The Psychology And Hassle Of Investing In Real Estate

Making deals sounds fun and exiting, right? Not so fast. If you are survival always relied on striking deals, how stressed out would you be?

Imagine you had a streak of success. For example, you had one or two months in which you had deals in which you earned a surplus of money. In addition, this was your sole income from a business in which you owned. That is, you had no steady income. Finally, things have a tendency to revert to the mean. You have a slow month or 2. Initially, you don’t worry because you amassed some extra money from prior months.

Indeed, you were concerned a tiny bit at first. But things did come together and cash was flowing in. Then a slow period came. In the first month, you altered none of your lifestyle habits and were not worried. You assumed that because you had some recent success, more deals must be around the corner.

Then, the second month passes and things are still sluggish. You begin to get scared and begin to ask when everything will revert to normal. You have some money left over so there is no need to panic yet. However, things start to get nerve wracking. In the back of your mind, you start playing the ‘what if ‘ game. You ask what happens if I cannot make the mortgage loan payment or buy food a month or two from today. You wonder if the last few profitable months were simply an anomaly.

After scrutinizing that, you look at your average income over the last year. Not too shabby. What if you had a steady income and every two weeks you were guaranteed to be paid? It would seem as if you got a raise.

If your revenue relies on your own deals or by receiving commissions, you won’t have a steady income. A steady income is simply worth more than earning the same overall amount that comes in bursts. It is also much more stressful.

This is a big reason which explains why most great investors place more focus on managing risk than on returns. Managing risk before worrying about returns will relieve lots of the stress that comes from deal making.

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The Psychology And Hassle Of Investing In Real Estate

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