Insider Secret #33: Don’t Let Your Emotions Take Your Profits Away!
maria gudelis | April 2, 2008Another tip in a series of insider secret tips on how to make money from real estate by real estate expert Maria Gudelis. This series will contain investment secrets, techniques, and resources that will help you immediately put more money in your bank account.
When it comes to buying real estate, we must never let our emotions take over the deal. The times that we do are often the times that we end up learning the “hard lessons”. I am sure that we have all learned this important lesson one way or another. It is often hard to not be influenced by all the money you keep hearing about in real estate investing…even the media is all over it:
Emotions can even play tricks on us; and allow fear and greed to rule.
Have you ever bought something at a great price, sold it for a profit; then, right after you sold it, the item went up even more in value? How did you feel? Probably not that great! It has happened to me, and I felt like I had gotten kicked in the stomach — I was sick.
Have you ever bought something at a decent price and, when the item went down in value, you sold it and cut your losses? Then, within a relatively short period of time, the item went down even more in value? How did you feel? If you are like me, we felt great. We might have even patted ourselves on the back about the great decision we made!
Wait a minute here, what just happened? We made money and felt crummy and we lost money and felt great? That just doesn’t seem right to me; but at the end of the day, that is precisely what emotions can do to any of us. Emotions really can play tricks on us in our investment lives.
Let me explain a little more about the fear and greed emotions €“ and it will be a real life situation that cost me money. During the heyday of 2004 real estate market in Vegas when things just kept going up up up…one of my realtors called me in August 2004 and said €“ Maria €“ you gotta put an offer on this property that you can get for $400,000 and it is worth over $490,000. You can easily rent it out or simply sell it for a profit in the spring of 2005.
I had just made wonderful profits on some other real estate deals and was sorta in euphoria of ‘nothing can stop this market’ €“ you put money in, bigger money comes out! So I went ahead and did this deal thinking another easy profit is coming my way…well…lo and behold, it turns out there were quite a few properties for sale in that subdivision and 3 months later when they weren’t selling, the prices then came down from $490,000 to close to what I got into it for!
Welcome to Las Vegas Baby!
Net Loss €“ Over $20,000!
Beware of the gambling euphoria that can be developed by making some easy profits €“ don’t let it lose your edge and normal due diligence practices…and most of all…don’t let it start trusting any realtor!!!
The bottom line is that when we let emotions dictate a deal, we can fall into the trap of not running all the numbers and doing your due diligence. It would have been pretty easy for me to analyze the supply versus demand in that neighborhood.
