Written by: Icel Dy
Imagine that you’re in a shopping mall and you need to buy shoes. You find a very attractive one, but from a not-so-durable brand. Your tried and tested brand has a line of shoes that you know can last longer. But the first pair of shoes you saw has a trendy design. Plus, it is advertised by your favorite actors in the recent Netflix series you are watching. What shoes will you pick?
It’s interesting how our emotions affect our every decision-making even in the littlest ways. And sometimes it’s funny (and frustrating at the same time) how our emotions get in the way of making better decisions — no matter how big or small that decision may be.
So, when talking about business (in real estate investment, for instance), there is this one trait that all must overcome to become successful: being controlled by emotions.
Why emotional control is key
There are things that make us feel excited, anxious, or lonesome — and they are all part of life. But in real estate investing, you should take them out to be as objective as possible in making better real estate investment decisions.
Psychologist and science journalist Daniel Goleman published a book in 1995 that introduces the concept of emotional intelligence. It says that our ability to understand and manage our emotions greatly increases our chances of success.
Now, how can we manage our emotions so we can make wise real estate investment decisions? Here are a few ways:
Don’t be impatient when searching for property.
Sometimes it can be frustrating after weeks of searching for the right property. But don’t ever give in to an overpriced one. The goal here is to buy at a lower price so you can sell at a higher price. That’s the rule: underpay instead of overpay. But because of the tiring search for that perfect property, you may be tempted to buy a property that is priced slightly higher and convince yourself that this is okay. Just don’t. Expert investors know that they have to sit and wait for a time because the market readjusts the prices in time, rather than buying at once just because they are starting to become impatient.
Also, when buying at auctions, remember the rule: Don’t overpay. Don’t overbid. Auctions capitalize on emotions because there is a sense of urgency that you have to buy now, you have to pay now or else this seemingly perfect property will fall off from your hands. Refrain from buying in hot auctions or situations like this because there is a high chance that you’ll just overpay. Don’t let your emotions ruin your budget.
Do due diligence checks.
Even if you’re really into that property you’re looking at right now, don’t skip due diligence checks. This is one of the ways you can be objective in your real estate investment decisions. Get the property inspected for its construction, possible pests, and also, have the finance valuation and contract checked and reviewed. This requires more time and additional costs, but all of these are worth it in the long run because you never want to get caught in a bad contract or a bad property, do you?
Stop looking at your investment property as your own home.
A financial investment, such as real property investment, should be purely objective. If you are buying a property to be used as your own home, it’s fine to have your emotions get a little bit in the way of making the decision; but when it’s for an investment, you shouldn’t. Your future buyers or tenants may want something different from your personal preferences, so you need to have specific target markets in mind when investing in property. You need to set specific property characteristics and goals, so you’ll be guided on what property to invest in.
Be critical of your own biases. You might be on the side of wanting only the properties with certain features and you tend to skip properties without those features when in fact, the latter can be a better buy than the one your eyes are fixed into.
Don’t let bad experiences in real estate discourage you.
In this business, you might experience dealing with bad, irresponsible tenants and you might work with awful property managers. But don’t let these factors affect you and discourage you from investing in real estate. All of these bad experiences are facts of life. Just absorb everything that the experience teaches you and make better decisions day by day.
Renovate with a strategy in mind.
Pause and think for a minute before you start deciding on what to renovate. Will that renovation benefit your property as being a source of income? Or is it just another “nice to have”?
Renovate with the target buyer or tenant in mind and not with your own preferences and biases. And remember to keep the property as neutral as possible so that it can be flexible for every opportunity that comes.
Listen to the right people.
When making a big decision, people tend to go to their families and friends to ask for advice. But absorbing the opinions of people who don’t know anything about the field of business – real estate investments, for example – can just ruin your steps.
When investing in real property, it is essential to have a trusted real estate advisor to guide and help you with every step of the way, knowing that he or she is expert with the market and the ins and outs of investment. His or her expertise can bring you to your goals in an objective manner, helping you cut off that unnecessary emotion that is getting in the way of making better real estate investment decisions.
ICEL DY is the Vice President of Spectrum Properties, a property portfolio management company. Her background in real estate stemmed from 10 years ago as a property specialist for Ayala Land, Inc. She used to live in a house, but has recently been fascinated about small spaces and now live in a tiny home. For questions, you may reach her at firstname.lastname@example.org, or get property updates from www.spectrumproperties.