An article written by Larry Arth for the website How to Buy Real Estate delves deep into the psychology of investors. Arth asserts that many investors who have failed in the property market had one thing in common: they failed to separate the emotional side of their mind with the side that makes rational decisions.
Keep emotions away from real estate investments
It is not hard to figure out. Property investment requires money and money is associated with deep-rooted emotions within us. Only the very seasoned investors are able to think objectively and separate money completely from emotions.
Overcapitalising during renovation because of love for a property
Think of the investors who make significant changes to their investment property just so it looks good to the eye. Unfortunately, cost and value are two different things and the world of property market teaches this to us all too clearly. Such investors feel the pinch when their homes fail to get an expected hike in value during the appraisal and they end up losing money in the deal. This, says Arth, is one example of emotional investing.
Spending in wrong property style
Investors, out of love for the properties, sometimes overcapitalise in renovating properties of wrong styles. For instance, there is no virtue in spending a lot of money on duplexes. “Who buys duplexes?”, asks Arth. At any rate, even if you find a few buyers, buying a duplex certainly narrows down the arc of your prospective buyers. So, is it not a case of emotional investing once again- an investor buying a property style which does not offer great returns?
You throw an apple at the property market and it may throw back an orchard at you but this is not all that simple. The real estate world is beset with many real traps. The least we can do for ourselves is to not get caught in psychological traps. Investing emotionally is a mindset crime and it gives bad results more often that it does something good for the investors.
Keep Emotions Apart From Property Investment
Keep emotions away from real estate investments
It is not hard to figure out. Property investment requires money and money is associated with deep-rooted emotions within us. Only the very seasoned investors are able to think objectively and separate money completely from emotions.
Overcapitalising during renovation because of love for a property
Think of the investors who make significant changes to their investment property just so it looks good to the eye. Unfortunately, cost and value are two different things and the world of property market teaches this to us all too clearly. Such investors feel the pinch when their homes fail to get an expected hike in value during the appraisal and they end up losing money in the deal. This, says Arth, is one example of emotional investing.
Spending in wrong property style
Investors, out of love for the properties, sometimes overcapitalise in renovating properties of wrong styles. For instance, there is no virtue in spending a lot of money on duplexes. “Who buys duplexes?”, asks Arth. At any rate, even if you find a few buyers, buying a duplex certainly narrows down the arc of your prospective buyers. So, is it not a case of emotional investing once again- an investor buying a property style which does not offer great returns?
You can read the original article here.
You throw an apple at the property market and it may throw back an orchard at you but this is not all that simple. The real estate world is beset with many real traps. The least we can do for ourselves is to not get caught in psychological traps. Investing emotionally is a mindset crime and it gives bad results more often that it does something good for the investors.
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