How to Overcome the First Deal Syndrome
The First Deal Syndrome is a topic I often talk about with my students. What is it exactly? How can you overcome it?
If you’re already an experienced real estate investor, you would know what the term means. It refers to how first-time investors would jump into a deal without thoroughly examining the situation first. This usually leads to a wide range of problems, particularly a wastage of time and resources.
One thing’s for sure, the First Deal Syndrome is normal among novice and inexperienced investors. Still, getting overly excited about landing a first property deal shouldn’t override the need for extensive market analysis. If you focus too much on the goal rather than on the process of accomplishing it, you will find yourself making really bad decisions.
With that being said, it is crucial for a first-time investor to do the necessary preparations first and avoid pitfalls that occur along the way. It’s only a matter of applying these important tips to overcoming the First Deal Syndrome.
Leverage your knowledge
What have you learned about real estate investing so far? For sure, it entails a lot of risks. This fact should serve as your guide towards making the right decisions. It’s a matter of reviewing the material you have acquired as a student of the real estate sector. For me, knowledge is powerful. If you are willing to put your knowledge to work, you will definitely avoid issues that will affect you later on. More importantly, you will be able to identify risks and avoid deals that are less likely to provide positive results.
Define your goals
What is it you want to achieve in the short term? How about in the long term? Your goals should motivate you in doing a good job. They enable you to draft effective strategies that promise great returns. You can begin by writing down your mission statement. From there, you can create highly-detailed daily, weekly and monthly plans. Include all the necessary steps to achieving the goals for each individual plan. After you have all your plans set, you can then begin searching for your first deal. If it doesn’t work out well, you can go back to the plans you have made and try to determine what you did wrong. This way, you can learn from your mistakes and make it easier for you to finally close a deal (and successive deals) in the future.
Be open and transparent
If you’re a syndicator, how can you tell investors that they are putting their money on a highly profitable business model? For this, you need to foster trust and show your investors that you have clear goals in mind. It’s important to know that your investors want to secure high returns for their money. They need to make sure they’re investing for the right reasons, so it’s highly crucial to be transparent and open. Keep your investors in the loop so they can cooperate with you when you are set on buying more properties. I really believe in properly and frequently sharing positive economic reports and the Job additions articles with them, especially in the Emerging markets where you are underwriting the purchases to find the “Golden Opportunity” for them to invest in.
Build your team
What makes an effective investing team? Before setting yourself up for an acquisition, you need to focus on building your investing team first. In this sense, make sure you have the right talents and skills on board. Opt for CPAs, brokers, lawyers and other industry professionals who can provide you with valuable advice. Also, form partnerships with people who have the same passions as you. That way, you can get relevant ideas that can impact your investment strategies. I would suggest gathering one or two like-minded, trustworthy and passionate team members to build the strong foundation of your business.
Educate yourself continuously
Don’t just stop with whatever knowledge you currently have. After all, investing is a process. In order to do it better, you have to open yourself up to new ideas. As technology changes, it’s important for real estate investors to adapt to these transformations by reading blogs, listening to podcasts and attending important industry events. When I got started with multifamily investing, I was overwhelmed by the amount of information about the topic. It was difficult to understand the sector as a whole; nonetheless, I was able to focus on learning everything I can about basic concepts and strategies. So, I read and read until I was able to use the knowledge I have to land my very first real estate deal. All that has led my companies to do 27 syndication offerings. It definitely gets easier after a couple of offerings and after distributing some good cash flow returns to the investors. And when they start telling people in their circle of relatives and friends. I guess the lesson here would be to spare precious time for self-study. This allows you to generate a lot of knowledge and identify a potentially good deal when you come across one.
I hope you can apply these steps and overcome the First Deal Syndrome without any trouble.