We have investors who purport to want to invest into a property. However, when an opportunity is presented they proceed to tell us why it’s not a good investment. The response would be a few reasons relating to the property, the majority of the other reasons relating to the state of the economy in general; for which there is plenty of fuel available from the mainstream media. It’s a fact interest rates are rising, and property prices are decreasing.
Clearly we are in a flux in the property market.
Recently, we sourced a river facing flat in Battersea, which was a distressed sale, it was on a high floor overlooking the river from the majority of the flat. The property was severely discounted, close to 40% off the market price. We presented it to the client, who wanted immediately to come and see the property even before I had a chance to review the flat.
Once I had agreed the price and terms to execute the deal, she then proceeded to send me articles of the mainstream press predicting a drop in real estate of 10%.
This sequence is illogical. If you’re convinced now is not a good time to invest into property, why would you even waste your time let alone mine to want to go and see the property in the first place?
It is illogical, because logic is not what governs human behaviour. We are ruled by emotions, not logic.
This manifests in various ways, with a variety of reasons why not to do something - we get to hear them all.
Logically this property will never come on the market again, it is unique. For this client the alternative was to keep the funds in the bank, not stagnating, but declining. At the current rate of inflation in real terms money in the bank is being eroded. This was not a development project, hence very few variables to contend with. It was a buy and hold opportunity to be bought in cash, with probably enough of a buffer to see through the coming times.
The point being investing, or any other activity for that matter, is 80% a matter of psychology and only 20% the actual activity.
I vividly remember the Tyson and Bruno fight a few decades ago. It was brutally obvious Bruno, before he even got in the ring, was going to lose the fight. It was written on his face, the face being the closest thing to the mind. Lo and behold he was knocked out. However, the fight was lost before it was even started.
Of course I am not advocating it’s all psychology. You must of course do full due diligence, run different scenarios, check the what ifs, and there are always risks involved. However, the major dominating factor is mindset, and unless this is not aligned there is little point in dabbling in the activity. You will be simply burning energy and wasting time at best, and at worst make a wrong decision.