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Real Estate Investing Fears and How You Can Overcome Them

by Michael LaCava on November 10, 2012 · 30 comments

  

I recently did a little survey to real estate investors to see what is holding them back from getting started real estate investing. I was really just curious to find out, more than anything.

Although I’ve done one-on-one personal coaching for new real estate investors for a while now I’ve been thinking about creating my first paid product. So in advance of that, I wanted to make sure I was on track with what really stopped people from getting into this business.

I figured I’d get the usual answers from the survey:

  • I can’t find the money (check)
  • I can’t find the deals (yep)
  • I don’t know how to analyze a good deal from a bad deal (sure)
  • I don’t know how to manage the rehab (definitely)

But what I didn’t expect was certainly surprising to me. Throughout all the hundreds of answers, one underlying emotional theme came through loud and clear: FEAR

The Biggest Problem Getting Started Investing in Real Estate

One of the biggest problems I found from the survey is that although most people REALLY want to learn how to invest in real estate, most people are TERRIFIED of actually starting.

Take a look at just a sampling of the fears we found from people taking this survey:

  • “I don’t have the knowledge of the house flipping process and I might screw it up”
  • “Just plain fear of the unknown”
  • “I work full time so I can’t do it with the time I have”
  • “I have no idea how to find houses to flip”
  • “Doubt and indecision as to what to do”
  • “Lack of a good mentor”
  • “If I do, what would my boss say if he found out”
  • “I don’t have the confidence to do my first house flip deal”
  • “Fear of what happens when the house flip doesn’t sell”
  • “Don’t know how to analyze a deal to know whether its good or not”
  • “I have no idea how to estimate renovations”
  • “I have no clue how to manage a rehab”

Although, this is just a condensed list, what’s the overriding factor?

Fear.

If this is you, you’re not alone.

Change, Pain, Pleasure and Real Estate Investing

Everyone in the survey did express an interest in learning the nuts and bolts of flipping houses. But when you delve into the open answer section of the survey, what really stops them is not the “how to’s” but its the fear of making a mistake, fear of the unknown, fear of loss and fear of failure.

Why?

Its actually deeply psychological…and proven by many PhD’s far smarter than me, that people will do more to avoid pain than they ever will to gain pleasure.

One of the most important concepts on human behavior is that at the most basic level, there are two opposing forces that motivate people to do everything they do in their lives:

“The desire to avoid pain or the desire to gain pleasure”

Unfortunately, these “yo-yo” opposing patterns make people go back and forth between taking action to create some kind of change and losing their motivation to do anything at all.

Unfortunately, the majority of people do nothing at all.

But if you continuously take action (an object “in motion tends to stay in motion” as my old physics professor used to say), you change and when you start changing small things by taking action, then larger changes are easier to act on.

The Power of Leverage

Anthony Robbins talks a lot about an idea called “leverage”, which is really kind of simple. Leverage says that in order to get someone to take action and make a change, you must help that person to “associate massive PAIN to not changing NOW, and massive PLEASURE to changing immediately”.

The motivation then comes from using both forces, pain AND pleasure to get them to take action.

The “pain” part serves as the short-term motivation, while the “pleasure” side kick-starts the long-term motivation.

The Fear Mindset and Real Estate Investing

Let me propose something to you:
What if you could trick your mind into thinking that there was no way you could fail? And you associated massive PAIN with not investing in real estate and massive PLEASURE to getting started.

Would you get started?

Envision the following scenarios:

Scenario #1

  • You’ve worked hard launching your real estate investment career and you find what you feel is the perfect real estate investment opportunity. All of the signs and all the numbers point to yes.
  • You have good financing, you know how much renovations will cost you, the 70% rule is mailed down and your broker has given a fact-based ARV that you are 95% sure of the price you will get when you finally sell the property.
  • With knees shaking and stomach churning…you buy the house, fix it up and flip it in less than six months…making a tidy $15,000 profit.

How much pleasure, joy and ecstasy would you feel?

Pour the expensive champagne (the one with a REAL cork)…you’d be feeling pretty good…

Scenario #2

  • You’ve worked hard launching your real estate investment career and you find what you feel is the perfect real estate investment opportunity. All of the signs and all the numbers point to yes.
  • You have good financing, you know how much renovations will cost you, the 70% rule is mailed down and your broker has given a fact-based ARV that you are 95% sure of the price you will get when you finally sell the property.
  • At the last minute, the day before the closing to buy it, your fears overwhelm you and you pass…only to see that in six months a real estate investor (not all that different from you) sells it at a price for what you are positive is at least a $15,000 profit.

