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How to Diagnose and Treat the Real Estate Investor’s Disease, “Deal-itis”

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Whether you’re just starting out or you’re a seasoned real estate entrepreneur, there’s a disease—a particular condition—you are susceptible to: Deal-itis. Deal-itis occurs when you want to do deals so badly that you make compromised decisions…and the long-term effects can be extremely hazardous to your portfolio health. In this episode, Jeff explains how to diagnose Deal-itis, and the three prescriptions for how to treat this dangerous condition.

Episode Transcript

Consider this episode a public service announcement. You see there is a condition, a disease. Maybe we would say that real estate entrepreneurs and investors are very, very susceptible to, and if you keep your eyes and ears open, you can make sure that you don’t catch it, but you have to understand it. This disease is called “Deal-it is” and in today’s episode, I’m going to tell you how to diagnose it and what the prescription is. Let’s cue up the theme song we’ll dive right into it.

Welcome to Racking Up Rentals, a show about how regular people those of us without huge war chest of capital or insider connections can build lasting wealth acquiring a portfolio of buy and hold real estate. But we don’t just go mainstream looking at what’s on the market and asking banks for loans. nor are we posting We Buy Houses signs are just looking for “motivated sellers” to make lowball offers to. You see, we are people-oriented deal makers. We sit down directly with sellers to work out win-win deals without agents or any other obstacles, and buy properties nobody else even knows are for sale. I’m Jeff from a Thoughtful Real Estate Entrepreneur. If you’re the kind of real estate investor who wants long term wealth, not get rich quick gimmicks or pictures of yourself holding fat checks on social media. This show is for you. Join me and quietly become the wealthiest person on your block. Now let’s go rack up a rental portfolio.

Thanks for joining me for another episode of Racking Up Rentals. Show notes for this episode are at www.thoughtfulre.com/e67. Please do us a huge favor by hitting the subscribe button in your podcast app. It really does truly help other thoughtful real estate entrepreneurs to find this podcast when you hit that magic button. Alright, onward with today’s episode.

Well, today we’ve got a serious topic, it is about a condition that we real estate investors and entrepreneurs are all too familiar with even if you don’t know what it’s called. You’re familiar with it and it is called deal. itis deal itis. You see real estate investing is it’s addictive. It’s exciting. You probably remember that first moment when you kind of got a taste for learning about it. And you just said to yourself, oh my goodness, this is this is incredible. What this could do your vision for what became possible in your life was just suddenly so much bigger. And that is intoxicating. And that’s a great, great thing because that’s a driver. It’s a motivator. It’s momentum. And it keeps us propelling ourselves forward learning and doing and learning and doing and that’s awesome. And when you have that feeling of intoxication, you want to do deals, oh my goodness, do you want to do deals, and you absolutely should be doing deals, there’s no doubt about that. But there is this condition called Deal-it is. Now what is deal-itis? So first of all, deal-itis is, I should say, it’s a semi-contagious condition. Not extremely contagious. But if you spend time around other people with deal-itis, it might rub off on you. And deal-itis is, it’s kind of a chronic condition. It you’re never out of the woods, so to speak, it can come and go it can sneak up on you when you’re not even expecting it no matter how much experience you have. So what is deal-itis? Deal-itis is when you want to do a deal so bad that you force it. And you basically make bad decisions. When you want to do a deal so bad that you start finding reasons to say yes and justify doing things simply because you want to do them. But not necessarily because they actually make sense.

Now before we dive into deal is too much and all the downsides of it. Let’s just make sure that we know the flip side of this. You need to take action. The existence of deal-itis — is not an excuse to be in analysis paralysis forever, to be in study mode forever. No, no, no. Deal-itis is just a reality of our business. You can’t study and listen to podcasts and read 700 books and analyze 1000 deals forever. You do have to take action but you have to take action with just an awareness and appreciation that deal is out there. And so here’s how you take care of this problem with deal-itis: you separate doing deals from doing this deal. Doing deals is doing deals in general. But doing this deal is what you should be focused on. And sometimes we get these two things confused. We are not confused but they just merge into one topic in our mind. We’re like, “Well, I’m out doing deals and that’s what I’m supposed to do.” But the question is while you’re out doing deals, which yes is what you’re supposed to do. Are you supposed to be doing this deal? So how do you ensure that both things are true that you don’t catch deal-itis but you also don’t stay in paralysis mode, you separate doing deals from doing this deal in your mind. So let’s talk about diagnosing deal-itis. Deal-itis can happen to long time investors and it can happen to new investors. Let’s talk about the new investors real quick.

