Fear is a human emotion that gets a bad wrap. People hear the word ‘fear’ and their mind automatically associates it with negative things. In some circumstances, this is valid; however, when it comes to real estate investing, I contend it is invalid!
Whether you are already doing real estate investing, or figuring out if you want to “jump in”, fear is something that you should pull along side you as a friend. Why would you want ‘fear’ as a friend? I personally can not think of a better motivator.
What will cause you to run as fast as your physical body can humanly run? My guess would be a grizzly bear. Now… WHY would this cause you to run as fast as possible: the fear of being eaten alive! As silly as this sounds (maybe a bit dramatic too), think about it… if there is no fear of being eaten alive, you may jog at a causal pace, or who knows, maybe just walk, and you’ll be eaten! The fear is the driving force.
So should be the case with real estate investing.
There are four common areas of fear in real estate that I’ve noticed over the years when either talking with people or cruising the message board forums. When looked at from the proper angle, these common fears are actually very good “driving forces”.
The FEAR of the Unknown When Investing in Real Estate
What am I getting myself into? What is going to happen? Am I being realistic? What will people think?
This are all legitimate concerns, but ask yourself, “How can I avoid being eaten by the bear” (Translation: what can I do to minimize the unknown factor?)
The best way to avoid getting eaten by the bear is something you have already done if you are reading this article: spend time at BiggerPockets. Read the blog articles. Read the message board forums. There is no better way to eliminate the unknown than to read about the experiences of others, but even better, learn about how/what they did about any bumps they experienced from these situations.
When I first got started, I loved watching/reading Case Studies from people. For me, this was a great way to see what actually occurs in the real world of real estate investing. The last place I would recommend searching for this is a guru course. They try and eliminate the fear of the unknown; however, they paint a very merry picture of how things are, so bottom line, avoid that sort of thing.
The FEAR of Networking with Other People in the Real Estate World
What should I say? What do we talk about? What if I look/sound like a fool? Will they take me seriously? I’m a shy person – I don’t like talking to strangers!
For some, this fear never crossed your mind. You are a social butterfly who could make a great conversation with an ant walking across the sidewalk. For others, such as myself, this was a massive fear due to me being shy by nature.
In my case, when I asked myself what I could do to not get eaten by the bear, my answer was quite simple: be honest and become whiz.
- Be Honest – when networking with other people, just let them know you are new and are still learning. If anything, most people appreciate this instead of you sitting there trying to BS your way through a conversation.
- Become a Whiz – pick a strategy and research it until you are blue in the fact. The keyword being “a” strategy. Don’t tell yourself you’re going to be a whoelsale-flipper-hard money lender-landlord. That is setting yourself up for learning a little about each strategy, but not enough to be able to present yourself in a professional way.
Bottom line, if you are nervous to talk with people, by becoming a master of the topic you are talking about, your shyness and reservedness will be replaced by confidence.
The FEAR of Losing Your Hard Earned Money in the Real Estate Market
What if I make a decision that loses me money? What will others think/tell me if they know I lost money? Am I gambling with my money? Is this a wise financial decision?
“How can I avoid being eaten by the bear?” – learn to love the numbers.
It’s as simple as that. If you are not a numbers person, then you better start becoming one or find someone you can trust who will help you out. Real estate is all about the numbers, and if you want any chance of avoiding the fear of losing money, you better take them seriously.
What are some practical ways of using this fear in your day-to-day real estate investing?
- Dropping the After-Repair-Value (ARV) during your analysis. Scared of losing money? Then hey, make your analysis extra tough and drop down the ARV. Does the deal still come out profitable?
- Dropping the expected rental income. If you knock off $25 from the area rental income average, how is your monthly cash flow doing still?
- Increasing the Days on Market. Are you calculating the “hold time” to be 4 months. What do your numbers look like at 6 months? 8 months?
Bottom line, if you are scared of losing money, then do everything in your power to make your analysis have upfront stress. Meaning, exaggerate the numbers AGAINST yourself (not in your favor) and see what happens. For more details on this concept, check out my article Make Your Real Estate Deals Less Stressful by Adding More Upfront Stress.
The FEAR of Failure in Pursuit of Your Real Estate Goals
This one can be summed up in one single question: what if I fail?
There are entire books written on this subject as it is the most common fear in human nature.
When the bear is chasing you, this is the fear that gives you the strength to take that one extra step when you think your body can’t run any further. It’s the fear that allows you to take one more breath when you don’t think your lungs can do anymore. Yes I know, I’m being very dramatic. And since I’m not Shakespeare, let’s just look at some practical examples in the world of real estate investing.
- Make that extra phone call. Exhausted after a long day? Push! Make an extra phone call or two to the people that have left voicemails throughout the day. Who knows, those couple extra phone calls may be what ultimately separates success from failure.
- Get that extra bid. Sick and tired of contractors? Push! Dig and find another contract to set up a bid. Who knows, that extra bid may be what gets you a smokin’ hot deal, or better yet, finding an awesome contractor for future use (and future ultimate success).
- Screen a couple more people. Frustrated because your rental is sitting vacant? You just want to get it filled? Push! (opposite direction). Have some patience. Due the proper screening. Turn people down if need be. Who knows, by you don’t being patient enough, this could lead to a tenant that drives you to the point of saying, “Fine bear, you win, eat me!”
What is/was YOUR FEAR in Real Estate?
I’ve outlined four of the common ones I see, but I’m curious what fears you experienced or have seen others go through? More importantly though, how did you avoid being eaten by the bear?
Leave you comments below. Fear is running rampant, so I think it’d be beneficial to learn as much as we can about how to embrace the fear, rather then run from it.
Photo: ValerieDon't Fear 'the Fear' in Real Estate Investing ... Embrace It! by Clay Huber