I’m sure that we are one in that we all agree that being scared of things is not a good idea. Whatever your fear may be whether it’s heights, large crowds or snakes, the cold sensation that has you shaking when your stomach aches and the hair at the back of your neck twitches. It’s not fun. In the case of investing in real estate there’s bound to be some anxiety involved. There may not be the same physical reaction to the one I mentioned earlier but fear is regardless. Many investors, particularly those new to the business, need to face anxiety at some point. It can manifest as a hesitation to move ahead with a project or a project, or it could be an actual terror when you are in a financial dilemma which could result in serious and lasting effects. One of the key factors of success when it comes to real estate investing is knowing how to deal with anxiety and eventually conquer it so that you can be a confident and secure investor. Here are a few of the most frequent concerns I see investors confronting, as well as tips for dealing with and reducing some of those fears.
Loss of Savings
It’s nice to have an investment account isn’t it? The mere fact that you have an abundance of cash sitting in the bank for emergencies and other reasons gives you a bit of peace. What happens when you put that money into an investment property but, for no apparent reason, you aren’t able to see any kind of return? It’s difficult to increase your investment, and you’re stuck with an unprofitable property. It’s an incredibly scary thought and it’s a legitimate concern. There are a lot of horrifying stories of investors who have lost their entire savings only to be without a dime. The common thread in these accounts is that the investors made a fatal error: they did not do their due diligence. If they had studied up on everything about real estate investment (buying in the right market, picking a good neighborhood/property, tenant screening, money management, exit strategies, and so on), they might have found themselves in a different position. It is important to learn! By doing this simple thing, you can greatly lower the risk you face.
Another problem to avoid is to own an investment property that has negative cash flow. This signifies that the amount of funds you’re spending on your property every month (mortgage repairs, mortgage and maintenance.) is higher than the amount you’re earning in earnings (rent and other payments). The reality is that you’re earning less than zero from the property which could become a problem. The best method to avoid this is to analyze the numbers prior to purchasing an investment property. Find the previous year’s operating costs and revenue for the present owner. look up the rates for Rental Properties to make sure the rate you pay is comparable and then run the numbers using your anticipated mortgage payments in your mind. Make sure you include ALL costs like taxes, vacancy rates, and HOA fees, else your calculations could be off. Before purchasing any property, you must prove that you’ll earn an income stream of cash from the purchase each month.
Do you remember what happened in 2008? I sure do. This was the start of an incredibly difficult period for real estate investors as it was the beginning of an important economic recession. Following the burst of the housing market many investors lost everything when they saw the worth of their property fell. In a position of no selling, they were left with depreciated property that was a huge financial burden. This is definitely a valid fear, and it’s kept me up at night, as well. I’ve learned how to deal with it, however, since I have two facts I know for certain 1. The real property market is cyclical and always bounces back. I’m very cautious about the investments I make. There’s always the risk associated with any kind of financial investment. And the truth is that you have no influence over market conditions. However, the one thing you control is what you put the money you earn. It’s here that self-education and research pay dividends, as the more you know about real property, the more informed your choices will be, and the less risk you’ll be taking on.
The fear of being afraid isn’t an uncommon experience for investors. It’s all we have to do since this is an extremely risky venture. My advice: be aware of your fears, But don’t let fear overtake your life. Learn to harness it and make use of it to help you move forward rather than hindering your progress. Chatting with other people in the business with prior experience, including realtors, investors, or turnkey suppliers, can be very beneficial. They can give your insight and advice, and might even offer you encouragement whenever you require it.
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