New investors often want to get their first deal so badly, maybe they’ve been studying a lot. But they feel like they’ve gotten to the point where it’s now time to stop studying and time to take action. And they really, really, really want to take action. And it becomes kind of like action for the sake of taking action, not necessarily purposeful, thoughtful action, but action for the sake of taking action. And this can manifest itself in a couple different ways. One is simply that you end up buying something that you shouldn’t buy. Or you maybe you buy it, and maybe it was okay to buy it, but you finance it maybe in the wrong way, which kind of kills the whole juice of the potential deal. Or you have determined your criteria for what you’re going to buy. But because you’re so excited, you start to fudge those criteria, you start to cut some of those corners and say, Well, you know, I know I said I wanted it to be in this area. But I just really want to get this deal done. And so I’m going to, I’m going to pursue a property that’s outside that particular area. But the second way it can happen is not just that you buy something you should but that you rush, the process that you’ve determined in advance like this is my process. This is how I work with sellers; this is how the conversation goes, this is the due diligence I will do. This is the exploration of financing and rental rates and all this stuff that I will do. But out of your excitement, you actually rush the process, even if you end up making a good purchase decision, you rush the process, you compromise that and you end up screwing that up. as well. I’ll give you a quick example of a coaching client that I have worked with. And he really wants to buy something. And so he’s got a partner, and he and his partner go out into the area that they want to do some deals in. And he identifies a property and writes a letter of intent and LSI. And this LSI is for a purchase for a deal that I can’t see has any upside at all, I can’t even figure out why he would really want to buy this, it seems kind of like the most benign and mundane type of purchase, I don’t understand how this will help him get ahead or get towards his goals. And so as I point this out to him like well, what exactly is the upside here? And that question was very difficult to answer. So he’s out there writing offers and ello eyes on things just because it feels good to do that it feels like action. But it’s not purposeful action on deals that make sense. So he was combining the idea of doing deals with doing this deal. And when we talked about what makes sense about this deal, it was very difficult for him to describe that to me. So deal ideas can happen to new investors. But it can also happen to longtime investors.

Longtime investors often succumb to deal-itis because they feel like too much time has passed since their last purchase. They feel like they’re starting to question their identity as an investor and they’re starting to say, well, it’s been too long I need to get back in the game. It can also be out of boredom; they just don’t have enough going on. If they’re an entrepreneurial personality type, they have to have a lot of new things going on and excitement and the thrill of the hunt. If they don’t have that, and they’re bored, they can start hunting for things that don’t necessarily make sense. Sometimes people have a crew, they have a team of people, maybe contractors, painters, vendors, things like that maybe even full time, office staff employees that they need to keep busy and so they feel compelled out of boredom or obligation or just questioning the amount of time that’s passed, that they have to go find a deal to do. I’ve got another coaching client that I’ve worked with in the past who was feeling this way, I think he was feeling like he hadn’t done a deal in a while and wanted to regain that sense of identity if I am a real estate investor. And he bought a property to do a flip with in a bad area kind of in the middle of nowhere to be honest. in an area where the demand was going to be low, the buyer profile was going to be really quite unique. And this is before he was working with me and it didn’t go that well for them because they cut corners on some obvious due diligence and some obvious criteria that today you know, with some out perspective and guidance that wouldn’t cut those corners. But out of the excitement of doing of wanting to do a deal, they make this purchase that then does not end up going very well. So that’s kind of how you diagnose a deal is if you’re feeling any of those symptoms of boredom, symptoms of too much time has passed symptoms of I need to get back in the game, because I’m starting to question if I’m really an investor symptom of, I need to take some action for the sake of taking action. That’s how you start to know that you’re getting deal-itis.

So what is the prescription for this condition that all investors face occasionally? And I should pause and say, I am no exception to this. I am very familiar with deal-itis because I have encountered it myself, I’ve had a few bouts with it. And I had to take a few shots of the good stuff to clear myself up from it. So let’s talk about what the medicine is that we prescribe for deal-itis.

