Why “Just Stay Positive” Is NOT Good Real Estate Advice

Why “Just Stay Positive” Is NOT Good Real Estate Advice

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Generally speaking, maintaining a positive outlook is, well, a positive thing. Those who tend to think positively of the future have more motivation and drive, leading to greater success. Positive individuals encounter fewer stressors in their social lives, as they tend to be more amicable, confident, and forgiving. As an investor, maintaining a positive disposition will leave buyers and sellers more confident that working with you will produce positive outcomes. Positivity can even benefit your health, as your attitude can powerfully impact your stress levels and immunity. But is “just stay positive” good real estate advice?

Ironically, there is a dark side to maintaining an unbridled sense of positivity. In combination with naivety or presumptuousness, a positive outlook can actually land you in some pretty dire situations. When you work in a field like real estate, i.e. a field in which your prices and profits are sublimated to the ubiquitous, all-powerful hand of the market, assuming that “everything will work out” could just lead to your financial demise. So is it good real estate advice to stay positive? The answer is, usually, no.

Here are a few instances in which it would be wise, as an investor, to tame your positive outlook

Buying a Home

Positive thinkers typically view challenges as opportunities for growth and change. While that can be beneficial and mature, it is definitely not good real estate advice. Now, a challenge that may involve lots of time and hard work with an almost certain payoff is most definitely a challenge worthy of sinking your time and money into. However, if you’re looking to flip a fixer-upper with a lot of hurdles to jump, think again.

A positive thinker is at a greater risk of seeing the potentialities of an investment while overlooking obvious failures. They might see lots of small repairs as an opportunity to develop useful new skills without thinking about the time, money, and stress they will have to pour into acquiring said skills. They may be inclined to believe that the best possible outcome, in terms of addressing drawbacks and damages, is achievable with just a little effort and positivity. Or they may overestimate their capacity to perform and fund repairs. Worst of all, positive thinkers may be more optimistic about the amount they can expect to receive after flipping a home.

Positivity is great in your personal life, but in the world of real estate, safety is savvy. Always lowball your expected profits and highball your projected expenditures. Do not assume you can fix something yourself (or that it will be “fun” to learn a nice new skill) unless you have extensive experience with that type of fix. Expect drawbacks, setbacks, no-shows, failures, and more. Being conservative might hamper your spirit in the short-term, but it more likely to procure success and profit in the long term. Positive yet unrealistic thinkers might end up having that positive spirit squandered early on in their careers if they aren’t safe.

The Market

How many times in recent decades have market projections proven to be entirely wrong? What about times that different projections have contradicted one another? While the market is logical, it is not predictable. It is not just a matter of simple math. Economic, political, social, geological, and even climatic factors can influence market conditions. And in the world we live in, these factors can materialize and vanish virtually out of nowhere. We live in turbulent sociopolitical times, and thus suffer from turbulent real estate markets.

If you are looking at a deal that is only promising when you take favorable market projections into account, stop dead in your tracks. Again, positive thinking might be inspiring and motivating, but it isn’t realistic. You want to try to choose deals that will generate profit even if market conditions become unfavorable. The best real estate advice out there is to make mitigating risk your primary prerogative. Though playing on the safe side may bar you from some lucrative deals, it will most certainly prevent you from suffering long-term financial setbacks.

As a buy and hold investor, don’t trust market projections. Those in fix and flips have the benefit of operating on short time scales in a market of illiquid assets. That means that the current market is likely to more or less reflect the state of the market when a flip is complete. But buy and hold investors are looking at maintaining a property whose profits will be indefinitely subject to market fluctuations. If you only stand to profit by a small margin in favorable market conditions, what will happen when you have to lower your rental rate ten years from now if the market changes? Like they always said when we were kids, safety first.

A Word of Real Estate Advice

When we are excited, it’s easy to paint beautiful pictures in our minds about how successful we will be. It’s like daydreaming. Faced with the stress and excitement of a new deal, you begin imagining all of the things you are going to do and how wonderful the place will be when you’ve fixed it up. At least if you’re positive.

This sort of positivity can lead you down a bad road. But the answer is not to be negative instead. Dwelling on everything that could go wrong is bound to only distract and deter you. Instead, try your best to sever your rational mind from your visceral, emotional reactions. Block all of your visions of success and disaster out of your mind. Sit down on a laptop or with a notepad and really take the time to calculate your figures. Then immerse yourselves in the numbers. Is your rational mind pleased with them? Doing this can help to protect the dreamers and worriers from poor decisions.


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