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Emotionless Investing

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Transcript

When you think of emotionless investing, what does that even mean? Well, I’ll give you what it means from my perspective and some real life examples of what I’ve done when I was investing and building my portfolio. Let’s have a look here and see what these numbers represent. Nine, one, five. This is interesting, and something very personal to me.

Nine properties is how many properties I own in my portfolio. Funnily enough, of those nine, before buying them I had only ever seen one. That property was my first, and the one I decided to live in. That is an example right there of emotionless investing. Of the nine, I had only seen one before purchasing it. Now, buying property is a massive financial decision, and there needs to be a lot of emotion taken out of that for me to be able to say, “I went on to purchase eight properties without even seeing them in person.”

I started investing in property in 2015, and now three years on I still haven’t seen 6 of them. Arjun, are you crazy? What’s wrong with you, what are you doing? Whoa, whoa, whoa. This is an investment, not a place I am living in.

The importance of me sharing this with you is that there were a few things that went on in my mind when I was looking to invest, at the start as well as maintaining and growing my portfolio.

Number one was the numbers. There are so many statistics, so much data, photos, so forth that go onto property in terms of giving you the information that you need. Times have significantly changed, and the data that’s available today allowed me to make the decision on my nine with the eight specifically where I actually did not have to go and look at it to make the decision.

But is numbers just enough? No, it’s not. But for some it could be. In my eyes it’s a combination of numbers and professionals. So what are the professionals that can help you with this journey? Your accountant, lawyer, mortgage broker or banker, buyer’s agents, pest inspectors and building inspectors. There are so many professionals out there who each bring their niche and their skill to the table.

When you combine these professionals together, you start to really master taking the emotion out of it. Because let me ask you, if you were, or if I was to go and inspect one of these properties and not engage a professional, for example a pest and building inspector, would I know what to look for? To be honest, even today, yes I’ve seen many reports, but I’m not qualified to look for all these things that come up in an inspection and neither are you. This is really where their expertise comes into play.

The same can be said when you start looking at a contract. Yeah, sure, I’ve been through a contract many times both personally and professionally. But the lawyers are going to really be able to take that next step in reviewing that for me, or for my customers, and allow us to really take away the emotion and get their professional view of it. This is where when you’re engaging so many professionals, if you do go and look at it or go and inspect it, what are you going to gain out of it?

Okay, maybe you might get a look and feel for the area, but is that your judgment, or are you ignoring now the judgment of the many people that do want to live in there. To be honest, I personally wouldn’t want to live in all of investments, however I do understand there’s a market that does. That’s where taking the emotion out of it really helped me get through some of these purchases without having to even go look at it.

What happens during your journey. Repairs and maintenance will come up. Yes, even in new properties I’ve seen things come up. The importance is how you react to them. Recently RP Data shared a report called the Pain and Gain. One thing I found that was quite consistent through this report were people that sold in their earlier years of ownership were making losses at a higher level or a higher scale compared to those who held a property for longer. It doesn’t mean, in all cities in all places if you hold it for a long time you’re going to make money. But there was a theme across most of the cities that this was the case.

Now, assuming the repairs and maintenance came up, and you emotionally were trapped with the idea of, “Oh, no, this maintenance is gonna cost me a lot.” Or, “This issue will cost me a lot.” If you weigh up that cost to fixt that issue compared to the goal that you had set yourself for how much wealth you wish to create or wanted to create for your portfolio, I assure you that that number would’ve been quite small in comparison. Yes, there are some occasions where they can be quite catastrophic, but those are very rare.

Now, I’ve had repairs and maintenance occur on some of my properties. Recently I had something that took me back three and a half thousand dollars. However, I had insurance in place, I paid the excess. The only out of my pocket was the excess. When it does come to the of an incident occuring and your mindset is conditioned to take the emotion out, typically your reaction and the way you respond won’t be as emotional.

These are sort of things that we should really start thinking about when considering property. The numbers, engaging professionals, and ensuring that you aren’t over-reacting to the repairs and maintenance that come up.