If you are new to real estate investing, you should consider the concept of the ”law of the first deal.” Of course, it is not a law like the law of gravity, or tax law, but a generalization that widely applies to the sport of investing.
It says, if you can manage to get to the point of doing your first deal, it opens doors for the next deal to come sooner afterwards.
Some apply specific timelines to this concept, but my belief is that such timelines are relative. If you get to the place of purchasing your first investment property or doing your first deal, your subsequent deals come much sooner than they otherwise would.In other words, you go much faster from first to second deal and from second to third deal than you do from no deal to 1st deal.
Why is the first deal important?
If you are sitting on the sidelines, hoping to get more education, waiting for the market to get right, waiting to be in the perfect financial situation, I advise you that you are better off going in with the knowledge you have today, in the market cycle we currently are within and in within the financial state that you reside. The experience that you gain from that first deal far exceeds the education gained from the theory and concepts that you read about even in my articles.
Case in point.
After studying real estate since 2013, I finally did my first deal. I decided that my goals wold not be met if I waited any longer for that perfect investment or time. I finally bought a single family in Palm Bay, FL that I knew would cash flow. I knew it was not going to make me rich, but that I would finally have a completed deal under my belt. And that is what I did. And about six months later, our we moved out of our primary residence into a new home and made the old primary residence our second rental. So here is what the time line looked like:
- Studying – 2013 —> First Deal – 2019. (6 years)
- First deal – 2019 —> Second Deal – 2020. (6 months)
See the concept at work? It took me 6 years to do my first deal and only 6 months to do my second (admittedly, I bought my primary residence in 2016 with the intent of eventually renting it and it became our second rental. I recommend doing this if you are not sure how to get started. Read the story here.)
To add, I am now beginning my multifamily journey, where I anticipate to exceed my original goals conceived in 2019 of 25 units in 5 years. Although the setting of these goals are what drove me to take that next step, there was one thing that I did not understand when I wrote those goals. The Law of the First Deal would allow for a natural progression into more deals and would drive me to set bigger goals.
Exceptions to the Rule
It should be noted that there are some who will be exceptions. How does one become an exception to the law of the first deal? Two things:
- One does not understand the power of generating wealth from real estate. If this is you, check out my article on the 4 Wealth Builders of Real Estate.
- One does not have a true desire to grow wealth through real estate. This one I cannot help you with. Each person has his or her own desires and passions. As a last-minute attempt to get you to think other wise, I will recommend that you read why I believe that everyone should invest in real estate to some degree.
If you are reading this, you are likely not the exception to the rule. You understand that there is true wealth building power in real estate and have some level of desire to invest. Recognize the general cause and effect nature of the law of the first deal and go out and make it happen. Of course, exercise caution and discipline in your underwriting, be patient and watch what happens when persistent effort mixes with time!
