I want to share some psychological pitfalls that many budding investors fall into as they begin their careers as professional real estate investors I have told my students time and time again that while the strategies and techniques they use in investing are definitely important, the most important element that successful real estate investors possess is a healthy psychology of investing. In other words, successful investors possess the right beliefs about money and the correct mental approach to investing in real estate. This approach will put you far ahead of the crowd as you continue to pursue your personal financial freedom through active real estate investing.
Pitfall #1 – Falling In Love With The Property
Many people make an unnecessary mistake when they begin their careers as active investors. They put as much passion into purchasing an investment property as they do when purchasing their own residence. Investing in investment property should be a passionless endeavor. Let me explain what I mean. When purchasing an investment property, the decision to make the deal should be all about the numbers involved and nothing about your emotions as an investor. When people purchase homes they are going to live in, they purchase emotionally. They ask themselves if they “like” the house, if they will “enjoy” living in the neighborhood, and might finally get around to considering the numbers of the deal as a third or fourth course of action. “Liking” a home and “enjoying” the neighborhood that it is in are all emotional issues. When successful real estate investors evaluate an investment property, they are exclusively concerned about numbers. They ask themselves questions like, “Can I purchase this property for a wholesale price?”, or “Is there enough room for a healthy spread if I use this house as a Cash Flow tool?” These are facts questions that have very little if anything to do with a person’s emotions. When purchasing investment properties, keep your emotions out of it. Just buy properties that work numbers-wise. You will be glad you did.
Pitfall #2 – Being Too Greedy
One major pitfall, especially for Quick Cash investors, is the danger of being too greedy. They get a great wholesale deal on a property and then try to sell it above retail instead of at or a little below retail. Consequently, they have to hang on to the property too long and end up losing more than they gain by holding out for the greed factor. Listen, being too greedy, especially on Quick Cash deals, will come back to bite you. Remember, the beauty of QUICK cash is the QUICK part. Price your Quick Cash deals to move. Make money, but move them so that you can get on to the next deal and make more money. The key to great Quick Cash deals is in the volume, not just the spread. Why are some folks susceptible to being too greedy? It’s because they subconsciously fear that this deal will be their last. We call that a scarcity mindset in the financial realm. Don’t fall prey to that. There are plenty of deals out there. This Quick Cash deal won’t be your last, unless you want it to be. So have an abundance mindset instead of a scarcity mindset and move forward by pricing your deals to sell.
Pitfall #3 – Thinking You Know It All
One pitfall that many people fall into after they have been investing for a while is the belief that they know everything there is to know about real estate investing. Listen, the market is always changing and the rules are, to an extent, always in a state of flux. There is always something more to learn in the realm of active real estate investing. Maybe the learning curve will be diminished for those who have learned the basics of real estate investing. In other words, maybe there won’t be as MUCH to learn, but there will always be distinctions to be made. So never stop learning.
These are the 3 major psychological pitfalls that plague some potentially successful investors. Be aware of them and you will be ahead of the game.
