by Ali Boone
In pilot world (I’m a pilot), I had to become very familiar with the attitudes and mindsets that get pilots into trouble. I partially had to learn this to attempt to keep myself out of trouble, but I especially had to learn about these mindsets when I began teaching flying because I needed to be able to identify these attitudes in my students.
Real estate investing is no different than flying an airplane when it comes to requiring a specific mindset. While everyone can have drastically different personalities, there are some common threads in those who succeed as investors and those who don’t.
For now, I want to focus on the common threads of those who don’t succeed in real estate investing. In flying, we call these mindsets “hazardous attitudes.” These are the mindsets or attitudes that can get someone in trouble. In real estate investing, trouble means either not succeeding in it or causing yourself a heck of a lot of hardship along the way. And sometimes not succeeding in real estate investing is due to never allowing yourself to get into it in the first place!
So what are the mindsets—or “hazardous attitudes”—that may cause you problems along the way if you are trying to get into or succeed in real estate investing?
I’m sure every industry has its fair share of problems with ignorance, but real estate investing is a top culprit in my experience. In our defense, though, most of us investors were never taught anything about investing in school or growing up, so we’ve had to teach it all to ourselves. That, of course, can leave a lot of room for error.
But it’s not even so much about the actual facts and teachings of real estate investing that contribute most to ignorance. It’s more about a general lack of self-awareness. In an industry with so many choices, so many options, and so many voices and opinions, self-awareness is imperative.
For example, everyone will try to tell you that the only way to make the best bang for your buck is to flip a house or to buy a distressed property and fix it up, which allows for equity on the buy. That is absolutely true, but it’s not the only way. As someone who stresses way too easily about getting things done (and done right), without skill set in swinging hammers, who buckles at the first negotiation, I would be miserable flipping or fixing up distressed properties. “Miserable” is actually an understatement, and I know that because I’ve had to fix up a house before. The amount of sanity that I lost each day that I was managing the contractor wasn’t in any way worth the money I would’ve gotten on the buy. I prefer to buy turnkey or rent-ready properties. Sure, I don’t have immediate equity, but that loss is worth it to me to not have to stress. That is key self-awareness on my part.
So let’s do a hypothetical with this scenario to point out what ignorance, in terms of self-awareness, can lead to. Let’s say I did decide when I started investing that I was going to be a flipper. I have to do everything I hate doing and am not good at—finding a distressed property, negotiating, managing a contractor, and finding a buyer. Along the way, I’m stressed and have headaches because none of this is natural for me. I’m smart enough to do it and figure it all out, but I’m certainly swimming upstream. I get to the end of it, after months of swimming upstream, only to find out I can’t sell it for what I originally predicted I could. I lose money on the deal.
Now, if flipping was something I had interest in and some natural skill in, a loss on my first deal probably wouldn’t kill my investing career. I could learn from my mistakes and try again. But if I had been straining and miserable throughout the whole process, and then I lost money, what do you think the odds are that I would do it all over again? Probably not very good.
It’s very possible, then, that I end up with a sour taste in my mouth about real estate investing. And what I don’t realize is that the sour taste isn’t because real estate investing actually sucks; I just feel like it does because I pursued the wrong strategy. Had I picked something that I was more naturally suited for, even if I made mistakes or lost some money, it probably wouldn’t be the end of my real estate investing career.
It’s a little bit of a catch-22, unfortunately. How can I know what investing strategy best suits me without trying them? But how do I try ones I’m not suited for and not let them be the end of me? That brings back in the idea of knowledge and learning. Education and research are key. This isn’t going to solve everything for you or answer all of your questions—only actual experience can do that—but it can definitely increase your odds of starting out on a more well-suited foot.
On the reverse end of research and education, though, you have to also be wary of Hazardous Attitude #2.
There is a point when researching and getting educated goes too far. It’s gone too far when you know about a million things and you’ve yet to have tried anything.
This part also requires some self-awareness. You need to be able to distinguish, if you can, when you still need more education and when you are using education as an excuse to not start. There’s not a definitive answer to where this line is, but it’s certainly worth you attempting to figure it out.
But back to analysis paralysis. Here’s the thing: No matter how much education you give yourself, you can never learn everything you need to know before you try it. It’s why so many of the greatest and most successful investors out there have failed so many times and so big—it’s how you learn. But again, this is not to say you should just dart out there and go crazy not having learned anything. Again, balance.
The first sign that you may be stuck in analysis paralysis is if you are re-analyzing and questioning results you have already determined. Or if you are asking questions you’ve already learned the answers to. Or if you’ve been given all the answers and you are still circling rather than just saying yes or no to the deal.
Some people get such a bad case of analysis paralysis that they literally never end up investing, ever. It’s one thing to end up not investing because you’ve decided it’s not for you, but if you still want to do it, you’ve done tons of research, you’ve gotten the education, and you can’t get to a place of just trying something, you might be paralyzed. But what is paralysis, really?
It’s really no wonder fear is such a common feeling when you start real estate investing. You’re basically flying in with little to no guidance or instruction and slapping a large amount of money down into a property you can only hope will do something positive. Can’t imagine why that would trigger fear.
Fear is absolutely the main driver behind analysis paralysis. The reason you are doing so much analysis is because you’re trying to get rid of risk. For the initial research and education phase, you really are decreasing risk by learning everything you can. But then once you get to that invisible line we talked about earlier—the one where you’ve learned what you need to—then you are just holding out on trying anything because of fear.
Regardless of how your fear shows up or comes out, what you really have to look at is—what is really at stake here? What is your absolute worst case scenario? When I ask myself this question about various things, I’m usually surprised that the answer is not as bad as I must have thought it would be, according to my levels of panic. I absolutely encourage you to ask yourself this when you are pursuing an investment deal. For one, you can probably relax a little knowing that the world won’t end if your deal goes bad (phew, what a relief!). For two, once you ponder the worst case scenario, things can only be better from there.
You can only do the best that you can do every day and with every task. If anything negative happens from that, there’s nothing else you could have done, and it is what it is. You then can learn from it and do your best the following day with your newfound knowledge.
If fear doesn’t cause you to avoid investing completely and you do invest, if you continue to be fearful the whole time, you are most likely going to experience unnecessary headaches. You will be on edge wondering if particular things are going to lead to the demise, you may lose sleep over thinking about it, and as they often say, we tend to attract what we most fear.
So try your best, if you are experiencing fear, to get to the root of it. Are you fearful because you don’t know enough about what you are doing? Well, that’s easy—learn more. How much is really at stake should things go wrong? Do you have exit strategy plans? Know your exit strategies! Once those are in place, go for it! But don’t go in with too much…
Having a little bit of fear is actually helpful in real estate investing. If you at least let a little bit of fear hang around, it will keep your eyes open to what is going on around you and what you need to be doing. Obviously, per the last bullet, too much fear can stop you in your tracks, but having just a little bit is a good thing.
If you don’t have at least a little bit of fear, you may come in with too much confidence. Confidence by itself is great, but over-confidence can cause you to get complacent when maybe you shouldn’t be. There is a lot to learn in this world. If you think you are rocking and rolling just fine by yourself and don’t need to learn anything else, you may end up learning lessons the hard way. This is not an industry where you need to prove yourself and not listen to anyone or learn from others’ mistakes.
Over-confidence will likely get you into deals that end up flunking, land you in trouble somehow, or have you burning bridges along the way. First of all, no one likes talking to someone cocky. Second, you’re likely to miss out on positive learnings that come your way because you’re either too good to hear them or you know everything already. Don’t be that guy (or girl). Your investments may suffer and people may not like you.
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