Controlling EMOTIONS

[Jake Milne]

I see it time and time again. First time buyers, novice investors through to your seasoned purchaser. I'm talking about people letting emotions cloud their decisions.

So here are some pointers...

The biggest thing is usually just identifying if you're being emotional to the extent that it's clouding your perception on a particular outcome.

Here are some examples of behavior that leads to emotional buying:

1. You're convinced that a property is the one without due diligence to support it;
2. You're prepared to stretch beyond your budget;
3. You're prepared to go above your initial valuation;
4. You think it's a good purchase because you'd live there;
5. You're excited by the potential and are rushing things;
6. You go to sleep thinking about one property more than others;
7. You're ignoring or not seriously considering potential concerns;
8. You want it NOW;
9. You let auction competition or agent negotiations sway your judgement.

If you are feeling like this it's easy to fix. Take a step back from your house hunting. Pause, go and do something completely unrelated. Sleep on it. When you re approach think about all of the negatives first. Reconsider your perspective. Make sure you back up your thinking with facts and numbers.

Review your overall strategy, then your asset requirements, then your purchasing strategy. If you've not done this, then stop thinking about buying until you have a defined strategy and goals in place.

Lastly, when you're ready to buy compare as many areas as you can, as many properties as you can both on paper and in person. Analyse the prices, the yields, the tax positions, the fundamentals and the cash flows.

Make your decision based on the numbers and then when you're 110% confident, cool, calm and collected about where you stand, choose your property, make your offer and be excited once the deal is done!

 

[CHAOS]

Thanks Jake

Good Advice. I can get a little emotional. Your posts and others on SS have been really supportive and helpful. I am learning to walk away if the numbers don't add up - despite how much I like the property.

 

[Robstar]

Yep nice one mate...
It was really tough for me at auction recently... As it turned out we got a good price & right at our limit but I had phone in hand ready to call the broker - I think the agent saw this, then saw me put the phone away & we got it
(This was for a PPOR BTW but still)

 

[sanj]

I think a lot of it can come down to one thing, CONFIDENCE.

If you are confident in your ability to find sites, do the appropriate DD etc you will find it a lot easier to make the hard decisions, both in terms of committing to the purchase as well as walking away once you think it isnt working out.

It is when you might not have as much faith in your ability to find another purchase of similar quality etc that you might bend too much to make a purchase happen.

I am of course talking purely for investments and not PPOR.

 

[7smurfs]

I think a lot of it can come down to one thing, CONFIDENCE.

Very easy to get carried away even when you are just attending auctions.

I nearly got myself in trouble during a bidding war for a Toorak apartment. The bidding got above the price I was willing to pay to the point where the yield % return benefits were horrendous but that little emotional voice in my head kept saying $1k more and it's yours!

Luckily I became sane again and stopped bidding. Once that reality hit, I was really thankful I had lost this one!!!

From my own experiences, I encourage first time investors to remind themselves of the end goal in some way!!!

 

[Jacque]

Almost every homebuyer who engages us to locate a home becomes emotionally attached at some stage- it's a perfectly normal reaction and one that we take the time to address with our buyers. I recently contributed to an article about this very topic in an REINSW journal and believe it's worth a read to gain a perspective from both sides of the transaction:

http://www.reinsw.com.au/Emotional-rescue-Journal-April-2012-/default.aspx

 

[matto_]

some great points Jake.

Very easy to get carried away in such a major purchase.

 

[Jen_PFR]

My other half and I have found we can dismiss a potential investment purchase reasonably easily if it doesn't add up. However it's completely different when we talk about a PPOR - for us, the personal aspects involved in living in a place have a really strong impact. Fortunately we have managed to resist making any silly decisions so far, but I fear it is only a matter of time!!

 

[Spades]

Some good points there Jake.

My 1st purchase was emotive as i was sick of paying rent.
In hindsight should have paid 10k lower than the final purchase price and or offered 10k lower.
But that said,i did get the fhbg and bought 9.5k below asking price and the rent i was paying at the time is lower than my mortgage repayments-so all good.

So points-1,4,5,6,8 applied on that purchase + maybe 7.

Fast forward 4yrs and i'm still looking for prop #2,to which will be an upgrade for ppor.
So points-4 and 8 apply today but saying that i'm after a good deal and i do now take a step back.

Only wished i'd come across somersoft many years ago,good site,good members and alot of great info/advice on here.
Cheers Spades

 

[bits1010]

We are looking for PPOR, we believe the following to control our emotions.

PPOR
1. at least find three houses in the suburb which you like and suitable for the budget
2. if (1) is hard to find for that suburb, look for another two suburbs which are similar, there is no one suburb which you must live in.
3. set limits for each property and stick to it, make offers
4. if your offers are accepted and you need to choose one, think about which property will worth more in 20 years.

IP
1. all about the numbers and your assumptions.