Investor · Boca Raton, FL · Member since 2019 · 1k+ posts · 159 votes
How many investors out there have let fear of losing money, stop them from taking a gamble on a property? Was it justified or did you end up regretting not making an offer?
Real Estate Broker · Bay Area · Member since 2018 · 1k+ posts · 3k+ votes
7y
I think fear is something all investors experience until they are confident with their knowledge, have the experience, and proven and completed 1 deal. Once they do that the natural feeling is gone. Fear from that point forward is just mental and getting comfortable.
I think what helps is putting "Fear" into perspective. Go straight to the worst case scenario. What is the worst case? You screw up losing all your money, time, and energy you put into it. OK, do you still have your health and family? Can't be that bad then. Failures happen in life, just regroup and try again.
I don't take big risks in general. The risk is the first thing on my mind and I always structure my plan around that. I always go with what's the worst case and work from there. This way I am confident in the investment.
Rental Property Investor · South shore, MA · Member since 2017 · 1k+ posts · 1k+ votes
7y
I worry about impulse more then fear. I have let fear slow me down, but ultimately it doesn't dictate the decisions I make. There is risk in any investment. Am I going to roll the dice on one house and risk losing everything? No.
Real Estate Broker · Bay Area · Member since 2018 · 1k+ posts · 3k+ votes
7y
I think fear is something all investors experience until they are confident with their knowledge, have the experience, and proven and completed 1 deal. Once they do that the natural feeling is gone. Fear from that point forward is just mental and getting comfortable.
I think what helps is putting "Fear" into perspective. Go straight to the worst case scenario. What is the worst case? You screw up losing all your money, time, and energy you put into it. OK, do you still have your health and family? Can't be that bad then. Failures happen in life, just regroup and try again.
I don't take big risks in general. The risk is the first thing on my mind and I always structure my plan around that. I always go with what's the worst case and work from there. This way I am confident in the investment.
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
7y
Sometimes fear is just False Evidence Appearing Real. Be fully informed.
Run a worst case scenario. Will it wipe you out? Then no thanks. Will it just make you keep your job or get a job like everybody else? Case by case. We all need a risk meter, but dont let it rule your decisions especially without adequate information.
I run mine past my nap index. Effort/reward. Then risk/reward. I have definitely turned down projects, podcast invites, co-coaching & partnership opportunities, etc based on my nap and risk cost/benefit analysis. Not just blind fear.
Rental Property Investor · Cranston, RI · Member since 2017 · 171 posts · 158 votes
7y
I agree with @Frank Wong with regards to confidence. Confidence reduces fear, but most beginner investors aren't confident (and rightfully so, I'd say). We were fearful investing in our first property but took the risk, slightly less fearful with our second property and took the risk again...I think this cycle will repeat and hopefully with positive experiences, but as the others noted, it depends on how much there is to lose.
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
7y
Whether we like it or not, many of us choose comfort over challenge, security over the unknown, and what's easy over the difficult. We have limiting beliefs, excuses, reasons, and lies we use to justify some of our decisions...around finances, health, fitness, family, and relationships. Fear of failure plays a huge role in real estate...and in every aspect of life. And so does the courage to try new stuff, fail, pick yourself up, and keep trying over and over again (which builds skill, character, and knowledge).
Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes
7y
If you are afraid of losing the money due to the impact it will have on your life, then you shouldn’t be investing that money in the first place.
If you are afraid of failing and the loss of money is a quantification of the thing you so fear, then that is a life outlook issue and it simply manifests itself in REI.
I never let fear stop me from making an offer on a property I am interested in. An offer is simply a commitment to do more research. I don’t make offers mainly due to the fact that the seller and I are so far apart on valuation that to submit an offer would be to waste our time.
Also failure does not mean you made a bad choice. Judging a decision by whether it was successful or not is a terrible idea. Using a Texas Hold'em analogue, if I play long enough, I will win a pot with a Seven Two Offsuit. The simple fact that I won with those cards does not mean it was a good decision to play that hand.
I care far more about my decision making paradigm than I do about the result. If I continuous hone my process with feedback from both good and bad outcomes, it is inevitable I will become a better investor.
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
7y
@Elliott Stern. I was most scared when I started. Like scared out of my mind some days. I have very successful people in my life who have never touched real estate. At all. So it’s very difficult to go totally against the grain on something like that AND I started out of state, having never owned a house before.
That being said, 3 years later I’m so glad I got started. Most people I meet always say “I wish I’d started sooner” and I started at 22, so while yes I could have started earlier, I think I picked the right time (for me).
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
7y
It’s funny how the mind works when it comes to fear and what our cultural beliefs are . For example most of the public in general would never buy a beat up distressed house for 40 grand to rent out because of the fear of losing money , yet the same people would drive around town stop by a dealership and out of impulse (and a slick salesman )purchase a new suv for 40 grand even though it will only be worth 10 grand in 5 years. I have come to learn that risk is relative . What’s risky for some is not risky for others . Knowledge is the key factor .
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
7y
It’s funny how the mind works when it comes to fear and what our cultural beliefs are . For example most of the public in general would never buy a beat up distressed house for 40 grand to rent out because of the fear of losing money , yet the same people would drive around town stop by a dealership and out of impulse (and a slick salesman )purchase a new suv for 40 grand even though it will only be worth 10 grand in 5 years. I have come to learn that risk is relative . What’s risky for some is not risky for others . Knowledge is the key factor .
