5 ways we talk ourselves out of investing

“What if?” – two little words that could have meant the end of the modern world as we know it.

What if our forbearers had been so paralysed by doubt and fear that they never ventured beyond their comfort zone in the cave?

Interesting thought isn’t it?

Fear of the unknown leads humans to exist in a state of inertia, where they go through the same motions day in and day out because it’s familiar and won’t challenge them.

It’s also one of the biggest obstacles for potential property investors, because although real estate is familiar to us – we live in a home where it’s a commodity of emotion – it’s not quite so familiar to many as a commodity of rational, fiscal logic.

So recognizing the ‘What if?’ inner dialogue, which can signal the demise of a good investment career before it starts, and knowing how to prevent the ‘what if’ scenario from eventuating helps.

That’s why I’ve compiled a list of 5 ways we talk ourselves out of investing, and how you can talk yourself back into the game…

1. What if I buy a dud? 

This is always a concern, regardless of how long you’ve been an investor.

But fact is, it’s also a fairly simple risk to mitigate.

Following a proven investment strategy and conducting due diligence, involving effective research and consulting local experts (such as an experienced buyer’s agent), is the best way to avoid buying a a problem property.

Of course real estate is pretty forgiving, with many a novice investor making mistakes and still walking away on top with a bricks and mortar asset, but of course it would be better to avoid them in the first place.

2. What if I can’t manage the mortgage?

Obviously the key to successful property investment is having the capacity to hold your asset(s) over the long term in order to maximise their capital growth.

If you purchase the right investment; one that appeals to both owner occupiers (who push up the value of similar properties around yours) and tenants (who’ll help you pay off your mortgage), you’ll already have half the battle won.

But just as importantly strategic property investors protect themselves through effective money management and planning.

They set themselves up with cash flow buffers in their lines of credit or offset accounts to see themselves through the early years of negative gearing or periods of cash flow shortfall such as unexpected vacancies or repairs.

3. What if I have the ‘tenants from Hell’ or none at all? 

Sure, there’s a chance that your investment property might be vacant for a while, or that a tenant could damage your asset, but you can be prepared.

Firstly you would have established cashflow buffer just for moments like these, and then there’s always landlord insurance to cover you for loss of rent and repairs as the result of tenant damage.

And let’s not forget the role of a professional property management team, who will market your premises, screen tenants, arrange lease agreements and handle all maintenance issues to minimise complications and maximise returns.

4. What if I get conned?

I’m not at all surprised that so many potential investors have this concern, given the current state of the financial services sector and the spruikers who abound in the real estate world  trying to sell the latest  off the plan project or developer’s stock.

Once again, avoid becoming a victim by undertaking thorough research and basing your investment decisions on a well-devised strategy that suits your objectives and financial capacity.

And always make sure you differentiate between independent advice and a paid sales pitch.

5. What if I lose money?

Real estate, like all other investment vehicles, comes with the potential for financial loss. But if you develop a plan based on clearly defined income goals and your personal circumstances, you’ll significantly decrease the associated risks. 

It’s important to understand the nature of property cycles and the fact that even prime properties don’t increase in value every year – in fact they can decrease in value for a year or two every property cycle.

And it’s also important to realize that property is not a get rich quick scheme.

Wealth creation through real estate is a long term (sometimes very long term) process.

Along the way you’ll need to treat your investments like a business, rather than get emotionally involved, regularly review their performance and pro-actively undertake improvements on your investments and increase your bottom line.

Don’t leave your assets to the whim of market forces.

Instead create your own momentum and manage your property investment portfolio accordingly.

And don’t let niggling doubts keep you from climbing the property ladder.