There is a fundamental difference between buying a home that you intend to live in and investing in a property as an investment that needs to generate an income for you.
For instance, wanting to buy a lagoon home with a host of leisure options on your doorstep could be viewed as an aspirational purchase, and you can get more information here about that, but it could also be viewed as a purchase that is inspired by your emotions.
It could turn out that investing in a lakeside property could prove to be a smart investment, however, the point to take on board as an investor rather than a home buyer is that you often have to adopt a more hard-headed and strategic approach to your property portfolio strategy.
Here are some pointers on how to create that distinction and separate your emotions from the process of investing for profit.
Buying a property that you would like to live in yourself is often not the way to approach creating a real estate portfolio.
There should be no emotional attachment or thinking that is influencing your purchasing decision and the main driver needs to more about achieving a set of key business objectives rather than anything else.
When you are buying a home to live in you will often be guided by your emotions whereas when you approach the transaction as a business deal it requires a more blinkered and unemotional approach where you want to negotiate the best possible deal in order to achieve a greater level of profit.
Buying to fulfill certain criteria
It is essential that you research your target market and identify the type of property that would make a great property investment.
This means identifying a neighborhood where there is a high demand for rental property, for example, so that you know that it won’t be hard to find regular tenants who will pay the going rate.
There is no room for sentiment in this approach and it could well mean that you are investing in a property that is located in a part of town that you are not so keen on yourself as a place to live in but ticks all the right boxes in terms of your real investment strategy.
Do the math
Another shining example of why real estate investing requires an approach that is almost totally devoid of any emotional influences is the fact that you need to make sure all the numbers add up before you do the deal.
In contrast to buying a property because it is somewhere you like and would happily live in, the approach to real estate investing is all about doing your calculations and ensuring that your expenses can be justified when you consider the potential profit that can be generated.
It is absolutely essential that you work out in detail exactly how much you can afford to buy the property for so that you can do the renovation work that is needed and still leave room for a decent profit when you list it for sale at the other end.
If you can’t get the numbers to add up most savvy real estate investors will walk away from the deal and that is the approach you need to take too.
Start out with modest ambitions
Even if you have a good-sized pot of cash at your disposal to start your real estate investment adventure this is another classic situation where you need to keep a check on your emotions.
The majority of seasoned real estate investment professionals will probably tell a similar story of how they started out modestly and built their portfolio over time rather than jumping straight in with some sort of ambitious project that stretched their finances to the max.
Keeping a lid on the level of financial exposure you have in a property deal will help you to cope with what will be some inevitable financial bumps in the road where you might have to meet some unexpected costs or your renovation plans go over budget.
It can be stressful when you are new to property investing and that’s why it is better to take your time and learn the ropes without overdoing your financial exposure.
Going it alone or not
Another test for your emotions is whether you go it alone with your investment strategy or decide to pool your resources with family, friends, or a business partner.
It is wise to choose your investment partners with care as you need to be entirely comfortable that you both have the same risk profile and are prepared for a few potential disasters along the way.
It might be plain sailing and your portfolio grows without any issues but it is a good idea to decide if you are happy to join forces with someone if you think that there may be confrontations or emotional challenges to deal with if something goes wrong along the way.
You should be prepared for your real estate experience to go either way and that mindset you can keep a lid on your emotions and cope with everything that comes your way.
Having a business partner with the same outlook and temperament can make all the difference if you decide not to go it alone.
The right time to sell
Finally, one of the keys to becoming a successful real estate investor is having a viable exit strategy and knowing when it’s time to sell and move on.
There is no room for your emotions to get in the way when there is a profit to be made or losses need to be kept to a minimum. If you can be disciplined in your ability to make sound business decisions and let go when you need to, that is a personality trait that should stand you in good stead as your real estate career moves along.
Emotions should never cloud your judgment when it comes to real estate investing.