Controlling Your Fear In Real Estate
When you have large monthly debt payments every single month, even when things are going great, that little thought pops into your head, "what if my tenants leave next month"? Its a fear that after the 2008 financial crisis unfortunately all to many real estate investors found out (it could happen this cycle again just from sheer overvaluation). You have to however understand that you must control your fear as nothing usually happens overnight in real estate. Whether you have luxury, small business or fortune 500 tenants things in real estate usually take time. When overall things go bad however they can feel frightening because since things don't happen overnight you maybe sitting there in bed everyday saying when is it my turn to bite the dust. Well just like any business real estate is no passive business it requires work and you have to take action when shit happens. Your fear has to become your passenger and not your driver.
When fear begins to take over in real estate there are usually early warning signs, take action. They maybe two or three years early but where there is smoke there is fire so you should take these warning signs seriously at the institutional and local level. Its during these times that investing in your backyard REALLY becomes important also. So when you start seeing these smoke signs here are actions you should start to take.
- Switch up your business model, if you only have been a long term holder start getting rid of some assets to clear up your debt. Take advantage of the high prices still around and build up that equity and reduce your debt payments. This is early on action and may seem dumb to have cash and equity sitting around for 2-3 years but it will be worth it.
- If it is to late to unwind your assets as things are starting to turn then begin being more proactive with your tenants. Make them happy because if anything happens you are going to want them to stay. Making them happy and showing good customer service will ensure this.
- If its to late to sell your assets off as things are beginning to dry up start searching for the people who do have capital reserves set up and are filling up their war chest. Discuss your business model with them and offer them an incentive to be your partner. This allows them to put their cash to work at a discount but for you to keep the long term value of your properties and not be overstretched in bad times so you can be in acquisition mode when everyone HAS to sell.
Taking action eliminates the fear you have, when you sit and hope for the best and victimize yourself you will become a victim. Take proactive steps to boost your portfolio in tough times because the tough times are only temporary. When you are able to ride them out you can achieve your long term goal but you have to be proactive. Real estates biggest selling points is that it is passive when it is the opposite and unfortunately for your competition whether Private Equity, HNWI, local or intuitional they are selling it to partners and investors as passive. This creates a massive issue for them down the road, not you though. You are proactive and therefore fearless.
10X Growth by Grant will eliminate your fear and make you take action.