Are You An Emotional Investor Losing Thousands Without Realising?
Wanna know how to completely stuff up your investment portfolio?
There it is. Straight to the point!
"But Wendy, this is an investment, not a place I'm going to live in, so I won't be thinking of it in that way."
If I had a dollar for the number of times an investor has said this to me, I could almost retire! Well, not quite but you get my drift.
It never ceases to amaze me how many investors I come across who claim to NEVER play victim to their emotions when it comes to buying investment property.
So what do I mean by this?
Buying property you LIKE or buying property in areas you KNOW are two of the biggest tell tale signs of an emotional purchase, EVEN IF you are looking at the purchase through investment eyes.
Why? Because both of these criteria are based 100% solely on YOU and YOUR opinion.
You're not thinking about things like capital growth drivers, an area's demographics, past growth trends and other criteria that drive your investments.
YOU'RE BASING THE PURCHASE ON WHAT YOU THINK IS GOOD, OR RIGHT, OR COMFORTABLE.
LET ME EXPLAIN WITH A HYPOTHETICAL EXAMPLE.
42 year old Bob from Sydney visits Brisbane to meet with his Buyer's Agent (me) for the day to look at investment properties.
He already has a small portfolio in Sydney that has seemingly performed well over the past few years, and now he wants to expand and diversify his investments into Brisbane.
So far, so good.
Since Bob doesn’t know Brisbane very well, he relies on me to show him around, explain where the best properties are located, and give him an overall run-down on where he should buy and the type and style of property he should purchase in Brisbane if he wants a high capital growth investment.
With that said, Bob and I agree on a few locations and types of property, according to my local expertise.
Bob goes home to Sydney and I get cracking on the search for the type of investment we both spoke about and agreed was right for Bob's growing investment portfolio.
HERE'S WHERE THE STRATEGY STARTS GOING PEAR SHAPED...
Bob begins to question the types of properties I am putting in front of him for consideration.
Even though these properties fit the Brief of what we discussed, I can see he’s leaning more toward properties in the areas that he knows.
You see, Bob’s sister lives in North Lakes in Brisbane and so he kind of knows this area a little so he feels more comfortable buying here than anywhere else.
AFTER ALL, HIS SISTER CAN KEEP A WATCHFUL EYE OVER THE PROPERTY IF HE BUYS NEAR WHERE SHE LIVES.
(BIG RED FLAG MIND YOU.)
He’s moving well away from our original plan and the Brief that was initially discussed, which was based on statistics and capital growth drivers.
Instead, he’s starting to consider properties that look great and are located closer to his sister’s house but offer little in capital growth potential.
See what’s happening here?
BOB IS BUYING EMOTIONALLY.
Funnily enough, Bob is not alone in his quest.
I’ve worked with several investors who swore black and blue they wanted an investment property based on capital growth performance and all those strategic elements that drive growth, BUT, when it came to the crunch, I found they were making go or no go decisions based on emotional factors such as their own ego, whether they FELT the property was right and even as far as the numbers of the house not being “suitable”.
DON’T BE THESE TYPES OF INVESTORS.
Remember, ALWAYS ALWAYS make rationale, strategic decisions when it comes to your property investments.
In the long run, you'll thank yourself because the numbers will show you made the right decision.