FEAR IS UNIVERSAL
Everyone is afraid of something. Everyone can remember being afraid of the dark as a child. As adults, many are afraid to sky dive; or to drive in traffic; or to confront authority figures; or to go door to door to cold-canvass for listings or purchases; or of speculating on properties out of their local area, or of lending money to entrepreneurs who buy, fix-up, and sell houses.
Even so-called entrepreneurs such as land developers, builders, and condo-converters rarely risk their own money, preferring to pass it on to so-called investors who unknowingly place their money and credit at risk thinking their investment to be prudent and safe because of a well thought out slick brochure and a lot of hyped optimistic projections.
In order to get everyone started on the same footing, let’s define our terms at this point:
FEAR IS AN EMOTIONAL RESPONSE TO PERCEIVED DANGER; ANXIETY, APPREHENSION, DREAD, AWE, DOUBT
In my mind, fear – especially among those in real estate – is irrational; based more on imagined rather than real peril. It is insidious because it causes paralysis; the unwillingness and/or inability to take any sort of action other than to flee the scene.
Certainly we all have encountered potentially hazardous situations that need to be avoided or de-fused; but in the world of real estate investment, physical harm isn’t what causes fear. It is the unknown result of decisions or actions that we might take, or decline to take. So, on the one hand, we’re afraid of losing our stake; and on the other hand, we’re afraid of losing a big profit.
Conversely, it always pays to be cautious and skeptical about claims made by sellers, buyers, promoters, and borrowers – and to do our own due diligence before committing money, time, or effort to a new project. Let’s look at the definition of caution:
CAUTION: TAKING CARE TO AVOID INJURY OR MISFORTUNE. PRUDENCE. WARINESS.
To me the central difference between being fearful and being cautious is that fear is often based on apprehension and circumstances not borne out by factual evidence. The response to fear is often irrational behavior, or the unwillingness to take any action to quell it.
It seems to me that caution is the culmination of education and experience that suggests some situations pose the threat of danger or damage. It usually evokes a rational response that takes the form of more acute observation and care in what we are doing, or are going to do.
The bottom line is that everyone should exercise caution, especially when buying, selling, fixing, leasing, or Optioning real estate. At the same time, everyone should make an effort to assess potentially hazardous situations without being afraid to move forward if sufficient profit can be extracted with reasonable investment of time, talent, money, materials, and labor.
In the following pages I have catalogued 20 of the fears the foregoing poll revealed as being most felt. I’ll try to show readers how best to overcome these in order to be able to move ahead as entrepreneurs. I’ve tried to array them in a logical sequence.
People in the survey were most afraid of the following twenty things:
1. Not enough money to buy with, and to make payments with.
2. Unpredictable economic ups and downs, national and local.
3. Market unpredictability as to whether to buy, sell, or hold.
4. Taking the gamble with the transaction and the property.
5. Investing years of focused effort and not succeeding.
6. Not having sufficient knowledge of real estate.
7. Insufficient skill and experience without a “hand-holder”.
8. Not being able to find affordable and feasible property.
9. Taking on too much personal debt.
10. Not being able to find trustworthy people to work with.
11. Not having enough confidence to craft creative offers.
12. Feeling foolish having my offers rejected.
13. Inability to leverage deals and pay interest payments.
14. Buying the wrong house for the wrong reason.
15. Paying too much with the wrong terms to make a profit.
16. Concealed property defects I can’t fix or afford to fix.
17. Lack of liquidity for repairs, vacancies, surprises.
18. Property management, tenants, collections, vacancy.
19. Legal issues and personal liability posed by real estate.
20. Failing in real estate and letting down family and investors.
In Jack Miller's book, Facing the Fear Factor, he shows how each of these fears build on the rest, and how they can be methodically attacked to eliminate them.
