Mastering Emotions that Drive Real Estate Decisions

If you are anything like me, you have made some decisions in real estate investing that weren’t so good, or just flat out bad. The question of the day is do bad decisions just happen or more straightforwardly, why did I make this bad decision. What I have found after my fair share of good decisions and bad decisions is that most of the bad decisions, I made were influenced by unchecked emotions behind the scenes. For that reason, today, we will dip our toe into the Psychology of Real Estate investing. There's a lot happening behind the scenes, in the minds of both buyers and sellers. Today we will explore the three common emotions that play a crucial role in investing decisions and how to identify them and manage them.

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1. Excitement - The Spark that Ignites the Purchase

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Think back to the first property you ever bought. Remember that rush of excitement when you had finally found “the one”? It's like finding a hidden treasure. Excitement is a powerful emotion that often kicks off the entire real estate journey. As investors, tapping into this emotion means seeing properties in a way that sparks joy. I remember how excited I was when I did my first real estate deal. It was a three bedroom one and half bath single family home in beautiful West Louisville, KY.? Suddenly, I knew I was basically a real estate tycoon and was about to take over the world. I was unstoppable, and undeniably on a path to be the richest man in Babylon. The stars were bright, and the weather was always right.? Everything was going my way.?

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Just like excitement can be a very good emotion that can get you past some mental barriers, it can also be a decision driver that keeps us from looking at the analytics in a critical way. We get so excited about a property because something about it speaks to us that we overlook, intentionally, the fact that the numbers don't work and the math ain't mathin’… excitement can get us into some pickles when we choose to overlook certain defects in a property or things that should be red flags. Make sure you have checks and balances in place and systems to discipline your excitement or you will skip and dance over your due diligence into a bad deal, then that excitement dies off real quick when you run out of capital or funding.

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2. Fear - Nervous about risks or things you may not know about.

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Fear can be a tricky emotion, but it's a big player in real estate. Both buyers and sellers experience it. Buyer’s fear making a wrong decision, while sellers fear not getting the best deal. As investors, understanding and addressing these fears can make a huge difference. What we have now found cure fear and reduces risk more than any other thing is knowledge and information. The more you know the less risky it becomes. The reason why we are fearful is because things are uncertain to us, and uncertainty leads to many different potential outcomes. As our mind works through all the different outcomes and potential decisions that we could make it gives us anxiety.? Anxiety can literally be summed up as being overwhelmed with options. Fear keeps so many people in the analysis paralysis loop, we think we're doing ourselves a favor by protecting our current resources when really fear is burying our hopes and dreams, so they stay undamaged by the realities of life.? Fear is like a two-edged sword it keeps us from making good decisions and once we miss a good decision, we then become afraid of missing out (FOMO) and we run into a bad decision directly after that. You may hear a lot of different things about fear but ultimately, I believe it's spiritual. Fear exists more abundantly when we are un-grounded in our direction and purpose. If you suffer from fear or analysis paralysis, it’s time for a spiritual checkup to recenter yourself on your WHY and your purpose for real estate investing.?

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3. Greed - The desire for immediate excessive gains

OK, don't get me wrong I like to make money just like you do that's why you're reading this article and part of this community but at some point, our desire to make money and achieve goals can easily go too far, and greed kicks in. Greed is probably the trickiest of all of these emotions because it's the hardest one to identify in people who didn't have a lot when they got started. If you started out with a little and you doubled your money a few times, is that greedy which is good business? At what point does greed start versus just being a savvy businessperson?? Very good questions that many of us never ask. Greed happens first in our motivation; when we let selfishness and pride influence our decisions and we feel like we have to get paid or achieve what we want and that supersedes everything and anyone else. We won’t admit it or even talk about it, but we would then become willing to bend rules or even step right on others to get what we want. We all know that there is a line between getting a good deal and taking advantage of somebody, and you personally know when you crossed it. I'm going to leave that right there for all of us to think about but let me assure you that the means don't justify the ends and no matter how much the good work you think you will do with what you gain, it's not worth it if you lose your character, integrity and peace all in the process.

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As you head into the remainder of the year, remember to take time out and reflect on who you are why you're doing this business to reground yourself and your emotions. Let's make our emotions work for us in a way that leads to our success and not influence us in ways that lead to our collapse.

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“It’s better to stumble at the right things than to be in full stride at the wrong things.” John E. Mays

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John Mays is an investor and current KREIA board member.? John and his wife Joy are passionately in love with each other and unapologetically obsessed with Real Estate investing. They are the founders of Mom & Pop Millionaire Marriages? and they enjoy supporting and coaching other couples on their journeys to build generational wealth while putting love and family first.? Find them at https://www.facebook.com/millionairemarriages

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