How Psychology Affects Property Investing And What Are The Effective Strategies To Follow
Warren Buffet said that you don’t need to be a superhuman with stellar IQ and analytical abilities who owns inside information to be successful in investing. You simply have not to let your psychology corrode your cold-headed decisions, he added. Although this advice sounds too general, it is, in fact, a good way to work on a real estate market – considering its long-time investment nature and always present news-triggered foam of buzz, which makes prices horse-race up and down.
Below, we’re considering the principles of the psychology of real estate and methods of making your property decisions more structured.
Consider your interests
The fundamental thing in real estate pricing psychology is that many people are simply afraid of investing, even despite enough budget they have and positive market news. If you’ve been looking for many objects in your price range and they are suitable for investments but, at the end of the day, you don’t pick any of them, being overwhelmed over time with the number of seen objects, this is you. Fear stops you, preventing you from moving ahead.
Maybe, you are just not the person right for real estate investments and you should consider other options – low-risk low-profit, like bank saving accounts or REITs (but in the US, saving accounts tend to bring negative income these years).
If you simply let your fear control your life, then it might be the time to overcome it and start thinking about your financial future cold-headed. It is in your own interests, for god’s sake! So the first and major piece of advice is actually to buy one of the good objects you have or will have considered.
You won’t overcome your fear before you realize that any investment is associated with risk. Even life itself! Your odds of dying from heart disease are 1 in 6. From cancer – 1 in 7. From choking on food – 1 in 2,535. Eventually, from lightning – 1 in 138,849! That’s in addition to hundreds of other dangers, which are all around us (and which we simply don’t have time to list in the article). But since you’re here, alive, and even have some spare money, it’s time to invest. Before you’re hit by a bicyclist and die (which is 1 in 3,825).
Don’t let overconfidence control you
You might have had a very positive previous experience of investing and this might form false overconfidence that the next ones will be at least not less successful. But that’s a very dangerous way of thinking! A true investor is always cold-headed and cold-blooded, always performing thorough due diligence on any object of investment.
Try to keep being humble and consider wisely, what are the real chances of profits and losses. And don’t lose the connection to the ground after being hit by luck – this might have been only one-time gods’ favor.
Analyze what losses you can really bear
Any investment is subject to ups and downs in the long run, which could be even greater than a rollercoaster. You should carefully and realistically estimate, what you’re ready to lose if something goes wrong. The same, if something goes terribly right and you’ve started drowning in money, estimate, which part of it you will reinvest.
When things go badly in real estate, you should completely stick with the understanding of this market’s nature – if prices fall now by 10-50…%, there will definitely be a re-bounce in several years, which will make prices even higher than before. Thus, you shouldn’t panic and sell your property, fixing a heartbreaking huge loss. Simply sit and wait for months or years until the situation stabilizes.
And that’s exactly for such cases, you should gain the financial cushion, which you’ll utilize to wait through the hard times. If you’re thinking of becoming overleveraged and stiff even on an extra penny, then real estate investing is not a good option for you. There are always some unforeseen circumstances that would require you to have a spare from 10% to 100% of the real estate cost if things go wrong. Don’t forget about various types of landlord insurance, though, which typically cover up to 99% of all potential risks (but also erode a buck from your pocket).
Real estate is always a long-term investment. Monthly cash flows might be stable or not – but investing in a property is, more often than not, investing in the future cost of an object. Here is where you should think generation-wise.
What do your children and grandchildren have? If you sell after 1-2-5 years of owning, are you sure you won’t regret it in 10, 25, 50… years from now? Taking the US real estate as an example of price growth, we see it tends to rise in cost by 334% every decade on average. Between 1953 and 2021, the average detached house median cost rose from $17,200 to $390,900, which is 22.73 times*!
* Data retrieved from the United States Census Bureau.
Not buying any property is not the way of risk minimization. An actual way is making thorough calculations while being optimistic about expenses (maximizing them) and pessimistic about incomes (minimizing them). Adjust it to the information received from other market specialists you will talk to and always form a financial cushion to cover your back.
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More about DGY
DGY is a real estate investment and property management company. Our experts have an impressive experience in turning businessmen into smart real estate investors. We collect limitless opportunities throughout the world’s best real estate markets and help our clients implement the best deals. We take care of all due diligence and customize documentation while your income grows. We also provide you with property management services so you can forget about the tiresome maintenance of several objects and entrust this process to professionals.
Investment advice and recommendations
DGY is an investment company that takes care of every client and helps them become successful investors. With the help of an investment experience and a well-thought plan, we will help you examine the market, choose a strategy specifically for you or your business, and calculate future costs to start making money with real estate investment.
In order to invest in real estate, you should consider how you will run your management in Ukraine. DGY will help you eliminate all possible pitfalls at an early stage as a personal project manager will be assigned to your case. They will assist you in choosing the project according to all required objectives.
DGY Investments takes care not only of purchasing property but also renovating an existing one. With the help of a thorough plan and estimating, we will thoroughly prepare a property for sale. Our professionals evaluate an investment property and create a strategy that includes the costs for renovation, possible taxes, fluctuations on the market, etc. Therefore, our clients are able to resell the renovated properties in Ukraine with more than 15-20% profit from the initial price.
Before our clients decide to deal with real estate investing, they consult with our experts concerning details such as the necessary documents needed to purchase a property and successfully run all the processes connected to it.
Therefore, if you are eager to invest in Ukraine, it’s essential to have all the paperwork done correctly, and that’s the moment when our team of experts takes care of this step. DGY Investments helps investors buy real estate property, manage the paperwork, start preparing relevant documents for purchasing realty in Ukraine, and close the deal successfully.
Real estate investment opportunities in Ukraine
When an investor decides to invest in real estate in Ukraine, the most affordable way to attain stable passive income is through buying residential real estate. Investors can expect to receive a regular monthly payment from their tenants at a fixed monthly amount, unaffected by inflation or other unforeseen circumstances. The amount of rental income will vary depending on the size, type of property and location. For example, buying an apartment in Ukraine’s capital Kyiv is beneficial to investors due to offering a large working population, central location and affordable prices. Hence, the minimum price of renting a decent one-bedroom apartment in Shevchenkivskyi District will be around $1000 per month in 2021, followed by Pecherskyi District with a cost of $850 per month. Besides, investing in real estate in Ukraine annually brings clever investors up to 15% of yield, attracting many business people every year.
Properties for investments in Ukraine
Ukraine has a giant sector for real estate investing. Businessmen who come there all over the world often choose between investing in residential and commercial properties. The main advantage of buying property in Ukraine is the affordability of prices on the houses and apartments. For instance, if you invest in real estate in a historical district, a luxurious apartment will cost you around $85k only.
How to invest in Ukrainian Real Estate
In order to invest in Ukrainian real estate, you should take into account a list of crucial factors. The first one is to choose what kind of realty you are going to invest in: residential or commercial. It is vital as it should comply with Ukrainian real estate law. The second tip is to identify the purpose of purchase in order to make a strategy for the property. For instance, you may purchase the property for your own use or buy it for lease. The next step is to calculate the taxes and what kinds of taxes are payable during the purchase, owning, or selling. Also, to invest in real estate properly, you should keep in mind currency control rules in Ukraine to sell a property and get a higher profit.