How to Break Through Analysis Paralysis
Every year more and more people are afflicted with analysis paralysis. This debilitating affliction stops real estate investors in their tracks. If you are getting started flipping houses and have not run into this, you will.
What is known about this horrible malady? What can be done about? How can we avoid it?
What Is Analysis Paralysis?
I assume most people already have heard about it, but for those that haven't I'll explain what it is.
Analysis paralysis is paralysis caused by too much analysis. Basically, analyzing details of a deal over and over and never being able to decide what should be done. We always feel like more information is needed. Even worse is when people try to just have other people make the decisions for them.
What causes it is fear. Fear of making a mistake. Fear of not having all of the facts. Fear of losing a lot of money. Fear of stepping out of your comfort zone. Any fear that arises from actually making a decision to act.
It's much easier to just try to think of ways to avoid acting on a deal so that the discomfort goes away. When we aren't under pressure we feel fine. As soon as an opportunity presents itself, we start to doubt ourselves and our decisions. There is a lot of pressure in having to make a decision. It's just much easier to get rid of the decision and go back to the comfort of inactivity.
We all do it.
Analysis Paralysis Affects Everyone
It's not just the newbies that come down with analysis paralysis. It's not even just limited to kids and the elderly. Even experienced investors tangle with it from time to time. Gasp. I know.
I don't know how many times I've tried to come up with reasons to not even bother going to look at a house. This usually happens when the house is not my typical bread and butter. If it's not a clear cut deal, the decision becomes more difficult and uncomfortable.
There have been times when I've struggled with deciding to buy a house only to end up doing it and finding out that it was a homerun house flip.
There was a piece of advice I had read or heard a long time ago. To paraphrase, "Be quick to decide and once decided, don't worry about any longer. Deal quickly with any problems that arise from the decision." That's a really rough recollection of what was it was, but I'm sure you get the point.
Still this advice can be hard to follow when we are working with investments that cost 10's and 100's of thousands of dollars. But, it still really does apply once you have all the details you need for the deal. At some point, you just need to pull the trigger.
How To Break Through the Paralysis
Pulling the trigger and taking the action is much easier when you are conservative with your numbers. If you buy cheap enough, mistakes should not cause you much pain.
Be sure to be conservative with your numbers.
Let's say you are looking at a house for a fix and flip. The numbers for the deal look good, but you are unable to check the HVAC system. It looks decent, but you don't know for sure if it will need anything. You might be worried that if you add $4,000 to your repair estimate, you could lose the deal. Don't worry about it. Add it and sleep well at night when the offer is accepted.
Don't let emotions affect your decisions.
Another way to push through the fear and paralysis, is to make sure that emotions aren't affecting your decisions.
Are the comparable sales (comps) you are using really comparable? Are the sizes of the houses similar? Are the number of bedrooms and bathrooms the same? Are they all two-story like the one you are considering? Do they have the same level of rehab that you intend to do with it?
You get into problems when you don't have enough leads coming in. This is when you tend to start getting the itch. The itch to do your first or your next deal. You've looked at nothing but garbage and this one comes along that looks marginal. The temptation to ignore certain facts could cause you to make a huge a mistake. You've got to know when to say, "next!"
When you know that you are making the decision based on the cold hard facts and facts alone, it is much easier to pull the trigger.
Have an experienced investor help you.
One of the best ways to break out of the paralysis is to have someone look over your numbers and help you make a decision.
Earlier, I mentioned that it was bad to look to other people to make the decision for you. That's true. They should be helping you make the decision. This is especially true when they aren't the right person to be doing it. You only would want to do this with someone that has a proven record of doing exactly what you want to do. Don't go taking advice about a flip from a guy that talks about having bought a house in Vegas years ago and sold it for double what he paid because it appreciated so much. That didn't really take much skill.
Be concious of the fact that you are paralyzed.
Just knowing that you are paralyzed can help you break through it. If you know what is happening, you can change it. Don't spend a lot of time wasting energy, feeling uncomfortable. At the same time, don't just escape the uncomfortable process of making a decision by passing up on the deal. Just make sure you get accurate numbers and make a decision based on that. If something makes you question how accurate the numbers are, be as conservative as you would need to be to justify the risk you may be taking. This is what I mean when I talk about always making an offer no matter what.
It's important to make sure your numbers are correct and that you scratch doubt out of the equation by being conservative when things aren't so clear cut.
Don't let analysis paralysis keep you from ever breaking out of your comfort zone and finally doing a deal.
Nothing that is worthwhile is ever easy.
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