Analysis Paralysis And How To Treat Its Symptoms

When it comes to investing, there are two general types of interested participants: Those who plan only and those who do. For years I was the former. I wanted to wait for the right time, I did not feel prepared enough and I was somewhat fearful about getting started. I listened to every podcast episode I could, read countless books and even talked about real estate investing to anyone that would listen. In the back of my mind I was disgusted that I had not yet started. I knew that my thoughts and theories would someday lose its credit and value if they were never put to use. By understanding concepts only, I began to feel like an academic, understanding concepts of investing in a safe environment, but without field experience those concepts were just that. What was holding me back?

Analysis Paralysis
Lot’s of things. Starting a family, focusing on my career, not having the discipline and of course….Analysis Paralysis. I was not aware of my condition until I realized that if I cleared every single gate and the path to my first rental was right in front of me, I would hesitate to walk through. In my case, this hesitation was due to the fear of the unknown.

What if there is something I do not know about the property that makes it more expensive to operate?
– Did I miss an expensive repair?
– How long will it take to rent out?
– What if I cannot rent it out?
– What if I get the word’s worst tenants?
– People are watching me do this; What if this is a disaster?
– If this does not work out, I will never do this again.

I kept waiting for the perfect conditions to overcome this fear. But guess what I learned….there are usually no perfect conditions. Investing brings with it inherent risk due to the unknown outcomes. That is why investors get rewarded. The best we can do is follow proven models and analyze deals very well.

But there is a happy medium.

How do I know if I have AP?
Here is a simple clue and one you can only answer. If you are analyzing and underwriting with the intent of never buying a property or investing in a deal, you may have AP. By doing so, you may find comfort that you are taking steps, but if you are honest and discover that, regardless of what the numbers say it is not right for you, you are showing symptoms of Analysis Paralysis.

If you have a tendency stop while you are a head when everything in your criteria says to move forward, you may be dealing with AP. But do not fret. Many others before you have dealt with this emotional and mental difficulty and have overcome. Here are some things you can do.

Treatment for AP
Learn to Analyze Deals: Whether you intend to actively invest or passively invest, knowing your investment criteria up front helps you identify your investment strategy, objectives and risk level and only pursue those opportunities that fit the description of what to move forward on

Find a mentor: Experienced mentors and coaches can help hold you accountable and cheer with you as you take the next step to get started.

Overcome Fear with Math: This is advice I heard from listening to Brandon Turner on the Bigger Pockets Real Estate Podcast that helped me get through the process of my first rental. Rather than stopping at the numbers, use the numbers to validate or qualify the decision to move forward. When something made me nervous or anxious about moving forward, I looked at the numbers to remind me of why this made sense.

In my case, I knew the likely maximum expenses I could incur as part of preparing the rental property and that it was in a desirable area and someone would rent it for more than its very low mortgage. Recognizing this, the unknowns were how long it would take to rent and what possible unforeseen repairs and issues could I find. I continued to move forward with these unknowns because my basic math made sense. In the case of my first rental, my mortgage was $675 and I expected to rent the property for no less than $1,150. So even in the case of higher than planned repairs, we would do okay. I decided to breathe and move on.

Overcoming AP
Many people are living with AP and do not even know it. Thankfully, it can be overcome. Identify early, follow the above steps for treatment, and go make great investment decisions.

Author: Rodney