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Property Investors Must Keep Emotion Out of the Way

beach homeObjective evaluation of our property portfolio is quintessential to maintaining a healthy one. Because we are so much involved in our portfolio and most of the times we cannot cut emotion out of the way, we falter…and it hits us where it hurts most. It is important to have an observer’s ‘vantage-point’ view and steer clear of those properties which give the feeling of hanging on to a sinking vessel.

Investing in properties with emotions at the centrestage

I had an acquaintance (and a fairly stubborn one whom I never volunteered professional advice) who was a big admirer of waterfront properties. He felt that they will turn into gold dusts; given the avalanche of investors looking for regional hotspots. But truth be told, he just loved the ‘waterfront’ ones and he did not need any reason to stick to them.

Now, he was otherwise a reasonably good investor and mixed his high-on-rental yield (positively geared) properties with high-on-capital-growth (negatively geared) ones and kept buying, selling, holding them in a combination that suited his portfolio’s health.

Such investments can cost dearly

Then came the bad news that water level was rising and many waterfront properties would be just washed off. In fact, in the beach areas he held properties in, further construction had been barred by the council. He stuck to his whim and did not get rid of any of the beach properties. Needless to say, his emotion came into the equation in a big way and it cost him a fortune.

Keep emotions out of the way

Many a times, we are in a position to understand that we are hanging on to a sinking ship. Some of our properties fail to perform up to the degree we expect them to and yet we stick with them. I strongly recommend keeping emotions out of the road and journey along only with the help of stats and figures.

For instance, a property placed in an area of historically low capital growth won’t suddenly start showering gold nuggets on you unless you are as lucky as a leprechaun. Right?

Is there a case you can narrate where an emotional investment cost you dearly?