The Fear of Property Investing and how to Overcome It in 3 simple steps… Well, there’s loads more but here’s a few ideas.
So today look we’re talking about the fear of investing in property and also how you can overcome it. And I’ve tried to put there’s so much we could talk about with this and I speak to so many property investors almost every day actually who have a fear of investing in property.
And so I thought hey, did you know what? I’ve got a few ideas on how people can overcome that fear, what that fear actually is and also how you can calculate that fear and put it into something that you can use and succeed with. So now I’m going to give you a few tips on how to succeed from the fear, how to overcome the fear, and all of those things.
So I’m no psychologist, by the way. I’m literally just a property investor and letting agent and all of that sort of stuff that’s got a few ideas. So hopefully you like it. Give us a comment if you’re listening to this like I say I’m trying out a new time, so I’d like to know that people are with me. So let me know if you’re here.
Anyway look so this is relevant for anybody who is starting out in property investing or if you want to start out in property investing or maybe you’re expanding what you’ve already got but maybe you’re a little bit nervous and apprehensive you’ve got some fears, you’ve got some worries that you would like to overcome. Everybody wants to overcome their fears don’t they? But sometimes you just need to know how.
So first of all and this is step number one is that you absolutely have to feel the fear and that sounds really cheesy. But what do I mean by that? Is you have to identify your fear and acknowledge and accept that you’re scared, because you know what? It’s alright to shit yourself from time to time. We know we’re all grown-ups and we’re all scared of something at some point in our lives and that’s okay. And it’s also okay to worry about stuff as well. Because I think worrying is good as long as you worry in the right way like a property investor. I think it gives you focus. So first thing I want you to do is identify your fear and write it down.
There’s nothing wrong with just jotting down a few notes. For me if I’m in the car or something like that. I record. I record my voice memo sometimes I record it into a video and I might well share those fears. Identify that fear and it’s alright to write it down. So I tend to record it like I say a video or a voice memo so I can either use it because I like to share all this stuff with everybody or a bit later on down the line I can label it and I can have a look back on it but this is what I actually do with it. I record my personal upside and downside so if I’ve got a fear about a property that I’m looking at and certainly when I first started property investing I had a load of fears and it took me a long time to actually make that first jump into investment.
So what I do now is if I’ve got some problems with a property or some fears I write down the personal upside and the personal downside not the financial stuff. What could happen to me personally, and then I work out the same thing but into a worst and best case scenario. So what’s the best thing that could happen to me if this one succeeds or the worst thing that can happen to me if this property investment fails? And I write this down and this is all good stuff. Eventually I’m going to write a book about my life, I’ve done so fucking much stuff. I’m just going to write it all out and see what happens. Anyway, best case and worst case personally just write this stuff down and then work out what personally you could lose if this property investment goes wrong and what personally you could gain, and by the way it is actually all right to be like a bit pessimistic and negative with property investing. As long as you calculate that and you also calculate your optimistic and positive side to all this there has to be two sides to everything right?
So write down all of that stuff. It sounds really cheesy, but trust me this really works when you go on to the next bit too because it enables you to calculate this like a property investor. So while doing all that write down all those risks. What are all these concerns that you have? And that will enable us to move on to step number 2, which is to translate the numbers. So next we’re going to move on to step number 2, which actually you’ve already done because you’ve done the personal bit, right? So you’ve written down all this stuff that you feel like might happen to you personally with this property investment, and now we’re going to translate it into numbers and that is step number 2. We’re going to translate all of this into numbers and I’m going to show you how to do that. Now all we’re going to do is put numbers to what you’ve already just done but we’re going to talk about actual and factual money.
Best and worst case scenario what’s it going to earn you as a best case scenario just write a number by that. Now, let’s say we’re talking about a flip right? You’re going to buy a property going to do it up and you’re going to sell it. Let’s just say that’s the investment.
Now, what is the best case that can happen right? 30 grand profit write that number down. That’s the best thing that can happen. What’s the worst thing that can happen? I mean, I’ll put that over to you, but for me, it might be that I only get my money back. I don’t make any profit on that property that would be worst case. Because I’m calculating this hopefully correctly, I’m working out risk, I’m working out upside, downside, best case, worst case, and I’m doing my due diligence. And by the way, I did a whole episode on my podcast of what due diligence to actually do on your property investments. But also, let’s see if we’re talking about if you’re buying a property to rent out. What’s the best case scenario and the worst case scenario financially. Let’s say you’re spending £150,000 on a property and you go to rent it out right? Best case scenario is that you rented out for £900 a month, worst-case scenario is that you rented out for £800 a month that’s one thing there. And again best and worst case scenario might be that the tenant doesn’t pay rent for six months or how much will you lose? Let’s work that out if your mortgage payments are going to be £400 a month. Then you only get to lose £2500. That’s a lot of money but now that’s your worst case scenario. So we can work with those numbers right? Now you know what you stand to lose if this does go horribly wrong, then you can put that into a calculation. Now let’s go back to your risks right? So hopefully you get the idea there’s so many ways you can calculate this but my plan or my thoughts on it are that you take the best case that could happen and the worst case that could happen.
