What Is the Cost of Not Taking Action?

What Is the Cost of Not Taking Action?

Over two decades, I’ve consulted hundreds of people who were looking to buy real estate. Some were novice real estate investors, while others were looking to purchase a home to live in. Some people were just too afraid to buy a house. I recognize that the numbers need to work. I understand that one should not take on more than they can handle.

Yet with some people there was paralysis by analysis. They found every reason not to buy. They said there was too much renovation work needed. They believed that they should wait because maybe interest rates would go down soon. To be extra safe, their offer price ended up lower than the seller’s bottom line. They believed that maybe a better deal would be out there if we kept looking. Possibly there were too many unknowns about the property. Maybe waiting until winter would make a seller take less. The pandemic could cripple the economy for a long time. The reasons went on and on as to why they should not take action on this house, that house, and the next house.

The question asked by many people is, “What is the cost of taking action?” That’s a good question. However, it needs to be asked in conjunction with another question.

Another question that many people neglect to ask is, “What is the cost of not taking action?” Instead of making a lowball offer in 2019 that was rejected, what if you had offered full price for a house that year? What if you offered full price for a house in 2020? 2021? 2022? Housing values in most areas of the country have gone up dramatically since 2019. Investors and homebuyers who took action in 2019, and/or 2020, and/or 2021, and/or 2022 have been rewarded with significant price appreciation. Landlords have been rewarded with dramatic increases in market rent. In other words, you could have overpaid for a property in 2019 and enjoyed 45% to 100% price appreciation and rental increases since then!

I’m not saying that you need to feel content with overpaying for a property. Do your analysis. Ensure you can afford it. Study the comparable sales. Obtain estimates. Shop lenders for the best rate and fees. At a certain point, trust yourself and make an offer that the seller can accept. You can’t win the game of investing unless you get in the game. Even if you make a mistake, you’ll learn from it.

I bought a fixer-upper duplex in 2004. My appraiser pulled me aside and told me that I was overpaying for it. I still bought the house. I spent way more on renovations than I initially planned. I made colossal mistakes. Yet I learned. I collected rent for 17 years and sold the property in 2021 for more than three times my initial purchase price. I did a 1031 tax-deferred exchange to buy another investment property. If you judged me by what I did with the property in 2004 and 2005, you would have said I was a dumb novice investor. Yet over time my missteps turned profitable. I was better off overpaying in 2004 than not doing a deal at all.

A wealthy investor doesn’t ask, “How much will it cost me?” Instead, they ask, “How much will it make me?”

My wife Amira and I leaned in to investing despite having limited resources early in our marriage. We bought houses in 2018, 2019, 2020, 2021, and 2022. Rents and home values went up substantially for us. We built wealth because we took calculated risks. I want you to build wealth like we did. Let me know how your investment journey is going!

Tai DeSa is a graduate of The Wharton School of the University of Pennsylvania.  He became a full-time real estate investor in 2004 after serving in the U.S. Navy.  Tai made colossal mistakes in investing (and learned some things along the way).  Tai has coached hundreds of entrepreneurs, real estate investors, and real estate agents on how to increase their income and net worth. He has helped hundreds of homeowners avoid foreclosure through successful short sales. Check out Tai’s books on Amazon.com. Tai may be available for coaching and speaking engagements on a variety of real estate topics.  Send an email to tai@investandtransform.com.

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