How To Overcome The Fear Of Investing In Real Estate
I was curious about what really fuels the fear of real estate investing so I did a little survey on real estate investors.
I’ve done lots of survey and talked to lots of new investors about what prevents them from getting started investing in real estate and house flipping in particular.
So at the last few House Flipping School MeetUps, I've been asking new investors what's holding them back.
I expected that some of the answers I would get would include:
- I’m too broke to start
- Deals are hard to come by
- I don’t know how to rehab a house
- I can’t tell whether I have a good deal or not
The answer I got completely took me by surprise; people actually were afraid of getting into real estate.
The Biggest Challenge When Starting Out
One of the biggest challenges that I noted from my ad hoc survey was that even though many people considered real estate investing as something they wanted to learn, they were terrified of getting started.
And it was the same thing for our Bootcamp attendees as well. Although those guys were actually doing something about it!
These are some of the fears that I uncovered were:
- I don’t know the process of flipping houses and I might just fail
- Fear of the unknown
- I have very little time since I have a full time job
- I don’t know where to get houses I can flip
- I’m not sure what to do in this business
- I don’t have someone to look up to or who can guide me
- I’m not confident enough to do my first house flipping deal
- What will happen if the house flip doesn’t sell?
- I can’t tell if a deal is good or not
- I can’t estimate renovations
- I don’t know how rehabs are managed
This is not a complete list of all the answers I got, but I can tell you that from those answers one thing stands out: FEAR
It’s All In The Mind
Everyone in the survey expressed an interest in learning how to successfully flip houses but in the open answer section, I found out that their hesitation was deeply rooted in the fear of losing, fear of failure, fear of the unknown and the fear of screwing up.
If you ask me, I think it’s all in the mind and many professors far much smarter than me have proven this.
According to human behavior analysts, there are two opposing forces that inspire people to do everything they do in their lifetime.
The desire to gain pleasure or the desire to avoid pain.
These two opposing forces unfortunately either encourage people to make some kind of change or do nothing at all. It’s very unfortunate that most people don’t do anything at all.
The moment you decide to take action, you will start changing small things and this will motivate you to act on larger changes.
This is the approach my team and I use everyday. If you are battling with fear, then I really recommend watching the below video.
An Idea Called Leverage
Anthony Robbins discusses an idea known as “leverage”. He says that if you want a person to take action, you have to show them that massive PAIN is associated with procrastinating change while massive PLEASURE is associated with making a change now.
Overcoming The Fear Of Real Estate Investing
I’d like you to trick your mind into thinking that you can’t fail. I have two scenarios in my mind that I think might help you out. Scenario 1 You’ve put in a lot of work into launching your real estate career and you have finally found what you hope is a good deal. You have enough money, you know how much rehabbing will cost you, your broker has given you a factual ARV and you are 95% sure how much the house will sell for. You take action and you purchase the house, rehab it and sell it in less than six months, making a $15, 000 profit. How much pleasure would you feel? Scenario 2 You’ve put in a lot of work into launching your real estate career and you have finally found what you hope is a good deal. You have enough money, you know how much rehabbing will cost you, your broker has given you a factual ARV and you are 95% sure how much the house will sell for. But the last minute you back out because you fear you won’t succeed only to hear six months later that someone else bought the house, rehabbed it and made a $15, 000 profit after selling it. How much pain would you feel?
Handle Your Fear Or It Will Control You
There was fear in both scenarios but the difference is in the first scenario, you controlled your fear, channeled it and defeated it. In the second scenario, you lost the battle and succumbed to your fears. Don’t get it twisted- controlling your fear and associating massive pleasure with getting started in real estate investing and associating massive pain with not investing won’t entirely guarantee your success in real estate investing. You still have to know how to do your math and double check to ensure everything is as it should be. You have to minimize your chances of a significant loss by taking certain steps. Don’t second guess yourself if everything is in order, you need to act now. It’s the only way you can overcome the fear of real estate investing. I’d love to know what fears you had to overcome to get started in real estate and what you think of FEAR in real estate investing. Please leave a comment below and let me know what you think!
Mike,
Almost all of the items you listed above involve practical fears, i.e. I don’t know how to find money or houses to flip, etc. etc. Those can be solved/overcome somewhat easily with proper education/coaching. The much stronger fears are deep in the mind. One of the strongest is the fear of success. Our society often teaches we aren’t supposed to be successful, just average. Or, I’m not entitled to be wealthy. This is the hardest to overcome because there are many dream stealers, usually family and friends. The other, and opposite, psychological fear is the fear of failure. For most people this fear is overcome with their first or second successful deal, i.e. YEA, I CAN DO IT. Most trainers focus their training programs on the practical fears; the “how to ” find money and deals. Few spend much teaching time, if any, on the psychological because it’s difficult. It doesn’t help to just tell people “control you fears.” A mentor/coach or even better a partner on the first deal or two can be a good solution. Bob
Yes fear is a factor,especially for something you have never done before.Something that involves convincing yourself that you may have enough of a clue of what you’re doing to try. Let alone be secure enough with your limited experience “zero” to try and convince someone else to do a deal with you .The else are “sellers” ; Banks ;property owners. Now just so you understand that doesn’t mean that I have given up on the dream of becoming a realestate investor but it does mean I ‘m hesitant and still dreaming.The reality is most people want someone to give them some personal guidance in learning something that is completely foreign to them . Books and cd’s are fine in the virtual world but there is no replacement for the reality and confidence of real life experience.
I need a list of all the financial services to start my home flipping business. I have the drive but not the financial means. If you can point me in the right direction, I would be very much greatful. I follow all the flipping shows and I think it is time for a change in my life. So please help me out so I can provide a better life for my son.
Hey Shawn – Check out the blog for different ways to get money to do deals. You can also google hard money and your state location for a list of lenders. Also contact you local banks and start building relationships with them for financing deals as well.
Good luck.