If you’ve got those two figures then somewhere in the middle you may well be quite comfortable with your risk. Now with everything there’s a risk, right? So now we’re going to go back to those risks that you’ve written down, all of those upsides and downsides, all of those best case and worst cases, and all of the risks of things that might go wrong. Let’s throw a few examples here. Let’s say for example your boiler right? So your boiler probably is going to need replacing every 10 years. You might get lucky and it might last longer but generally speaking a rented property boiler should be replaced every 10 years, right? So that is highly likely that that will happen, very strong odds and chances that you will need to replace the boiler every 10 years. Now that’s going to cost you about £1,500 right? Might be more might be less generally about £1,500, build that into your costs. Now over the course of 10 years if you’re going to have to spend £1,500 over 10 years.
Now, you can work it backwards and work out what element of your net profits you need to just put by because you know, the chances are every 10 years you’re gonna have to replace the boiler. Simple as that and you can work that out for the beginning. If you have your rent coming into your personal account, then you can just set up a little selling order that fires off a little two, three, four percent whatever it may be into another account. Me personally, I allocate 20% of the rent for management and maintenance and that covers me generally for everything. Sometimes that pots got a lot of money in it, sometimes it gets back down. But what about things like you’re. Alright so here’s another one.
We’ve looked at your boiler needs replacing every 10 years the chances are high. What about the chances of the whole house falling down gone? Well, that’s nearly impossible right? Pretty much impossible. One in millions you’re thinking. Now there is a little caveat to that but now you can work out. Okay, so I’m not going to lose all of my equity if you bought this property with a mortgage by the way bare in mind, you only have 25% of your own money in it right? So if the whole house falls down, then you’re only own 25% or you’ll only lose 25%. That’s the worst case and the chances are literally millions to one. So you can work that out as that’s probably not going to happen. What about the roof falls off or collapses or something like that? That’s going to cost you £10,000. Well, that’s highly unlikely, right? And you can work that out. You can say “Okay, it’s highly unlikely. The chances are that’s going to happen once every 100 years. When was the last time it happened? When was the last time you have to completely replace the roof on this property?” So you can work it out based on that and then you can build into your costs maybe you cover yourself by extra knot point 5% of the rent, just in case something horrifically bad goes wrong in 50 years.
So what about things like property prices? That’s a big fear property prices drop by 25%. I mean the chances are it’s not going to happen. It’s extremely unlikely that property prices are going to drop by 25%. Now think about that. When was the last time that happened 25%? Now if you think about in your area if property prices dropped by 20% that would be very rare, very unheard of, and pretty devastating to the entire country. So the chances are that’s not going to happen. I’m not saying that’s not going to happen. I’m saying the chances are it’s not going to happen right? It’s a very low risk that will happen and if it does happen, then you’ve got 25% of equity that you can fall back on. So, yeah, you can only stand to lose 25% right? Of the equity because that’s all you’ve got in that property.
Now, there’s another side to this because if property prices did come down by 25% which is highly unlikely, but if they did. Don’t read the headlines by the way, terrible paper’s like the Sun just go “Property prices is going to drop by 25%. We’ve got proof because Dave told us in the pub.” Come on. Anyway, the chances are it’s probably not going to happen. So If it does draw then how are you planning to sell that property in the next year or two? Probably not. You’re probably going to keep it for 20 years if it’s a good rental property and it’s generating a good profit. Then have a look over history if prices have dropped anything then they’ve gone back up again. So you can expect an element of safety in the knowledge that at some point your property price will go back up and it only affects you if you’re going to sell that property.
What about negative equity? The chances are if you’ve got an investment property the chances are you’re not going to get into negative equity, but the mortgage companies are not going to start repossessing your property at the moment because think about it if property prices are coming down they know it’s going back up too.
So they’re going to want to keep hold of it to keep their security otherwise, they’ll lose money as well. The whole negative equity thing is a bit of a headline as well. It’s really irritating actually when you read headlines like that in my industry because it makes people scared and then I have to do bloody Facebook lives at 5:00 to 6:00 at night about overcoming fears.
