Unpacking the psychology behind ‘future-focused’ investing

Finance and opportunity are important, but having the right mindset — one that is focused on long-term goals — is the overlooked key to success in real estate investing.

Steve and Victor

On a recent episode of Investing Insights with Right Property Group, Steve Waters and Victor Kumar along with SPI’s Phil Tarrant talked about why property investors easily lose their “eyes on the prize” in relation to the ever-shifting narrative on the real estate market.

Mr Kumar highlighted that while there are always opportunities and setbacks in every market, which need to be identified, it’s how investors view them that will determine how they come out on the other side.

“Investing is largely about psychology. It’s not necessarily about reacting to the media, reacting to the news of the day. If you did that, you would lose a lot of money,” Mr Kumar emphasised.

He further elaborated that many individuals who solely rely on news reports without considering the broader factors that shape the market ultimately find themselves compelled to sell.

“And when they did [sell], they lost all of the phenomenal gains we’ve seen since then,” Mr Kumar said.

But he acknowledged that it has not been all good times, with the market going through periods of property value decline, stagnation as well as challenges in obtaining financing. Conversely, he noted there have also been times when entering the market is relatively effortless.

Despite these fluctuations, Mr Kumar underscored the significance of taking a broader perspective by asking the question: “What am I trying to achieve?”

With this, he also called on investors to focus on their personal affordability, stating: “Do I invest in a more negative cash flow, higher growth property or a cheaper property?”

“Because there’s two aspects to affordability: the capital that you’ve got to play with and the ongoing cash flow you’ve got to play with, without impacting significantly lifestyle, so without taking a step back in lifestyle,” he added.

Mr Kumar and Mr Waters reminded investors that investing “should happen in the background”, with “life and lifestyle happening in the forefront, within reason”.

“The minute you bring investing right to the forefront, you will make mistakes. You will start focusing on the right here, right now, as opposed to playing the long game,” Mr Kumar said.

He explained that being caught up in these errors, as mentioned earlier, can begin during the process of buying.

This includes while “doing your sums”, performing necessary calculations and bringing the decision-making process down to a personal level.

“And so, that means that there is a whole lot of pre-planning that needs to happen. Most people jump into the market buying the property and then they try and solve all of the other moving parts as to the reason why. You need to have the ‘why’ sorted out first and then the ‘how,’ ‘where,’” he noted.

Listen to the full conversation with Steve Waters and Victor Kumar here.

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