It’s completely normal to feel a certain level of fear when doing something unfamiliar.
And this is especially relevant for novice investors because not only are they wading into the unknown, they are also about to risk significant amounts of money while they do so.
With property investment, we’re not talking about lollipops, you see, but rather assets which cost hundreds of thousands of dollars.
Unfortunately, sometimes fear can stop people from attempting anything at all and they never make any inroads whatsoever into their wealth creation or achieving their financial or life goals.
But there are tools that you can use to mitigate your fears and help you on your path to investment success.
The first one of these is to ensure you’re getting the right education and the right advice from qualified experts.
And while it’s always a good idea to share your hopes and dreams with friends and family, if they are not as keen on real estate as you then sometimes their opinions can drag you down instead of lifting you up!
Your mind is a great tool for raising alarm bells when there’s risk in doing something, so listen to it but don’t be dictated by it.
This is because the greater the fear, then the greater is the risk.
The fear of debt
One of the most common fears new investors have is the size of their debt and their ability to pay it off, but this isn’t what property investment is about in the beginning.
Real estate is good debt, whereas credit card debt is bad.
Good debt is debt used to buy something that will make you money over time, like income-producing real estate, but bad debt just keeps repeating on you like a bad curry and never makes you any money at all.
The income or rent from these income-producing assets is used to pay the mortgage payments and property expenses, while the owner reaps the rewards of the increasing capital growth in the value of the property.
In short, the property pays for itself and makes money while you sleep, work or play, which is known as passive income.
The fear of Change
Another common fear is if your financial situation changes, such as through job loss or maternity leave, and you’re worried about covering the mortgage repayments.
This answer to this fear is to keep a financial buffer, you know… money set aside for a rainy-day, which will cover any temporary shortfall.
A line of credit or offset account can be used for this and your tax refund (helped by claiming depreciation on your property) could supply you with additional funds to help with your investment property cash flow.
No Exit Strategy
Investors should always have an idea of their exit strategy from the start of their journey.
An exit strategy is a plan that describes the point at which you’ll “pull the pin” on the property and get rid of it.
You need to put this plan together in the cool light of day, as doing it under stress or pressure will always lead to the wrong decision.
Ideally, investors should attempt to hold their properties for as long as possible, but it’s important to consider that you can always sell one of them if your financial situation becomes particularly tricky.
It’s vital that investors develop an exit strategy for each and every investment property they own, as it will protect their overall investment strategy and give them peace of mind.
You never know what’s around the corner, so as part of your risk mitigation strategy you should always plan an exit strategy for each property.
That’s because if you’re going to purchase investment properties, you need to start with the end in mind.
So, before you take the plunge and purchase the property, have a think about what you’ll do as part of your risk mitigation.
Investment property can be scary in the beginning but over time as you gain more experience and access expert advice then you will become more relaxed about it.
Then all of the “risks” which seemed so big at the beginning will suddenly seem very small indeed.