A while back in a recent episode, we talked about solving for awesome. So my question to you if you need some clarity about whether you have deal itis and you’re coming to me with a particular deal, the first thing I’m going to ask you is what is quote the awesome. What is the awesome part of this? Why are you so excited about this deal? Now? I’m not? I’m not asking you why you’re excited about doing deals. I’m asking you why you were excited about this deal? What is the one at least one amazing, awesome fall out of your chair, exciting part about this particular deal? And you need to have an answer to that question. And if there isn’t an answer, it’s a good sign that you’re doing a deal that’s too benign that that you don’t need to do mostly because you want to do a deal. The very definition of deal-itis.

So prescription number one is ask yourself, What is the awesome and if you can’t come up with an answer, that’s a problem. Number two piece of medicine is give yourself the benefit of some outside perspective. Now this is frankly, where coach comes in extremely helpful. A coach can look at this, a coach can point out that they don’t see the awesome, a coach can point out that your decision you’re about to make here seems to be in conflict with what you previously told me was important to you and where your deal criteria and what you wanted to accomplish. A group maybe a group of investors, maybe it’s a Facebook group, like the Rental Portfolio Wealth Builders can also be very, very helpful. Now, as I mentioned earlier, deal-itis is semi contagious. So you need to make sure that this group that you’re going to whether it’s a group, whether it’s a coach, you got to make sure that those people don’t have deal-itis because you do not want their deal is rubbing off on you. So I’m not talking about just joining any old Facebook group, because in any random Facebook group, you’re likely to be surrounded by a real mix of people, some of whose perspectives are going to be valuable to you, many of whose perspectives are not going to be valuable to you at all and potentially even dangerous might pass the old deal is on to you in a contagious manner through some kind of a Facebook comment. So get some outside perspective. That’s medicine, number two, a medicine.

Number three is ask yourself this question. Okay, this goes this falls under the banner of separating doing deals from doing this deal. Ask yourself this question: If I didn’t do this deal, if I didn’t buy this property, what would I be missing out on? What would be the worst thing that would happen from me not buying this property? I’m hoping that you’ve got an answer to that question that says, oh, a lot of terrible things would happen if I didn’t buy this property, right? I’d miss out on $100,000 of instant equity, I’d miss out on $2,000 of cash flow on this property, I’d miss out on acquiring an amazing seller financing note, I’d miss out on buying this property in this area that is clearly on the on the rise. And in 235 10 years, I’m going to be so glad I owned it. If there’s an answer like that, that’s a good sign. But if you cannot come up with a compelling answer to the question, what would I be missing out on if I didn’t buy this property, then you probably have deal itis and we might need to pass on that. So as we wrap it up, I just want to reiterate, deal itis is about losing sight between the notion of doing deals and doing this deal. And if you keep those two things separate in your mind, you are likely to steer clear of this, this infectious disease that we do not want to catch any more often than we absolutely have to. Because being a successful, thoughtful real estate entrepreneur isn’t about you can’t claim success simply because you’re out there doing deals and keeping busy. You claim success. Because you are doing the right deals, and you’re doing it in the right way, in the right way, the right deals. Those are thoughtful deals. Those are strategic deals with a strategic purpose and very, very intentional for your portfolio for your business objectives for your way of doing things. That is the definition of thoughtful, and it’s hard to be thoughtful and have the itis at the same time.

And with that, we conclude another episode of racking up rentals. So again, show notes for today’s episode are going to be at www.thoughtfulre.com/e67 for episode 67. Please do us a big favor by hitting that subscribe button in the podcast app. And if you would be so kind take a second to rate and review the show that helps a ton. I read them all myself. And it’s super, super encouraging. And I really appreciate it so if you like the show, please make a rating and a quick review.

Did you know also that we have this Facebook group for thoughtful real estate entrepreneurs. It is called Rental Portfolio Wealth Builders. We’d love to have you over there if you are not part of that already. You could go to Facebook and search for Rental Portfolio Wealth Builders or through the magic of the internet. If you just go to your browser and type group.thoughtfulre.com, it will take you right there. If you like this episode, and of course I hope you did, you might be listening on your phone, good chance of that. So take a screenshot right now with your phone and post that screenshot to Instagram and just tag us We are @thoughtfulrealestate on Instagram. All spelled out — thoughtful real estate. I’ll see you in the next episode.

Until then, this is Jeff from the Thoughtful Real Estate Entrepreneur signing off. Thanks for listening to Racking Up Rentals where we build long term wealth by being win-win dealmakers remember solve the person to unlock the deal and solve the financing to unlock the profits.

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