Over the years, I’ve talked to a lot of new and experienced real estate investors across Canada. When I ask people,
“What is the worst fear you have investing in real estate?”
the number one answer I hear is
This fear is more powerful than the promise of great wealth or cash flow, and it’s the main reason why most people don’t ever buy their first property.
What most don’t realize is that to receive some sort of reward from real estate, you have to risk something – whether time, effort, or money. However, very few are willing to risk anything because they are afraid of making a mistake, and so they never get started.
The Learning Curve
If you invest in real estate on your own, you will have a learning curve, just like you do with any new endeavour. For example, when you go to school and learn math, are you an expert after listening to the teacher or reading a textbook just once? Not likely.
You practice math problems over and over again until you get good at them. You take exams to test your knowledge. You work with the teacher or other students to get help with any problems you have.
After a lot of practice and a lot of mistakes, you get better at it. You make fewer mistakes, and the ones you do make are smaller. Eventually you can can perform common math problems all day long with very few errors.
Real estate investing is the same way – you need to practice a lot and make some mistakes to become an expert.
Practice Makes Perfect
Practice is repeatedly doing the actions that will help you achieve the results you desire. Many investors think they can read a few books and courses and expect to make huge profits on their first deal. That’s like learning to ride a bike from a book and expecting not to fall down the first time.
The only way to excel at real estate is to place lots of offers, close on lots of deals, and manage lots of property. The problem with real estate is that some mistakes can wipe you out financially. The trick is to learn enough to ensure you don’t make those huge financial mistakes and, most importantly, to get enough courage to take the first step.
How To Overcome The Fear
So what if you’re afraid to practice due to this fear? Here are a few simple solutions:
- Start small – When you’re just getting started, don’t start off trying to buy a 20-unit apartment building worth millions. The size of the mistakes you make in real estate usually vary directly with the size of the deal. For example, if you buy a single family home and you miss the fact that the roof needs replacing, it might cost you $2000-$3000 to have it replaced. If you make the same mistake on a 20-unit apartment building, it could cost you 10-20x that amount. The bigger the deal, the bigger the financial mistakes that can be made. Start learning on small deals, and work your way up to big deals as your financial resources and experience grow.
- Reduce your initial investment – if you’re uncomfortable with investing $50,000 on a real estate deal, try scaling it back to something you ARE comfortable with – say $25,000. If you can’t find anything that produces positive cash flow within your city, look to small towns outside of the city. If that’s still too much for you, look into using creative techniques to reduce your down payment. However, keep in mind that with lower down payments usually comes higher leverage, which means higher risk, so be sure to know what you’re doing by getting educated. If you’d rather invest with more cash but don’t have enough yet, take your time, build up your financial resources, and when you’re ready, the real estate market will be waiting for you.
- Gradually increase your investment – To continually grow your portfolio and the size of your deals, your comfort level with investing will need to be continuously challenged. Once you’re comfortable investing a small amount, increase it to something larger. Make sure that each increase is a bit of a ‘stretch’, you’ll eventually find yourself investing larger and larger sums of money on larger and larger projects.
- Have an experienced person guide you – Wouldn’t investing be easy if a ‘guru’ just handed you a 100% guaranteed way to make money? Well unfortunately real life isn’t like that. However, an experienced investor can be instrumental in helping you see things that you might overlook. They can give you the confidence that you’re making the right decision, but remember… YOU always make the final decision on a deal, and you should always take full responsibility for your actions. Don’t ever invest in something just because someone else says it’s a good deal — always do your own due diligence.
Real Estate Profits System
If you’d like to learn how to invest profitably and
drastically reduce your learning curve,
check out my real estate investor training course.
Just do it
There comes a point where you’ve learned enough, you’ve heard enough advice, and you’ve practiced making offers. At that point, you just have to make a final decision to invest.
In fact, that’s the only true way to get over your fear of investing — just do it, and then do it again and again and again. Repetition will make you an expert very very quickly, and if you do things right, you’ll soon be the person that other people look to for guidance.