The real estate market is by far and away the largest investment arena in the world and has an impact upon the lives of everybody on the planet. This is an industry which attracts billions upon billions of dollars of investment each and every year with new investors entering the market on a regular basis. Many of these will make a long-term professional career out of real estate investment and many will fall by the wayside licking their financial wounds.
To make money in the real estate market you need to act like a robot and ignore all of the emotions which can impact your decision. So, why on earth would you want to act like a robot when investing in any market?
Human emotion gets in the way
The real estate world is littered with individuals who let their emotions get the better of them, chasing stocks higher and holding onto assets as they continued to move downwards. These are the individuals who act on emotion, often ignore traditional valuation methods and seem determined to put their investments at the greatest risk possible. In conclusion, these are the individuals who invest their money on human emotion alone.
Quote from PropertyForum.com : “Whether we like it or not, real estate markets around the world are very often used as a political tool. History shows that sitting governments often manipulate the economic situation so the property prices move higher just ahead of elections.”
There will be times when your gut instinct and your emotion will tell you to buy or sell an investment and this may turn out to be right. However, in the long term there is no doubt that using relatively traditional valuation methods, getting a feel for the market and acting on pure facts alone will assist in securing your investment going forward and maximising the potential.
Stay calm and relaxed
There will be times when announcements are made which will impact your investments in the short-term, there will be changes over the medium to longer term which could affect your valuation process and you will need to take these into account. The most successful real estate investors manage to stay calm and relaxed and make decisions after due consideration. Very often we see knee-jerk reactions to specific announcements which affect specific markets which are sometimes overdone and tend to balance themselves out in the short-term.
There are many factors to take into consideration with regards to real estate investment including supply and demand, the cost of finance, valuation rulers and indeed your own financial position. If you are struggling financially and entering the real estate market to make a “quick buck” then there is a real chance that you will lose everything and be in a worse situation than you started. Investment markets can make individuals short-term money but when somebody is struggling, under pressure financially and desperate to improve their financial situation, it is very easy to make knee-jerk reactions which can be very expensive.
History shows us that the best and most successful real estate investors work to a particular valuation formula and more often than not they will stick by this. They act on cold hard figures and facts as opposed to human emotion which can lead to significant fluctuations in the short to medium term. This is why a successful real estate market will always push that one step too far towards the end as everybody jumps aboard the bandwagon and then all of a sudden the trickle of sellers turns into a tidal wave.
It is also the same for depressed markets which very often experience a “final sell-off” where those who’ve held off disposing of their assets finally give in and sell at any price. This again is very much down to human emotion and it can very quickly become something of a financial nightmare when you realise you have made the wrong decision. Stick with the cold hard facts, keep an eye on the underlying market figures and do not rush into any real estate investment, take your time and consider every possible outcome. If the risk reward ratio is in your favour then take it to the next level, if not, simply cross it off your list and move on.