I agree with @Frank Wong with regards to confidence. Confidence reduces fear, but most beginner investors aren't confident (and rightfully so, I'd say). We were fearful investing in our first property but took the risk, slightly less fearful with our second property and took the risk again...I think this cycle will repeat and hopefully with positive experiences, but as the others noted, it depends on how much there is to lose.
Interesting question...thanks for posting!
Nancy I grew up poor, I betcha I was more fearful than you with our first one! Now we're planning our second this fall and have of course not eliminated the risk, we're just working it into the plan based on the success we've enjoyed with the first one. Still scary...but like you the positive experience has given us the confidence that @Frank Wong mentioned!
Investor · Columbus, OH · Member since 2015 · 625 posts · 601 votes
7y
@Dennis M. I'm closing on a duplex with a detached house out back of it Monday. 42k, that's about your prices ain't it lol?
As for letting fear stop me from making a deal I have never done that. It's nerve wracking dealing with all the unknowns of a new deal but even before I started I had complete confidence that this was the path for me to get where I wanted to go.
Investor · Scottsdale AZ · Member since 2015 · 1k+ posts · 423 votes
7y
Great discussion. Glad you brought this up.
I tackle this by having a long list of due diligence items I review before I pull the trigger on an acquisition. Not only do I spend time making sure the property is great and priced right, I will pay for my own $400 inspection and review deeds back as far as I can go.
I'd rather spend some cash now on an inspection than be stuck with a property that had a flaw I missed. I also put on my title agent hat and make sure ownership and prior transfers check out before I send it to an escrow agent. (Again, no need to waste anyone's time.)
Over the years, my checklist has grown and if I am not feeling great about a deal, I will pass. There is always another one right around the corner.
Rental Property Investor · Torrance, CA · Member since 2016 · 724 posts · 1k+ votes
7y
I was fearful when I was younger. Around my early to mid twenties the vision of my future started to come into focus, and my goals began to solidify. Fear of failure mostly went away. I’m still motivated by fear. The fear of wasting time, and realizing one day that I’m too old to become successful.
When you think about it, the fear of failing is extremely irrational. We are all dying. Literally, every night when you go to bed is -1. It’s a countdown. The worst thing that could happen in any given scenario is also the only thing that is inevitable. It’s like we’re all on a train headed towards a cliff, but nobody wants to risk jumping off. But, if I don’t jump off I’m guaranteeing a life of mediocrity. That scares me.
This conversation reminds me of this guy I used to know when I was younger. He had a tattoo that said something like “I won’t tiptoe through life to arrive safely at death.” We are all here on BiggerPockets because we share a common goal. There’s only one way to get there, and it sure as he$$ isn’t going to happen without taking action.
Investor · Austin, TX · Member since 2014 · 184 posts · 229 votes
7y
I find that fear is a healthy ingredient of risk management in a life of investor. I noticed that many new investors are, on one hand, afraid of making a purchase. Yet, on the other they have no concept of risk or risk management at all.
I recently had beers with a couple in their late 40s at a local meetup. The told me about their first investment -- a new construction project of a duplex property with a $230K lot purchase and $500-600K in construction costs. They gave me a long list of reasons why they were going to net $250K profit on it and wanted me to confirm that they would make the profits. I could only shake my head in disbelief. They were somewhat upset when I raised a number of questions about their assumptions.
The couple had no experience in construction, no prior ownership of investment real estate, no management experience of projects of this scale.
The best way I found to mitigate fear and dramatically eliminate risk in any deal is to change my thinking about acceptable margins. In 1-4 units arena in a decent area of town a purchase at a 20-30% discount is, IMO, a marginal deal that I'd pass in a heart beat. At 40%-50% I'll start paying serious attention, but will still check my numbers carefully. At 70% off, I'm drop everything and jump on it.
I find that I can borrow hard or private money for these type of deals and sleep really well at night, knowing I can't possibly loose mine or lenders' money on something like this.
I don't know how old you are or how much life experience you have but at some point I realized that the most important things in life to me are: god, my wife, my kids, and my health. Everything else is really excess. Overtime I was able to make sure that my family would have a roof over their heads and food on the table even if I lost everything. If I lost my job and lost all my tenants and I had to give everything away. I would still be able to manage.
As long as god, my health and my family are good, losing money isn't that big of a deal.
This is what keeps me from fearing moving forward in my investments.
Eastern Michigan · Member since 2018 · 81 posts · 144 votes
7y
I have been thinking about this a lot lately. Fear is totally holding me back from doing a flip right now. I've done a handful of live-in flips and bought some rentals but what is really holding me back is that now I have an investor (my mom) who is willing to put up the money and I have total analysis paralysis. I am fine with the potential of losing my own money (although I haven't) but the thought of possibly losing someone else's money freaks me out!
Anyway I love this thread and reading people's take on fear and how they mitigate it. It's such a reminder that to be successful I can't let fear stop me.
Lender · Pensacola, FL · Member since 2017 · 658 posts · 626 votes
7y
All of the above. Taking risk is foolish. But everything changes once you're in your fortress of solitude. 😃
If you are at work and can use headphones for privacy (highly recommended), learn what you can do once you've reached The Position of F*** You (you can even do it with index funds instead of income real estate if you want). I wish I had known this when I was starting out. My journey to financial freedom would have been quicker and smoother.