How much pain, anguish and REGRET would you feel?

Pass the Jack Daniels with a side of hemlock….

Either You Control Fear or Fear Controls You

In both scenarios, there was fear, but the difference is that in scenario #1, the fear was controlled, channeled and defeated. In scenario #2 fear was succumbed to and fear, I’m sorry to say, kicked your butt.

Don’t get me wrong – by merely “controlling fear” and “associating massive PAIN with not investing in real estate and massive PLEASURE to getting started real estate investing” this is not going to guarantee you success entirely.

You still have to do all the numbers and double check everything after all. And you need to use a specific SYSTEM of steps that minimizes that odds of a really awful deal – so you can place yourself in a position to reap the profits while dodging the pain of losing your shirt.

But if all is right, you need to act. Don’t second guess . . . take action and start investing in real estate. This is the mindset you need to invest in real estate and the first most critical step to real estate investing success.

What’s holding you back?

If you made it this far, please leave me a comment below! I’d love to hear about what you think of “The 70% Rule” or questions about anything at all relating to real estate!

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{ 30 comments… read them below or add one }

Lynn November 10, 2012 at 12:49 pm

Hi Mike,

I presently have 3 houses and I am a buy and keep them kidda of gal !!
I rent them out for now, so someone else is paying the bill :}
I’m not sure about flipping yet… I thought that went out of style…
Can you explain your 70% rule. What does that mean.
Thanks,
Lynn

Reply

Joshua Dorkin November 10, 2012 at 4:34 pm

Lynn –
Mike did an article on the topic just recently: All The Math You Need to Succeed as a House Flipper. That should help with your question on the 70% rule.

I definitely recommend going back through the articles here on the site and our discussion boards; once you’ve done so, you’ll likely have the answers to any and every question you might ever have. Of course, if not, don’t hesitate to ask for help.

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Lynn November 11, 2012 at 5:59 am

Thank you Joshua for your reply…..:}

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mike November 11, 2012 at 6:13 am

Ty Josh for making that easy for Lynn.

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Lynn November 11, 2012 at 8:22 am

But sometimes fear does work in your favor. For example, I was bidding on a house
at the Jersey Shore… just a few short months ago… at the.last minute.. I got nervous and backed out…. I was so upset at first for not going through with the deal and was kicking myself after it was sold to someone else….
Now I feel so bad for all of those poor people who lost everything……

Michael Borger November 10, 2012 at 1:29 pm

Tony Robbins’ principle of pain and pleasure is vitally important to making change, especially massive change. Leverage in this regard is a very powerful tool once you know how to apply it. That goes for everything, not jus business. Thanks for the reminder.

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Michael November 10, 2012 at 2:01 pm

Thanks Michael for your comment. That is so true – It is not just for business & can be just as challenging in personal life decisions if not more!

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al November 10, 2012 at 3:01 pm

Mike,

Thanks for the post as I am still new to real estate investing. I have had several friends own a rental or two and they always have said, “You need to get in!” I “jumped-in” in 2011, after several years of “thinking about it”. Glad I did. Fear of failing, fear of the unknown, and lack of funds were the initial core feelings that I had to overcome.

Thanks,
al

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Mike November 10, 2012 at 5:30 pm

Thats great Al. Good for you. Love to here where your investing and about any properties you are renting. Different areas in the country have good cash flow while others I here dont cash flow at all.
Thanks for your comments

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Chris Grenko November 10, 2012 at 7:00 pm

Hi Mike,
Im a Realtor and want to get started in investing but dont have any answers on how i could with no money to do this and my credit is not very good. Any suggestions?

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Michael November 11, 2012 at 5:23 pm

Hi Chris,
As a Realtor that put’s you with a great asset. How to figure the ARV of a property and find great deals. It is where I start all my calculations to determine my MAO.
You absolutely can get involved with out any of your own money.
Bigger Pockets has lots of great articles and commentator’s you can learn from for sure. Josh does a great job to let quality people in. You can inbox me or check out my website as well to get lots of great idea’s. I just did a survey & that came back as the # one reason why people don’t get involved. I did a video to answer that question.
TY

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Jerry November 10, 2012 at 10:25 pm

Great post, thanks for reminding me of what I should do to get started.

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Michael November 11, 2012 at 5:15 pm

Thanks Jerry! I appreciate your comments and glad I can help.

