I listen to a lot of podcasts, but these days I don’t listen to too many podcasts on note investing. Because I’m living it everyday from morning until night, I don’t really feel the need to hear more about notes. But occasionally I do and the other day I listened to an episode of Scott Carson’s Note Closers Show that I really thought hit the nail on the head. The episode was about overcoming analysis paralysis, and I see a lot of note investors who struggle with this problem. It was episode 487, and you can find links to it here: https://weclosenotes.com/ep-487-overcoming-analysis-paralysis-today/
Scott’s main point was that many investors end up over analyzing ever deal. This can lead to being too conservative and pricing yourself out of every deal. Or it can lead to finding reasons to become scared and walking away from every deal. I see people who do this all the time.
Here are some ideas and takeaways that I’ll add on to this:
- You will never eliminate all risk, especially if you want outsized returns.
- Every deal will have some element of risk. You can’t architect a deal where the risk is zero.
- You really can’t do this if you are targeting out-sized returns. It cracks me up when investors want to make a 30%+ ROI and then make sure there is no risk at all. Those investments don’t exist, and if you think you found one you are probably missing something.
- Over time you will figure out rules of thumb.
- In the podcast Scott talks about not going too crazy with an ROI calculator, and adding in every possible expense that could come up in a worst case scenario. My ROI calculator is pretty detailed. But because it is and I’ve used it so much, I usually know without even using it what the costs are going to be for a deal in a particular state. So I can often make bids without even using it, especially if I am bidding on a CFD in one of my focus states.
- If you are pricing yourself out of everything, you aren’t being a responsible investor.
- When I talk to someone who likes to find reasons to walk away or submit lowball offers on every bid, I get the sense that they think they are being responsible. They are being conservative, and trying to reduce risk. On the surface those might seem like responsible things, but if you do it all the time they aren’t.
- If you aren’t doing deals you are denying yourself learning experiences, which are the things that really give you the ability to do deals with confidence.
- You are also leaving your money sit idle, which doesn’t seem financially responsible. I still end up doing a very small percentage of the deals I run into. I don’t bid most of the notes that I see, and of the ones that I do bid I close on maybe 10% of them. But if you find yourself doing no deals or only 1 or 2 after being in the note game for a few years, you may want to make some adjustments.