The Psychology Behind Real Estate Investing Risks: Do you have what it takes?

• The Unpredictability of The Market: There is never a guarantee that you will make a profit when you make a sale.
• Credit Risk: When investing using leverage, the bank owns the property until you have paid the loan in full. If you are unable to pay your installments on time, you risk facing foreclosure.
• Depreciation: Generally, real estate property will increase in value, but it is not guaranteed.
• Negative Cash Flow: It is the result of a low occupancy rate due to bad tenants that cause destruction or irregular payments. Property with hidden structural problems could also cause problems.
• Liquidity Risk: If you need cash quickly, you cannot rely on the money you invested in property. Real estate is a long-term investment.

• High-Risk Tolerance: Real estate is a high-risk industry. One should be financially and mentally prepared to gain or lose. Rash decisions should be avoided.
• Unbiased Judgment: Successful investment in real estate requires an open-minded assessment of market forecasts and trends. Objectivity is crucial.
• Long-term Mindset: Avoid investing money that you may need in the near future, or putting all your cash in properties.

• Be aware that risk is needed to make any gain in investments. Start with low-risk opportunities and work your way up to riskier investments.
• Work on controlling your emotional reaction to situations. Learn to deal with losses calmly, and don't let it affect your decision making.
• Focus on your why. The reason for getting into real estate investing will help you over your fears.

• You may need to overcome the mental boundary of taking on credit, for fear of foreclosures.
• Borrow what you can repay and maintain a good relationship with your lenders.
• Work on a way to maximize the cash flow from your property.
• Have a backup plan that can service the loan, like savings or an alternative source of income.

Do your homework before you invest in real estate property, but don't get overcome with analysis paralysis.

• How has the appreciation rate of property in that area changed over the last few years?
• What amenities are in the area?
• What are the plans in the area with regards to development?
• What are the crime rates?
• How are the weather patterns?
• How has the population grown over the last few years, and what is the level of traffic congestion during rush hours?
• Work with a local and experienced real estate advisor in the area. They will provide helpful insight.