In my experience, from having spoken to, and from having coached, numerous would-be investors, in most instances the limiting belief behind both of these behaviours is “fear” – usually the fear of making a mistake. This in turn feeds the fear of “losing everything”.
This might sound very bleak but, again in my experience, without exception, in an ideal world, fear can be put to rest by having correct knowledge. And knowledge can be derived through proper research and due diligence prior to purchase (see my earlier posts on Fear of Failure).
But I appreciate that there are times when you have to move quickly to secure a great deal and you don’t have time to do all the research or at least not to do it as much detail as you would ideally like. In those instances you have to go on your gut feel and use what you have, combined with experience and common sense. If you are not able to proceed on this basis, then you need to accept that is who you are and look for deals or situations where that element of risk has been removed for you.
Buying “risk free”, if there is such a thing, will usually mean paying more for a property. For example, an investment club or property broker will find “suitable” properties and will undertake enough due diligence for you to be able to decide whether a deal is worth looking into and taking further. This will not obviate your need to do your own research but it will probably speed the process and give some comfort. But of course you will pay more because they will want a fee for finding the property and for doing the preparatory work for you.
However, assuming that you want to find your own deals and can do things at your own pace, when you’ve done your initial research, you can go through a two-stage process which should greatly help to clarify your thinking.
You start by asking yourself a question. Ask yourself, “What is the ultimate downside position?”. In other words, “If I buy this property, what is the worst thing that can happen?”
Now, human imagination being what it is we can start to list all sorts of terrifying scenarios so we need to install some common sense and reality into this process.
So we now need to ask a second question – “What is the probability of this happening?
Let me give you two common examples. This may not apply to you but my experience from talking to would-be investors is that many fear that the day they complete on their first property all tenants everywhere will disappear forever and they’ll be left with a property that they can never let.
Then, as their imagination fuelled with fear works overtime they express the fear that the day they complete the property market will crash, the value of their property will plummet to zero, and they will lose everything
What is the probability of these events occurring? Almost zero. I would never say never, but in the scheme of things, short of all out nuclear war or an asteroid hit, both are so unlikely as to not be a real problem.
Now, I accept that these are extreme examples, but you can see what I’m getting at here.
Having asked the question it may be that you consider that the chances of your worst case scenario happening is so unlikely that you no longer need to consider it.
Here’s to successful property investing.
Peter Jones B.Sc FRICS
Chartered Surveyor, Author & Property Investor