his list of requirements was so long that he never found the multi-plex house that had them all.
3 years have passed and the market in Windsor has appreciated and deals are are hard to come by. He lost out on over $20,000 of appreciation due to “Analysis Paralysis”. He fixated on small things and completely lost sight of the big picture.
A seasoned real estate investor I know gave me some advice. You will always runs into little things here and there.
There are times where you pass on an opportunity, but most of the time do your diligence and move forward and take the plunge. As with
any sport or activity in life, we become better and better each time we go through the process. The best way to sharpen your skills is
through experience and applying those experiences to future investments.
The bottom line here is "Do NOT sweat the small stuff". Stay focused on the “bottom line” and don’t lose sight of WHY you are investing in real estate to begin with.
Take the emotion out of the deal and ask yourself if the investment meets the following minimum criteria:
1. Cash flow positive even after contingencies (vacancy and repair allowance)
2. Can deal with mortgage rate fluctuation and a degree of risk
3. Attracts and maintains lower risk, lower maintenance tenants
Life doesn't require that we be the best, only that we try our best. Strive for excellence, not perfection.
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