The ROI of real estate investing is well known. In fact, you’ll be hard pressed to find any investment vehicle that delivers a higher return than real estate over a three-, five-, or ten-year period.
So, why do so many people with the means to invest in real estate never give it a go? Contrary to popular belief, it’s not laziness or complacency. In most cases, a failure to invest has more to do with fear than anything else.
7 Tips for Overcoming Your Fears
Investing in real estate can be scary – there’s no question about it. It typically involves a large sum of money (relatively speaking) and, at least the first time around, an enormous amount of uncertainty. Most people are okay with putting up a large sum of money for something or taking on some uncertainty, but they normally don’t look for situations in which both are involved at the same time. Unfortunately, real estate investing happens to exist at the convergence of these ideas.
There’s no way to completely eliminate risk in real estate investing, but there are ways to overcome your fear of that risk. So, without further ado, let’s investigate some of the practical action steps you can take.
1. Take Inventory of Your Fears
In order to overcome your fears, you have to first identify them and acknowledge they exist. We’ll call this taking inventory of your fears. In an effort to prime your brain, here are some of the most common fears people have:
- Not having enough money
- Losing money
- Incorrectly timing the market
- Unforeseen issues with a property
- Not having time to manage the property
You may have all of these fears, or yours may fall into totally different categories. The point is that we all have them and must be honest enough to acknowledge their presence.
2. Imagine the Worst-Case Scenario
Once you’ve identified your fears, you can take a moment to be a pessimist. Try imagining the worst-case scenario. If everything went wrong – which is highly unlikely that it will – what would the result be?
Most people realize that the actual worst-case scenario isn’t nearly as bad as they assume. Sure, you might lose money, or your pride may take a hit, but you’ll still be standing at the end of the day. It’s not that nothing bad can happen, but that the negatives aren’t life-threatening (and generally they aren’t anywhere close.) Once you realize this, everything else sort of pales in comparison.
3. Educate Yourself
Imagining worst-case scenarios gives you a sort of baseline to work with. From here, you can begin to take proactive steps that will help you avoid ending up in these scenarios. And at this stage, education is the primary vehicle through which you’ll grow.
There’s an abundance of knowledge on the internet and you can begin educating yourself with nothing more than a computer and an internet connection. Our Green Residential blog features tons of in-depth information you can sink your teeth into – as do hundreds of other websites and blogs on the internet. Gather information from as many different resources as possible and always be of the mindset that there’s more to learn.
4. Build a Support Network
Reading a book will help you gain a bit of confidence. Immersing yourself in an online message board or chat room will grow your confidence even more. But if you really want to feel like you’re moving in the right direction, you need to build up your own personal support network of people who can answer questions, provide assistance, and offer guidance on the issues you’re dealing with.
5. Focus on a Specific Niche
A lot of people shrivel up and succumb to paralysis by analysis as a result of not knowing what they want to do. They can’t decide if they want to invest in land, single-family homes, multi-family homes, apartment buildings, mobile home parks, house flipping, wholesaling, etc. As a result, they’re exposed to a fire hydrant of information that eventually causes them tap out.
In order to overcome your fears, you need to focus on a specific niche (at least initially) and block everything else out. This will help you build your confidence and expertise.
6. Do Your Due Diligence
Have ever heard a real estate investing guru say something like, “Don’t be afraid. Just do your first deal.” While there is a hint of truth to this, be careful not to invest prematurely. There’s something to be said for doing your due diligence and eliminating as many risk factors as possible. The greatest antidote to your fear of real estate investing is finding success on your first deal. From this point on, you realize that success is possible and you’re willing to do it again and again.
7. Move Towards Your Fear
Have you ever had a fear in your life – such as a fear of an animal, like a dog or cat – that suddenly dissipated once you were actually forced to confront that fear? Research has shown that being exposed to the thing that you’re afraid of actually has a way of making it seem less intimidating. The idea is that most fear isn’t rooted in reality – something you discover when you actually experience it firsthand – which is why it’s a good idea to run towards your real estate investing fears.
“The objective here is not to eradicate fear. Fear is important,” real estate professional Julie Broad explains. “The day you stop fearing you could make a mistake is almost always the day you screw up big time. Fear will keep you checking in to make sure you’re taking precautions. Let fear do it’s job to keep you safe but do not let it anchor you.”
Green Residential: Houston’s Leading Property Manager
When it comes to hiring a property management service for your investment properties, you have options. There are a variety of individuals and companies to choose from. Some will offer you a cost-effective price point, while others will provide lots of different services.
At Green Residential, we don’t force our clients to compromise. We offer a comprehensive selection of property management services at a competitive price point that allows you to keep more of your profits. For additional information, or a free property analysis, please contact us today!