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mike November 11, 2012 at 6:05 am

Hi Lynn
My comments were reformatted by Josh for easier connection for you. I hope they help answer your question. Let me know how you make out.

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Christopher Somers November 11, 2012 at 7:28 am

Great write-up here. Fear is the biggest obstacle for folks to overcome to have success in any venture, that and procrastination. “Just do it”, learn and grow. Personally, I bought another property on Friday that am excited about (will be a resale).

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Michael November 11, 2012 at 9:47 am

So True Chris. Where you buying?

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Greg November 11, 2012 at 9:22 am

Why do you think sell their mutual funds when they take a big hit? To stop the pain of loss! Even if you don’t, the other people leaving can cause to get shut down, hitting you anyway. One of the many flaws that has caused them to perform so dismally over the few decades. It wasn’t until I realized the pain of lack of performance that I got out of 401k-wrapped mutual funds and moved to real estate. The results are already on the upswing. It’s no get-rich-quick, just build-wealth-securely.

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Mike November 12, 2012 at 1:32 pm

Ouch! We’ve all had our fair share of painful experiences that’s for sure Greg! The stock market has its place in a well diversified portfolio, but you cannot beat the returns in the real estate market. Thanks for your comment, Mike

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Jessica November 11, 2012 at 9:33 pm

I live in a big renters market (NYC) and I’ve begun marketing for multi-family properties to flip. Unfortunately, I haven’t found much information on wholesale/house flipping for apartment buildings. Any tips, advice or suggestions?

Thanks!

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Mike November 12, 2012 at 1:36 pm

Great question Jessica. We primarily do single family homes for our flips, but the apartment market is a bit different – largely dependent upon how many units. How many units are you talking about? We’ve done some multi-family apartment buildings for some longer term rental deals, but it all depends on how big the buildings are to answer your question a bit better. Mike

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Jessica November 12, 2012 at 6:23 pm

Hey Mike!

Thanks for responding. I’m focusing on 5-10 unit multi family properties…big enough to be considered a “commercial” property but still small enough for me to feel comfortable with. I was going to wholesale or assign my contract, although I’m still trying to figure out the fine line of difference between the two and which would be better.

Your insight is greatly appreciated :)

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Mike November 13, 2012 at 12:07 pm

5-10 unit multi-families are a real good market to start on especially if you’re in a metro area like you’re in. The bigger buildings are a bit more complicated, feel free to email me any time if you need some help. Thanks, Mike

Sharon Vornholt November 12, 2012 at 8:56 am

Great post Mike.

The hardest part is getting started. I have found that the one thing that sets the “successful” folks apart from the rest, is that they “feel the fear and do it anyway” whatever thei “thing they fear” is.

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Mike November 12, 2012 at 1:38 pm

Thanks Sharon – you mentioned one of my personal favorite expressions: “feel the fear and do it anyway” – a great creed to live by. Nothing ventured, nothing gained! Mike

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Frank November 16, 2012 at 8:43 pm

Great post, I agree that you need to face the fear or fear will control you. Sounds like you’re a big Tony Robbins guy. I love all that. Thanks for reminding.

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Michael November 17, 2012 at 7:40 am

Guilty as charged on Tony Robbins! I always seem to go back to him, Napoleon Hill and Dale Carnegie when it comes to motivation, controlling fear and success. So much can be applied to what we do in the Real estate world. thanks for your comment! Mike.

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Kevin November 18, 2012 at 9:54 pm

Great post Mike on a topic that I think predominantly gets brushed over when talking to new real estate investors. I work with entrepreneurs in a variety of industries and thing that I’ve found is that everybody experiences fear when starting a new venture. What separates those who choose to take action from those who don’t is the individual’s beliefs about him/herself that control his/her perceptions of his/her world and his/her choices. In that regard, helping new investors change their beliefs about themselves (many of which are not factually-based) is just as important as teaching them marketing, deal analysis, exit strategies, etc.

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Michael November 19, 2012 at 6:42 am

Thanks Kevin. Perception of Reality & everyone’s can be different. That is so true.

I appreciate the comments and feedback.

Thank you !

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Jerry November 24, 2012 at 3:30 pm

Tony Robbins has always been a big influence for me. Isn’t it he who said “do what you fear most and you control fear”? Great words to live by in real estate because those big numbers can get intimidating for sure. Nice post.

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Michael November 26, 2012 at 6:02 am

Thanks Jerry!

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