How you feel impacts the purchases you make … from toothpaste to two-tone paint … yes, emotions even influence your investments in real estate!
There’s a reason stock analysts talk about “the mood of the market.” Business decisions are vastly influenced by emotions.
In our latest episode we hear from two leading economic researchers about the smart way to keep emotions under control in uncertain times. Personalities in our latest episode of The Real Estate Guys™ radio show include:
- Your emotionally intelligent host, Robert Helms
- His emotion-turned-motion co-host, Russell Gray
- Popular author, trend forecaster, and “Emotional Capital” scholar, Chris Martenson
- Researcher and leading economic publisher, Bill Bonner
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Watch out for these two emotions in real estate
As ROI investors, we want to be as detached as we can, and use our intelligence to make informed decisions.
Yet, the real estate marketplace is full of emotions … Think about it.
Remember the first time you bought a house … in the process, was there fear? Perhaps anticipation? When it was purchased, did you feel relief? Maybe joy?
Sometimes in real estate we don’t let our emotions serve us. The first step is awareness of how emotions influence your ability to make decisions, negotiate, and work with people.
When the market’s not giving you a lot of great deals, perhaps you might fudge your pro forma, change your standards. Why do we do this? Generally, two emotions are the culprit.
GREED and FEAR.
Greed makes you chase a deal and sometimes causes you to overbid or be too stingy with those trying to work with you.
Fear keeps you up at night. It causes you to stumble and second-guess yourself, knowing there’s a possibility of making a mistake.
Harness your emotions – lessons from two real-life examples
If you want to advance your life, emotions are the fuel and energy that makes that happen. We at The Real Estate Guys have a couple examples for you.
When the real estate bubble burst in 2008 and Russ lost loads of money, he felt a lot of emotions. The first was shock. Then denial. Then depression.
Then Russ realized, “This is real. I have to deal with it. Put it back together.” He lowered his emotions so he could make more rational decisions.
Lesson 1: Looking back, that hard time was one of Russ’s greatest gifts. His marriage was tested. Friendships were tested. He saw who his real allies were.
In a second real-life example, when Robert and an investing partner were searching for a parcel of land to buy, they set a price together. Soon, they found themselves bidding in an auction.
The bidding started. Competition soared. Emotions heated.
Before Russ knew it, his partner’s hand when up for a price higher than they’d agreed.
Lesson 2: Don’t let heat of emotions take over in a real estate transaction.
Emotional Capital, the most important type of capital
Chris Martenson, author of the new book, “Prosper!: How to Prepare for the Future and Create a World Worth Inheriting,” shares research on many types of capital, which he discusses with us at length in our podcast.
For example, many of us are familiar with “Social Capital,” or the people we have in our Rolodex who will help when we need them.
Another type Martenson outlines in his book is “Living Capital,” which includes a person’s body and resources for nurturing physical life. He shared how he’s lost 30 pounds and grows a garden around his property, his supply of clean food.
The third, which most people overlook, is Emotional Capital. “It’s most important,” said Martenson. “If you don’t have Emotional Capital, you will be ruined. Most people won’t be harmed necessarily by the next economic downturn, but by how they react to it.”
He shares an example of economic disaster in Russia from 1989 to 1997. During that time, 54% of all deaths were from alcohol, up from the normal rate of 4%. “Some couldn’t manage it,” said Martenson. “They drank themselves to death while others created fabulous wealth. The difference is their emotional outlook.”
With a healthy supply of emotional capital, resilient people have the ability to shift directions and adapt when changes come.
Not sure you’re that type of person? Good news: It can be learned! Martenson gives specific tips on how to increase emotional capital in his book.
“Reacting emotionally is the worst thing you can do”
Researcher and publisher Bill Bonner, since the late 1970s, has exposed and predicted the world’s most disruptive events. His research and publications reach 2.5 million people worldwide.
Bonner sees the mistakes people make when they’re scared.
“Reacting emotionally is the worst thing you can do,” said Bonner. “We see it over and over in history. Every time there’s crisis, people get frightened and sell. You want to sell before the crisis. Don’t wait until everybody’s feeling bad.”
What’s his advice for those looking to build wealth?
“Everything is in context of your age and what you want to do,” said Bonner. “If you’re young, you’re likely looking to build capital. If you’re older, you need to figure out if you have enough to speculate, or want to hold on to what you have.”
Bonner recommends investing in property and productive investments with businesses that produce tangible goods. “Even if you’re thinking about stocks and bonds, look at carefully,” he said.
Whether you’re looking to build up your real estate portfolio through syndication or want to expand your other tangible assets, remember to keep your emotions in check.
Yes, investor, YOU be the master of your emotions – don’t let them master you.
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