First Rental Property

There is more to investing in real estate than most people think.

The general public believes that you can invest in real estate if you have the required money, you know about the area that you want to invest in, you have researched the property, and perhaps you know some other people that have invested in real estate as well.  Well my friends, it is not that easy…

What most people don’t realize is that there is one key variable that is required.  If this variable is missing, it does not matter how much money a person may have to invest in real estate, they just will never end up doing it.

This one key variable is:

The Psychological Variable

What is the Psychological Variable?

The psychological variable refers to the mindset of the individual real estate investor.  Everyone in this world is different, that goes without saying.  As such, there are no two people that share the exact same thought patterns.  As a result, some people might be better suited in invest in real estate than others, just based upon individual thought patterns.

What I am saying is that people create psychological barriers for themselves, that prevent them from investing in real estate.

This not only happens with investors just starting out, rather this also happens with experienced investors.

For example, a novice investor could create a psychological barrier for themselves in the following manner.

They could fear that if they purchase their first rental property, and it goes vacant for a period of time, they may not be able to pay the first mortgage on the rental property.

This can be a legitimate fear for people.

However, I know from experience that this is a risk that can be mitigated.  Many people can’t get past this fear, and as a result, create a psychological barrier which, creates a mental roadblock that prevents them from investing in real estate.

This not only happens with novice investors, rather it also happens with experienced investors.  Investors with multiple properties can fall victim to this fear as well.  For example, if an investor owns 6 rental properties, and they have the capacity and the funds to buy their 7th property, this investor may get nervous and create a psychological barrier for themselves.  They may fear that if they buy this next property, they may not be able to pay the mortgage on the property in the event that the property goes vacant.

Again, this is a legitimate concern.

In both scenarios with the novice and experienced investor, in order to combat this fear, and get their head in the game, they both have to ask themselves the following question:

What is the worst that can happen?
If both investors asses this situation and realize that if their properties go vacant for a period of time, they will experience financial difficulty, they should not purchase the property.  As a side note, this financial difficulty could be a result of the investor not having a sufficient reserve fund for their investment property.

If on the other hand, bother investors analyze the situation and see that they are in a good financial position, and able to cover the vacancies, they should realize to move ahead and buy the property.

They also would now be aware that they were creating a self imposed psychological barrier that was preventing them from moving forward.

Whether you are a novice or experienced investor, it is always important to take inventory of our own thought process.  Continually ask yourself,

“Am I creating psychological barriers that are limiting my ability to move forward?”

If this is the case, you need to get your head in the game.  The only way to move forward is to break down these psychological barriers.

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To read yesterday’s article, click here.