I think that this is a great dialog happening here but I think that Tim NAILED IT! For a Sub2 deal you want to be ultra educated! This is not something that you want to take lightly and I've seen a lot of investors get excited about their first couple of deals and end up "just doing the deal" without being ready to do it.... I'm big on being ready to do a deal and getting your education in before you execute any deal. A lot of investors don't do that and I'm not really sure why? As a newbie I would do (at least) the following:
1. Study! Get as much material and/or go to seminars to learn your craft/niche.
2. Get a mentor and/or ask experts... You want to be clean before executing a deal.
3. Run the numbers and do your due diligence. If I'm one dollar off of my cut-off point, I will not do the deal...
4. Look for red flags.. If you don't feel comfortable for any reason then don't do the deal. In my opinion, walking away from a deal is not a bad thing. No deal is better than a bad deal. As an example, I recently walked away from a deal because the seller just didn't sit well with me. I lost a significant amount of $$, but (to Tim's point) you want to sleep well at night.
5. Exercise your due diligence! Yes this is in point #3 but this to me is the most important thing that one should do. You need to know (as much as you can) what you're doing... Take some time to be educated (as you should do with any niche that you pursue). Doctors don't operate on patients until they are educated, you don't become a teacher until you go to college, you don't become a police officer until you go through the academy, so don't do your first (solo) deal until you're at a place to where you're a SME......
Thoughts?
Brian R. Baker, MBA
brian@texashousingpartners.com