Anyway, so I’ve gone on a bit more than I wanted to there but what I’m saying is that price drops over any major devastating significance are highly unlikely. So I want you to remember that because also the only thing that should change if you’re going to buy an investment property is your offer. Now if you calculate your risks and you do your due diligence, you might come up with a real little gem you might see. Right this property’s got high chances of something going wrong this property’s got this. So you change your offer like that, but then you can also see that the data is telling me that this is a high-demand area or it will be in a year or two’s time. I did a podcast actually with a guy called John Penquet and John if you read this, Hello mate, good talking to you the other day.
And John is big into the data element of the property industry, in fact, he stopped everything he was doing to go more into the data side. But anyway, so John, he talked about using the data to identify growth spots and demand areas and so on around the whole country. So if you’ve done your due diligence and you’ve worked out your risks. Then, now you know “Hey, I’ve worked out my risk. This is the worst that can go wrong but I know this is going to be a high demand high growth area.”
Hey now your fear is coming down like this it should be but it’s not that you won’t have fear it’s that you feel a bit more confident about what to do if your worst fears come to life, right? That’s all it is fear just doesn’t go away. We’re all products of our childhood right? Fear is something we can either use or be consumed by and if we’re consumed by it we can’t act on it we can’t take action. So now we know what our fears are. Look at what we’ve just done like I say, there are so many more things we can do to calculate and work out our fear in property investing. These are just a few. Hey, I mean, I probably could do a bloody all day workshop on overcoming fears and identifying different fears in property. Bad tenants stuff for that, hurricanes. We’ve talked about property prices, demand coming down, and rents coming down, mortgage market crashing. All of these things are fears, but that we can translate into numbers.
So anyway that moves us on to step number three, and I’ve got to credit there’s a book by the way, which has this title I’m about to give you but I never read that book and I was given this title as a bit of a comment or a phrase by a guy called Tosin. And Tosin if you ever get to watch this by the way, then that changed my life. Because I’m going to give you a statement which is “Feel the fear and do it anyway.”
Because what you’ve just done is you felt your fear, you’ve understood your fear and acknowledged it and it’s there on paper now, we’ve written it all down. So, you know where it is. It’s right there, but you know, it’s there there’s your fear and now we can translate it into numbers and do it anyway. Because we now know what the risks are factually, not emotionally that’s what we need to do. We need to turn it from emotion into objective factual information that we can then calculate with.
So make the offer that works for you because now you understand what the fear is you can now make an offer. You’ve got it into a number or a series of numbers. So make your offer that works for you. Remember you’re the buyer and if it doesn’t work for you don’t buy it and you make your offer with the attitude of I don’t want to sound rude by this, certainly don’t wanna be rude about this but make your offer of “Take your leave it Mr. Mrs. Seller. This is my offer. This is what this property is worth to me because I’m a property investor.” Believe it or not you’re entitled to make money and make profit and remember it’s a take it or leave it offer. There might be some room for negotiation but show how you’ve worked that out, show the owner or the agent or whoever you’re buying through, show them how you’ve calculated and what sorts of profits you want to make. I know right. That’s crazy, tell people what profit you’re going to make? Well, yeah, you’re an investor, of course you’re doing this to make profit. And if anybody on the selling side like the agent.
If the agent doesn’t appreciate that you’re an investor to make profits. They probably shouldn’t be an agent and if the seller has such a terrible property that you’re able to buy it cheap, then they also don’t really realise that. Well no one’s just going to spend their money to do you a favour Mr. and Mrs. Seller. I’m sorry to say that but it’s true. So there just take it or leave it and also remember that it’s just a pile of bricks and there’s another pile of bricks down the road. So if this seller doesn’t accept this offer then hopefully the other offers that you’ve made well come about. And I did the whole podcast on how to buy properties through estate agents that includes a little bit about this. But I always work to about an 80-20 rule right?
So if I view 10 properties out of those 10 properties if I’ve done my due diligence. Remember you got a podcast on due diligence and then you’ve got the podcast on buying through agents. So if I’ve gone to see 10 properties that I’ve done due diligence on beforehand and then out of those 10 properties I would expect to make 8 offers. Now after those 8 offers I would expect to get 2 sales agreed. Now if you’ve got money and you’re going to buy 2 properties a week because you’re going to view 10 properties a week. You’re going to make 8 offers a week and you’re going to buy 2 then you’re doing very well. Especially if you’re raising capital from investors and joint venture partners and mortgage lenders and so on or your own cash if you’re doing that, you’re doing well. I don’t do those numbers, by the way. I started doing it and then I launched this stupid podcast and doing all these videos and lives and stuff. So now I don’t see so many properties.
