While the above question may seem a little bizarre at first glance, if you sit back, think about it, it does make sense to ask the question. In simple terms, should you learn from experiences in the past or should you be looking forward to the next leg of a property market rise or fall?
Human nature dictates that we are dominated by our past experiences, our past problems and sometimes these can make us a little hesitant with regards to deals we would have jumped at in years gone by. Alternatively, some people have the ability to write off their problems from the past, assign them to the dustbin and look ahead and not backwards. So, do the best property investors have long memories or short memories?
Learning from the past
Whether we like it or not, the person we are today is dictated by our experiences of years gone by – good and bad. This is a basic fact of life and in reality we should remember this in our property investments, both now and in the future. In some ways it is easy to fall into the trap of focusing too much upon things which have happened in the past, and missing opportunities in the future, but if we take a little of our experiences in the past and use them to come to balance/informed decisions in the future, can we really go wrong?
Quote from PropertyForum.com : “At this moment in time even the most sensible of investors are struggling to obtain finance for many property projects around the world. It is sometimes easy to forget that these are investors who have slowly but surely built up their assets, never over-extended themselves on the financial front yet somehow they are paying the….”
Those who are over pessimistic about for example the worldwide property market will likely miss turning points in the property market cycle and jump aboard at a later date. They may have missed out on a significant rise from the bottom but in their own minds they will have jumped aboard when the trend had firmed up and the risks had reduced.
Looking to the future
One of the main elements of any investment market is that while in hindsight there may be similarities with years gone by, the future is unknown. Those looking towards the property investment market today may well have their thoughts dominated by the Euro crisis and US mortgage collapse when in reality these were extremely rare situations unlikely to happen again in the short, medium or relative long-term. They will happen again, human nature will push markets to extremes but what we saw in 2008, and the preceding aftermath, was in reality the perfect storm.
In some ways you do need to disassociate yourself from the past, look at each situation on its own merits and not always try to compare and contrast different periods in the worldwide real estate market. Use the experience you have learned from problems in the past, but also use your experience from successes in years gone by, never forget the fear of failure, but never forget the feeling of success.
The reality is that the better property investors are able to take their past experiences, both positive and negative, forward but also look at each individual market and investment opportunity on its own merits. Those who are stuck in the past will remain pessimistic if they experienced issues such as the 2008 US mortgage crisis, and those who discount the past and see the property market through rose tinted glasses, believing everything they hear, will remain overoptimistic and pay the price at some stage.
Finding a balance between optimism and pessimism, learning from experiences in the past to looking at individual situations on their own merits, is not easy. However, this is what separates a good property investor from a very good property investor.