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Fear Factor Part 1

If you knew me, you would wonder why I had any reservations at all about buying my first investment property.

As Del Walmsley describes it, I’m what he calls a “Type A” personality who tends to shoot before aiming. If I happen to miss the target, the attitude I adopt is: “Oh well, I’ll probably hit it the next time.” So why then did I experience one apprehension after another, and time after time during the process was I paralyzed with fear?

On each page of this journal I’ll explore this puzzling question, and from the answers, hopefully you’ll be able to recognize that the fear is normal, manageable, and ultimately can be productive. I’ll start at the beginning…

I grew up in California, and during the late 70’s and early 80’s I spent many hours doing rehab and make ready work on single family homes my parents owned. Of course Del wasn’t around back then to explain why it was better to hire a professional instead of your teenage kid to do the work, but at least I was the beneficiary as I learned some good skills and made a few bucks along the way.

Over the years my parents bought and sold over thirty rental houses and retired with a very nice nest egg and monthly cash flow. Every property they purchased was a positive investment, except for one which was a piece of land with no improvements on it. It’s kind of ironic that their one loser was the type of real estate Del says makes no sense purchasing: raw dirt. It’s also ironic that after experiencing firsthand their tremendous investing success year after year, that I would have had any concerns when I started to seriously look for a property. But I did.

It didn’t seem to matter that I knew my parents were financially independent from their real estate investments and not from my dad’s dental practice. It didn’t seem to matter that from my association with so many successful Lifestyle members and employees that their success could also be mine. And so when I searched the MLS for the first time, put a potential house into Quest (a slick tool Lifestyles has to evaluate properties), and began to look at the numbers, I suddenly felt insecure.

Was I finding and choosing the right sales comparables in order to accurately assess market value? Was I picking the right rent comparables in order to accurately assess the market rent? How did other foreclosures affect the value of the property? Was I including all of the relevant monthly expenses so that my cash flow estimate was accurate? Was this house on the market for too many days, or too few days, to be a good deal? The list of questions seemed endless, and every answer I tried to come up with was a guess. As the guesses piled up, my insecurities became more and more acute, before they eventually turned into the ominous fear of the “undiscoverable unknown,” and I felt paralyzed.

On one hand I knew I was holding the key to independence, but on the other hand, it was as if I was holding a poisonous spider ready to bite me; I didn’t know what to do next.

Part 2 coming soon. . .