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My 6 Biggest Fears About Buying My First Rental Property

May 29, 2019 By Derrick Deese 2 Comments
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In a recent article I wrote, I shared my criteria for finding an ideal property as you begin with real estate investing.

After my wife and I decided on a state/city, we purchased our first property in January 2019. There were some bumps along the way, but it was a great learning experience overall.

However, finding the ideal property is only the first step. There are also many common real estate investing fears surrounding real estate that investors need to overcome in order to make it a profitable venture.

While there isn’t an official statistic on how many people are fearful, intuition tells us that fear of something leads to inaction, which can then lead to not starting at all, or analysis paralysis (i.e., finding the “perfect” deal), among other things. Before we explore those common fears we have to overcome as real estate investors, let’s start with the basics.

Why Do We Have Real Estate Investing Fears?

My 6 Biggest Fears in Buying My First Rental Property

There are many reasons why people are nervous about investing in real estate out of state. People come up with many excuses ranging from ‘it’s not the right time’ and ‘I don’t understand it,’ to ‘I like to be able to see my properties,’ and so on.

Simply put, I boil these thoughts down to fear. Fear can be a paralyzing thing; it keeps many people from realizing their dreams and creating the life they want. Fear can also keep people from even dreaming because they are afraid to fail.

The dictionary definition of fear is “an unpleasant often strong emotion caused by anticipation or awareness of danger.” I tend to think of fear in three general buckets:

Physical Fear: A genuine fear for your own physical safety, which arguably is reasonable and healthy (who wants to get physically hurt)? This is likely as old as time – early humans could be prey for predators, and it is likely that fear is a natural occurring emotion in most (if not all) humans.

Limiting Fear: I view this as a limited mindset regarding what is feasible or a disbelief that things can happen. An astounding 60% of our population fears things that will never happen. That means people may spend lifetimes anticipating and being stymied by something that will never become an actual reality in their lives.

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External Factors Fear: These are fears of things that are largely out of our control. For example, Statista polled Americans and found that 74.5% of responders were afraid of corrupt government officials. While you can vote people out of office, you generally can’t control someone’s character.

The second type of fear is what I needed to overcome to make my first real estate purchase. Limiting fear ALMOST kept me from starting my entrepreneurial dreams in the real estate world.

My 6 Biggest Real Estate Investing Fears

Below are the biggest fears that I had when it came to buying my first real estate investment, along with how I worked through them.

1. I will fail.

I was nervous that the investment would go wrong and I would lose all my money. Part of this stemmed from a deal back in 2007 where I invested in a development deal in Charlotte, North Carolina (right before the financial crisis).

That deal obviously went badly, and I did in fact lose all my money. I overcame this incident primarily through my mindset. I believe the foundation of any financial shift is having the right mindset – not necessarily “failure is not an option,” but rather “failure is a natural part of life, and I can learn from it to propel forward.”

I also read a book that I highly recommend called Discipline Equals Freedom: Field Manual, which was a quick and great read about discipline and managing failures.

2. I can’t do long distance investing.

My 6 Biggest Fears in Buying My First Rental Property wealth noir

I was nervous that I wouldn’t be able to see the property as a long distance investor. How could I possibly invest in something I couldn’t see? Then I thought about buying stocks (which you can’t see) and other investments that you physically can’t see.

I was simply buying a cash flow producing property, and there are professionals (like property managers and inspectors) who could do a much better job than I could. For example, I was nervous about not seeing a property in person and missing potential repairs or maintenance.

My agent recommended an inspector who provided a thorough analysis of the property (including a written report with pictures) and even recommended items that were either must repairs or those that could be deferred. This process eased my concerns, and I’ve also learned about the inspection process and what to look for in the interim!

Check Out:  How to Refinance a Home with Ease

3. I can use my money for something else.

Why would I invest in property when I could buy stocks through a brokerage? It would probably be much easier and I would have more peace of mind.

However, I realized there is ALWAYS an opportunity cost for anything we do. I live by the motto you can have ANYTHING you want, but not EVERYTHING you want. In this case, I want to have financial flexibility and my family’s financial independence.

4. I won’t be able to scale a real estate business.

Capital is one of the largest components in the real estate business. When I talk about scale, I mean having enough capital to purchase process quickly and have enough cash flow on a monthly basis to truly have freedom.

I’ve researched and seen companies that have built sizeable businesses from rental property investing (some are privately held, and some are publicly traded like Invitation Homes). That is a bridge I will have to cross at some point, but NOT getting started won’t even allow me to get there.

Since I started thinking about scaling, I’ve had conversations with friends who have the same mindset as my wife and I. I’ve been pleasantly surprised about how many people are interested in real estate investing.

I’ve actually since partnered with a couple friends from college to create an LLC; we have our first deal under contract (hopefully by the time you read this, we will be the owners)!

5. Other experienced investors will find better deals.

This is, and probably will always be, the case. There are always people who will have a better deal flow, more experience, more capital and more contacts. This is one of those fears that I simply had to acknowledge.

I also believe that in general, life is a bit like this fear. We may have fears of not being good enough for a job, for example, and become paralyzed t o taking any action (“limiting fear”).

6. I’ll make the wrong decision on a property.

This was more a fear of whether the property would be a lemon or not and also not picking the “right” property. I had to realize there was no “right” property and each one will have unique benefits and challenges.

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Also, the first property probably won’t be a slam dunk. You will probably make mistakes. However, with a long-term view, these mistakes are simply opportunities to learn and carry over to the next deal.

I don’t feel the need to beat myself up over something that goes “wrong” with a property, but more focus on the things I can learn from anything that may happen (positive or negative).

For example, I made the mistake of not negotiating better up front for a roof replacement, which cost about $7,000. However, I learned what to look for in roof replacements and found an AWESOME contractor that I’ve used for subsequent repairs. Now I won’t have to worry about the roof for another 15-20 years!

How to Move Forward

As mentioned above, there are a variety of fears that can hinder you from taking action. While there are certain fears that are healthy, in business fear can limit your ability to make an impact. In the pursuit of financial freedom and flexibility, fear will always be present.

Taking action and control of your mindset is the first step – the rest will fall in line!

Do you have experiences dealing with fear? Share your comments below on how you overcame yours.

Derrick Deese
Derrick Deese

Derrick Deese got started investing when he was 18, buying Starbucks stock. He is still kicking himself for not holding it, but has learned a lot since then. He’s passionate about investing, financial freedom, and photography. He works in marketing and lives with his wife Natalie in Seattle.

theblockchainbasics.com/
My 6 Biggest Fears About Buying My First Rental Property

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Filed Under: Real Estate, The Lifestyle

Reader Interactions

Comments

  1. Esther Page says

    April 24, 2020 at 2:59 pm

    Thanks for sharing. I’ve been stagnantly worrying for weeks now. Time to put some money into action. I think I’m going to write out my worries like you did and use that to fuel my fire. Thanks for the inspiration.

    Reply
    • derrick says

      April 25, 2020 at 12:41 pm

      Hi Esther – taking the first step is always the hardest step. But you can certainly do it as have many before you. Always feel free to reach out with questions – can reach me on twitter on @derrickdeese

      Reply

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