Fear Factor: 4 Steps for Overcoming Fear in Real Estate Investingby
I’ve been in real estate for over 11 years and done dozens and dozens of deals, but time and experience doesn’t totally get rid of my fears. How I look at my fear is different but I think I will always be scared that people won’t like what I have to say. I’m sure I will always worry a little bit that something could go wrong with a deal. But those fears serve an important purpose in my life – they always make me stop and double check what I am saying and doing in my business. The key is that it doesn’t freeze me in place – it just serves as a good double check.
Fear is an emotional response to perceived dangers. Trying to ignore or suppress fear doesn’t work. I also don’t think you should try. It’s our ability to recognize potential danger so we can choose whether to confront it or run away.
Fear in real estate investing is common. It can be scary at times. There’s a big fear of losing money. There’s concern over the stress that you can feel if something goes wrong with a tenant or a partner or a deal.
Running from what scares you, doesn’t work though. Doing nothing doesn’t change anything either.
I think the best thing you can do is acknowledge you’re afraid of something, understand it, and then decide if you need to run from it or confront it. When you do it this way you’ll be able to recognize the fear that is protecting you and move past the fear that is holding you back for no reason. Specifically, here’s how I overcome my fears and how you can too:When you do it this way you’ll be able to recognize the fear that is protecting you and move past the fear that is holding you back for no reason. Specifically, here’s how I overcome my fears and how you can too:
1. What are you really afraid of?
I’ve met hundreds of investors that are stuck – they want to do deals but aren’t. Sometimes they have been stuck for years and years!
When I ask what’s holding them back the answer is almost always because they can’t find good deals in their area or they don’t think their market is a good one to invest in, but they don’t know where else to invest. Sometimes they don’t have investment capital and feel stuck without money to put into the deals.
It’s possible these issues are actually the issue, and in hot real estate markets with bidding wars and limited supply, lack of good deals is quite possibly true. However, in most phases of the real estate cycle, there are always plenty of deals out there for investors willing to work hard to find and create them. And there is definitely money.
Rarely are these actually the obstacles holding you back. More likely, it’s something deeper like a fear of making a mistake that leads to you being judged poorly by someone you love. In other words, you’re likely not just afraid you will do a bad deal and lose money. You’re afraid that if you do a bad deal and your Dad finds out he’ll say “I told real estate was a bad idea – now quit trying to make money in real estate and get a real job like I taught you.”
You have to look at WHY you’re afraid of losing money. What is it that you are really afraid of?
Until you get into it and actually uncover that real fear, it’s hard to move past it. But once you realize that you are afraid your husband or wife will think less of you if you do a deal that doesn’t make money, you have something you can tangibly deal with.
2. Get Comfortable with that Fear
Again, I am not a big believer that you’re going to get rid of the fear so the better plan is to acknowledge it’s there, figure out what is driving it, and then do what you need to do to feel more comfortable with it’s presence.
Let’s just say you’re biggest fear is that your husband or wife will be upset with you for a deal that isn’t that good. What can you do to get more comfortable with that fear? My suggestion would be to sit down and have an open conversation with your spouse.
“Listen honey – you know I’ve been wanting to get into real estate for awhile. I really believe it’s the best way for me to ensure we’re all taken care of in our retirement and to hopefully have some additional money to pay for our kids to go through University if they want to do that. I just feel a bit stuck. I’ve done my homework. I have taken some courses and done lots of reading as you know, but I am not able to move forward. I think it’s because I am really scared that if I make a mistake it will change how you feel about me.”
Maybe that’s not a conversation you’d normally have but if you’re married it’s probably time you opened up and started to talk openly about your fears around your investments. What you’ll probably find out is that your spouse appreciates your concern but supports you. He may even offer support, suggestions or other ideas to help you achieve your goals.
It’s unlikely you’ll erase the fear but now you’ll feel more comfortable to move forward.
If your fear doesn’t involve a desire to be liked or a fear of being judged then a conversation might not solve it. If, instead, you’re lacking confidence in yourself and feeling terrified you’ll pick an awful tenant you still have to get comfortable with it. My suggestion? Think about the absolute worst thing that can happen to you if you pick the world’s worst tenant. Now, think about what you will do to resolve it. In most scenarios I can think of, it’s a pain in the ass to deal with but insurance will cover me or I have to spend several thousand dollars handling the issue. I can almost always come up with half a dozen ways to find the money to pay for that kind of damage and I am sure you can too if you really think about it. After you’ve done that, you have to remember that your absolute worst case scenario is very unlikely to ever happen but if it does, are you going to survive it?
3. Plan For Success
When my husband Dave and I are preparing to present an investment opportunity to one of our money partners we always plan for them to say yes. We prepare and practice what we’re going to say so that we can deliver the message clearly, concisely and with confidence. Sometimes they say no. Once in awhile we turn them away because we don’t want to work with them. Usually they say yes because we’re ready for it.
You might feel like there is no point lining up your mortgage broker, lawyer and property manager until you’ve found a good deal. The reality is that you’ll probably never find a good deal until you’ve planned for your success. Your own self doubts are holding you back from doing what you’re going to need to do once you find that great property. And you know what? Once you are ready for that deal it will probably be right there under your nose!
4. When All Else Fails, Take Action
There’s almost no fear that can’t be overcome by simply taking action that moves you squarely towards what you’re afraid of. If you’re afraid of rejection from a potential money partner, nothing else will help you truly become more comfortable with that fear than sitting across from someone and risking that NO.
The objective here is not to eradicate fear. Fear is important. The day you stop fearing you could make a mistake is almost always the day you screw up big time. Fear will keep you checking in to make sure you’re taking precautions. Let fear do it’s job to keep you safe but do not let it anchor you.
Get to know it so you can recognize when it’s protecting you from something real versus scaring you from becoming as great as you can be. Once you feel better that it’s a fear of something that won’t kill you or damage your life forever, you can move forward to planning and taking action.
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