Well, I’m certainly offered a lot of properties at the moment. I think it’s because I’m doing this and everyone knows I’m an investor. I get offered a lot of properties and thank you very much Joanne. But anyway, so look what we’re saying here is it is just a pile of bricks. So there is another pile of bricks down the road and especially if you’re very active in your pursuit of a property investment deal. Now, if you lose money then how much will you actually lose? If you buy a property you’re going to do it up and sell it and you’ve calculated that you can make £30,000 but you end up only getting your money back which you know, if you’re going to make £30,000 profit, then the profit becomes 0 right? Based on what you’re going to spend on that property. If that’s all that happens. Think of it like this. How much would you spend on real-life training that tells you what never to do ever again? You’d probably spend a couple of grand on that training, right? You’d spend training on actual real life experience of and lessons on what should I never do to never lose money again? Well, there you go. You just bought it. Now you might have lost yourself 3 or 4 months of your time and you might not have made any profit. You might have even lost a couple of grand but that’s how I would see it and it’s like what Conor McGregor said “You either win or you learn. You never lose.” So remember that, whatever you lose in investing not just in property, but in investing or in business, you look at the loss. How much of I actually lost? Sometimes you just need to know how much you lost and it’s okay to lose money right? In any investing and any investor has lost money as long as you make more money on the other 10 deals, then you’re all right. And all you look at it is as this. What did I lose? And what did I learn? And that’s the best way to look at these things.
And lastly I just want to stick in here, right? We’ve talked about roofs falling down, houses falling down, boilers need replacing, all of that sort of stuff. Now you probably do have buildings insurance on your property covered. You’ve probably do have landlords insurance on your rental property covered. Even if your roof falls down, you’ve probably got some sort of insurance that will protect you on that it’s probably a buildings insurance too.
So remember all of these fears are actually put into you by guess work. Your mind is guessing at what might happen but actually in reality these things that we’re talking about either a very unlikely to happen or there is protection against them. So I want you to remember a couple of things here. First of all, I want you to remember that you are entitled to make money. For some reason landlords and property investors are heavily criticized, because they make money. And in fact, you know how that is a bit of a mentality in this country isn’t it about if you make money or if you’re successful or anything like that people tend to try and tear you down a bit. And I find that quite sad personally, but look, hey, we’re all entitled to make money and I bet those trolls who attack and criticize people for being successful and making money. If you offer them some free money and some profit. They’ll take that straight away. Anyway, so you are entitled to make profit Mr. and Mrs. property investor. I promise you that. Everything you do that is profitable is also risky.
So make sure you calculate that risk. So, you know exactly what the risk is and what it could cost you in real life. Try to ignore these big bad headlines because they’re big and bad. And also, remember that if there was no money in property investing then no one would do it. If everybody lost money in property investing then nobody would do it. You just have to make sure you know the risks, you know what you’re getting into and you calculate them properly and that’s it. And lastly I’m going to end by saying.
Actually I did a podcast on this with something similar as a title if I remember right? But you need to see other people’s success so that you can be successful yourself. And all you need to do is just copy them. It’s simple as that. There are no secrets. You can spend thousands on training courses and there are so many property trainers and experts and stuff like that around and some of them are great and some of them are shit. But actually there are no secrets. So if anybody ever says to you “I’ve got the secret to property investing.” No you haven’t mate. You absolutely haven’t. Because you are not the one person on the planet that knows a property investment secret unfortunately. We’re all governed by the same rules, right?
We’re all governed by mortgages, and bricks and mortar, and legal transactions, and the land registry, and stamp duty we’re all governed by those same rules that we all know about. It’s all open information. Anyway, look I kind of did this one because I’ve spoken to a few people recently who have said “They’re just really nervous about investing in property.” So the first thing I want you to do is identify your fear, feel your fear, acknowledge your fear. It’s okay to be scared, don’t worry about it. Write all your fears down pros and cons, upsides and downsides, best case and worst case. Write those down personally and financially. Now translate it all into numbers.
Remember calculate the odds, what the chances of the whole house falling down and you haven’t got any building insurance. Pretty close to zero. Turn it all into numbers and then once you’ve felt the fear and you’ve translated into numbers do it anyway. Do it while you’re scared. What a buzz. If you do that while you’re scared and then it comes off and happens for you. What I will also say is that you remember when you’re a kid and used to jump off things into the sea or into the swimming pool and you stood over this edge and you’re like “Aah shit. I’ve shit myself here.” And then you did it anyway. And there’s that almost that excitement of doing it anyway.
Well, that’s what I want you to feel here. Thank you very much everybody for watching and remember this is just one more thing isn’t it? This is just one more thing. And I would love you to be the best version of yourself at everything. So in order for you to be the best version of yourself at this one thing that I’ve just been through right now. Then hey, be the best version of yourself at everything because you can and you should.