The Mentality of Buying
Buying a new property is one of the most fun parts of the real estate business. It’s natural to feel excited — even giddy — about a “good buy” and all the potential that comes with it.
In the excitement of the buying process, it’s all too easy to overlook the “fine print.” There are unexpected costs and factors that will pop up when you buy a property. Also, consider that a property that seems like a great acquisition may not be quite as great after you’ve done a little more homework.
I’ve made the mistake myself of getting too carried away with the emotional side of buying, only to deal with issues I wasn’t prepared for afterward (sometimes to almost disastrous consequences, I might add).
Few properties are “perfect”, and not every find needs to be a golden opportunity. Just make sure you do your due diligence ahead of time and go in with your eyes wide open. Here are three factors that will help guide you in doing this.
- “Make Me Want to Land”
When I was getting my pilot’s license, my flying instructor shared with me some very interesting advice. It’s since turned out to be invaluable in how I purchase properties.
“When it’s time to make a descent,” he told me, “your mentality needs to be, ‘ make me want to land!’”
At first I thought his words were a bit counterintuitive. After all, you need to land the plane, right?
But his point was: there are many dangers and unknowns when flying, especially so when landing. You should not actually land the plane until you have checked all the boxes that you’re safe and clear to do so. Even a small mistake could lead to regret or even catastrophe.
While buying real estate (usually) doesn’t come with the same mortality risks, there are still a number of risks involved. Especially ones that are easy to overlook in the euphoria of finding a place that “feels” right.
It’s important to stay as detached as possible all the way until the day you close on the property. You may have heard the advice “don’t fall in love with a home,” and there’s a lot of truth to that.
This doesn’t mean you need to be cynical or cautious to the point of obsession. It does mean doing your due diligence before buying and keeping your expectations neutral. Save that champagne bottle for the day you actually close.
- Do Some Deeper Digging
When landing a plane, I had to learn what all the “boxes” were that I had to check to make sure I was safe and ready.
Buying properties also involves boxes that need to be checked. Some of these boxes are easy to overlook or even forget. Know ahead of time all the things you need to consider so that when you find a property you’ll have your list ready to go (and hopefully you’ll be able to check all the boxes!).
Here are several examples:
- Migration patterns . Are more people moving into the neighborhood, or moving out? What has been the migration trend over the years, and is that trend changing in any way?
- Employment levels. What percentage of the people in the neighborhood are employed? Employment is related to income, and level of income among residents in turn affects the value of the area as a whole.
- Availability of housing. How many houses are currently available in the neighborhood? Are there any more being built (or planned)? A lack of available houses may indicate demand, but not necessarily. Make sure you look into the “why.”
- Cost of purchase vs. Market rent rates. Is it currently more expensive to rent a home in the area you’re looking at, or to pay a mortgage?
- History of the property itself. If the home is cheap but the neighborhood is great, there may be a catch. Having a home inspector visit the property and taking the time to learn more about its history will let you know if there are any red flags.
Have a checkbox ready to go before you even get serious about buying a property. It will be a valuable resource and streamline the whole touring/inspecting/purchasing process.
- Get a Second Opinion
One of the greatest things about investing in real estate is the wide variety of people you meet, many of whom offer a wealth of insight and experience that they’re only too happy to share with you — all you have to do is ask.
Some of the best decisions I ever made were thanks to the help of friends who were investors like me, but with more experience. Their advice was free but invaluable.
Make sure you take the time to network and surround yourself with those who are more experienced than you. People who have been in this business a long time love sharing their insights and are usually only too happy to help. Besides, a second (or third) opinion always helps you stay as objective as possible.
Summary
You can stay smart while buying a property and still have fun in the process. In fact, buying a new property, I’d argue, is more fun when you are empowered with the right tools and information going in.
Good investment opportunities come along all the time. Be ready to take the leap, but only after you’ve taken a good look first. Review all the checkboxes until you have no good reason not to land.
Finally, take the time to talk to mentors and friends who you trust. They’ll be happy to share their advice and honest opinions. Having trustworthy people to consult is not only a lifesaver, it’s a very meaningful part of the process as well. Due your due diligence and you’ll be rewarded not just with a good investment, but with peace of mind.
