Don’t Over-complicate Investing Starting Simple Will Better Serve You
Working and investing in Real Estate holds the designation of being two things:
1- A pursuit where you can all too easily get in over your head (keeping it simple helps to avoid that) and; 2- A pursuit where creative thinking and unconventional strategies (NOT keeping it simple) can pay off big time!
So exists a difference between keeping your deals simple and creatively complicating your deals for maximum returns.
I recently had a series of conversations with a new real estate investor where he had become confused and overwhelmed by the amount of information he was reading. He had read and studied information from a bunch of different real estate gurus and was trying to pull together a strategy from all of them. His “a-little-of-this-and-a-little-of-that” approach was taking him in too many different directions. He was not keeping it simple.
Now, I’m not saying you shouldn’t study other material and I’m certainly not saying that you shouldn’t get creative in your deals. You should–eventually. But, if you’re working on putting together one of your first deals, stick with the basics. You’ll get to a point where you’re ready to get creative. For now, a concerted focus on getting some momentum with a few easy deals will serve you well.
What’s the difference between simple deals and complicated deals?
Let’s take a look at an example a simple wholesale deal. In this scenario, you;
1) Enter a contract with the seller where you’re the buyer.
2) The price is negotiated. Once you have an approved price, you;
3) assign the deal to someone else for a fee–simple.
Contrast that with one where you pursue a short sale using multiple methods.
1) At the same time that you enter a contract, you also get a deed to the property (just in case the seller gets cold feet).
2) Then you get an authorization letter for someone to talk with the bank;
3) plus you get a Power of Attorney (just in case something happens later on that you can’t control).
4) Then, before sending information to the bank, you heard somewhere that if you take all kinds of pictures of the property, it might help.
5) And don’t forget that you can influence the BPO by being at the property at the same time.
6) Plus, you almost forgot that if the bank doesn’t accept the short sale, you might want to take the property “subject to” so you go back to the seller to get another contract.
7) And, you heard on a CD somewhere that getting an option on the property gives you a lot more control with not much risk, so you might as well throw one of those in as well.
Before long you’ve exhausted the whole real estate encyclopedia on this one deal.
There is nothing wrong with those steps. You may be in a position someday when you would do every single thing on that list. But not when you’re putting together one of your first deals. You’ll be challenged enough with just the basics. Over time, you can creatively manipulate deals for maximum returns.
The moral is: Don’t overwhelm yourself by doing too much too soon. Go out and make some money the easy way. It might not be as much as you could make from that deal but, if you over-complicate it, you’ll lose the deal entirely. Making something is always better than making nothing. The earlier you can see that the better off you’ll be!