Real Estate Investing Career: Let’s start this off with a quick question.
How differently do real estate investors make decisions, when compared to normal people?
Now, if your answer was anything other than ‘not very differently’, you would be mistaken. Yes, of course real estate investors are in a different line of work than other people are, and therefore have to make different decisions. That is true.
As a real estate investor, you make different decisions. But as it turns out, you don’t necessarily make them differently.
Let’s see if you can identify a little bit of your own behavior in these patterns.
1. Basing your decisions on existing information.
When you’re confronted with a new fact or statistic, do you evaluate it based on everything you know and have learnt in your life so far? If you do, how would you know whether you are making an objective decision?
If the new information you are presented with relies on a completely different set of principles and fundamentals than you are used to, you don’t have the information to evaluate it. But most of us simple ignore the information or look at it through our existing lens rather than trying to learn or understand it further.
2. Playing it safe.
If you were presented with the following two options…
• You invest Rs. 100, and have a 50% chance to make Rs. 200 off it.
• You invest Rs. 5000, and have a 50% chance to make Rs. 50,000 off it.
If you’re like most people, you’ll chose option 1. Because even if the transaction doesn’t go your way, you only stand to lose Rs. 100. In the long term, making a lot of these ‘safe’ investments could actually stunt your growth because getting to the top means taking some risks once in a while.
3. Being superstitious.
How many times have you decided to wear a certain pair of shoes or a particular tie when you’re meeting an important client? We, as human beings have an uncanny ability to attach importance to things that are otherwise random. The downside of this approach? It blinds us to assessing our successes and failures objectively.
“Oh, I didn’t wear my lucky shoes. Of course I didn’t close the sale.”
4. Selectively assessing information.
This phenomenon, also called confirmation bias, is extremely common. What’s more, it’s one of the major reasons why people make bad investment decisions. Let’s say you go into a meeting with a predisposition to agreeing or disagreeing to a certain proposal. Now, regardless of what happens during the meeting, you will try to twist the information to suit your theory.
If the advice offered contradicts your decision, you’ll cherry pick parts of it that sounded positive and use that to justify what you were thinking. Needless to say, this behavior can be very costly in the real estate arena. Don’t ignore data because it doesn’t fit in with your theory or hypothesis.
5. Following the trend.
How many examples of tremendous real estate successes can you think of? A couple? Maybe a dozen? Ok.
And how many real estate investors would you say are in the business at this point in time?
Yes. You’re getting the point.
The successful people are the outliers. Not the people who mindlessly do what everyone else does. They aren’t the ones who buy property in a certain area because three of their friends suddenly seem to think it’s a hot purchase. Maybe it is, maybe it isn’t.
Whenever you are taking any decision in your business. Whether it’s buying or selling a property, choosing a mortgage plan or even entering into partnerships, you should ask yourself one question.
Would I do this if I was the only one doing it?
If you’re convinced enough, then and only then should you proceed.
Did you notice any of these behaviors in yourself? You probably did. So, now that you know, it’s time for some improvements. Get to work.