Fear
I’ve never purchased a property without fear.
People are different. Maybe you are fearless. But I am not. Every time I make a purchase, I have a lot of doubts.
- Am I doing the right thing?
- Am I being ripped off?
- If this is a good buy, why hasn’t someone else bought it?
- Will I be able to pay the interest?
- What if I lose a tenant?
- Do I need this much debt? Wouldn’t I sleep easier if I don’t have this extra worry?
I think it’s healthy to have doubts, and to ask yourself some tough questions. These are all sensible questions to ask. If you’re not asking them, then you’re probably being reckless.
When you answer these (and more) questions honestly, you may end up discarding some properties. I had to do this recently. I got quite excited by a deal, but then when I asked some tough questions (and my business partner asked some even tougher questions), I decided not to go through with the purchase. The deal was good, but I wasn’t convinced it was the best thing to be doing with my money. So I said ‘no’.
But if you answer all these questions, and still, the deal looks good, then what? I’ve seen a lot of people who still won’t act. They get gripped by fear, and don’t act. They say things like “I’m still thinking about it” but really, if they are honest, they are afraid to act. Eventually, soemone else will come along and do the deal, then they say “oh too bad, I was quite interested in that, I guess I missed out.”
In fact, not acting is a deliberate act. It’s a cover for “I’m too frightened”, or “It looks like a good deal, but I don’t trust my judgement”, or similar. It’s a way of saying ‘no’ to a deal without having to find a good reason to say ‘no’. It’s a way of pretending to be in the game without actually being in the game. Essentially, it’s a lie.
There’s nothing wrong with saying ‘no’ to a deal. But saying ‘no’ is a very different thing to simply not acting. While it has the same end result, saying ‘no’ is more positive act, and avoids our human tendancy to kid ourselves.
There are a lot of frightening things about purchasing property. It involves large sums of money. There are the negotiations with the vendor. Emotions can run high. There are lots of official documents to sign. There are mortgages with horrible consequences if you don’t pay the interest.
Literally every property I’ve bought, I’ve asked ‘why am I doing this?’ at some point during the process. When things get complicated, or don’t go the way I want, I’ve been gripped by doubt and concerns. Somehow, at least up to now, it doesn’t seem to get much easier, even as I buy more property.
But afterwards, I’m always glad. When the rent is flowing in, I’m happy. When my equity goes up, I’m happy. In hindsight, investing in real estate has always been a very good use of my time, energy and money.
Perhaps getting past all the fear is a big enough barrier to stop most people becoming serious property investors.
How do you press on, despite your fear? Well, you’ll have to figure it out for yourself, but I’ll tell you what works for me:
1. Excitement
I revisit the numbers which excited me in the first place.
I put together a spreadsheet showing how much income I get now, and how much I’ll get after the purchase. How much equity I have now, and how much I’ll have afterwards. If it’s a good deal, these numbers are exciting to me. I examine this spreadsheet frequently during the process, to remind me, and excite me, about why I’m bothering to do this.
2. Risk Mitigation
I look at: if things went wrong, what would be the worst case? Surprisingly, it’s often not as bad as you think.
Example: I once offered an unconditional $40,000 deposit on a deal, without knowing if I could get finance. This was scary - in the worst case, if I couldn’t raise finance, and I would lose $40,000. Would that hurt? Yes, absolutely. Would I continue to live, eat and breathe? Yes, I’d still be alive, and I would still have some money. So the worst case, though bad, wasn’t the end of the world. The sky wasn’t going to fall on my head.
I look at what can go wrong and try to minimize the risk. I get a sense of peace once I feel like I know all the things that might go wrong, and what the consequence will be. If I can handle things going wrong, then I’m usually happy to proceed.
I try to recognize if I’m being hopeful. If my solution to dealing with a risk is to hope it doesn’t happen, then I’m not dealing with that risk properly. This is a warning sign to me.
If there is an outcome which I can’t accept, but I’m crossing my fingers that it won’t happen, then I have a genuine reason to fear, and it’s too dangerous to proceed.
3. Sense of Perspective
If you can, try to put your fear in some sort of perspective. It helps me to consider the bad things that can happen in the world. That might sound odd to you, but it works for me. I read a book about World War 1 recently, and I think about the horror of the British Army losing 20,000 men killed, most younger than me, in a single day on the Somme. I think about what all those men faced. Compared to them, my concerns are of very little significance. Gee, I could lose money. So what? I’ll still be alive. My dogs will still love me.
This line of thinking genuinely helps me to take action despite my fears.
Feel free to substitute some event which touches you.
4. Support
Whether it’s my wife, or a business partnership, I find it helps having other people involved in the adventure, who also care about the outcome. I doubt I would have done the deals I’ve done on my own.
Do I sound like some sort of motivational life-coach? I don’t mean to. But if you’re not growing your portfolio as fast as you would like, consider whether fear is one of the factors holding you back.