One of the most critical things to get your head around as an active property investor is, well, your head.
You may not think so, but how you think can greatly influence the outcomes of your daily reality. Frequently we do things on automatic pilot, making conscious decisions as we go about our business, rooted in all sorts of associated emotions at a subconscious level.
Some will be favourable and pleasant…others not so much, depending on the associated memories of the particular experience.
The interesting thing about how we think, Is that the more aware you are of your own instinct and intuition…the more self aware you are…the more likely you are to make effective decisions based on logical, solution seeking processes.
This is the difference between an investor who remains calm and focused in the current frenzy of negative press surrounding property and finance, and capable of making investment choices in line with their strategy and objectives…or the one who panics and reacts to all the noise.
When you feel entirely uncertain about what you’re doing and importantly, what it means to you at a deeper level, you’re far more easily led by the headlines and scared off by negative connotations about the direction certain markets are seemingly taking.
The first question to ask yourself to get a better understanding of how your mind works is…
What drives you?
What is your agenda? And please be entirely honest with yourself, even if it proves difficult.
Many people don’t want to suggest money is their end goal, because it’s associated with greed or self-interest. But guess what…everyone is secretly driven by some form of personal compensation, and hence, some degree of self-interest. It’s just how we humans are programmed.
Some people focus on self-interest that’s perhaps broader serving…think those always volunteering their time to ‘the greater good’ without expecting compensation. They do it because it makes them feel good.
For some, making money has the same effect on us at a physiological and psychological level. It makes us feel a sense of personal achievement and hence, we feel good about ourselves. Remembering these are all proven chemical responses that actually do, make us feel good!
Naturally, the better we feel about our decisions, the more confident we grow in our own intuition and the more positive our inner dialogue becomes.
With this mindset, we are less likely to panic amidst the mayhem. We can maintain focus and find solutions to problems that might arise on our investment journey, because we’re not in a constant state of fear, and attempting to work in a logic inhibiting, flight or fight response.
Feel the fear
Fear repressed is almost twice as unhealthy as fear acknowledged and worked through. Because when you refuse to acknowledge fear as an investor, you risk losing that connection to why you’re doing what you’re doing.
Do not underestimate the damage that occurs to your decision-making capacity, when you operate in a perpetual state of fear…
Will the markets crash? Can I keep making my repayments? Will interest rates go up? What if I can’t find a tenant?
Studies have demonstrated that people suffer almost twice as much pain losing $1, as they feel pleasure in gaining that same dollar (Kahneman and Tversky, 1991).
Often, this fear to let go is what inhibits important investment decisions, such as whether to retain or offload a less than startling asset in your portfolio. Invariably and without even realising it, this combination of subconscious reactionary decision-making that’s grounded in fear, can lead to self-sabotage on a grand scale.
Don’t get too attached
Investment decisions must always be based in logic and rational thinking, and not made on the emotional response you feel at any given time.
Emotional attachment is crippling to many a portfolio. It’s far better to become attached to your sound investment strategy, than it is to form some type of bond with your rental property. And finally…
Remember who you are
It’s easy to be guided by a self-proclaimed property guru into some type of investment strategy that promises profits beyond your wildest dreams. But rarely will such schemes deliver.
Don’t be tempted to follow trends at the risk of losing sight of what it is you’re doing and why. If it feels wrong, it most likely is. And if it’s all too hard, there’s a good reason for that. Go with what works for you.