Influences on our investor mindset

The mindset or psychology that we use to approach investment decisions is subject to a variety of different influences. The way we view debt and the risk attached to things like using our owner-occupied home as collateral are individual to us as investors. Whatever the influence, it is best to know how to identify it so you can determine whether altering your investor psychology could give you a better chance of success.

The parental influence

Our psychological approach to debt and investing stems from lessons learnt from our parents. This is how we get out ‘financial blueprint’. When I first started doing property investment seminars, I initially thought knowledge and research made a good property investor. But then I found a lot of people who had the knowledge just couldn’t move. This was the same for people’s education and their origin. Eventually, I realized their success comes from something I would call their ‘mindset’. I realized a child was not born knowing how to do money, but was taught these things.

We learn about finance and debt from our parents in three different ways:

1.Things we hear – the saying ‘money doesn’t grow on trees’ can instill a conservative guarded view towards spending money

2.Things we see – seeing your parents arguing about money can instill fear and pressure about the importance of having a good financial position.

3.Things we experience – money being used to buy love or frivolous or meaningless objects can shape our ideas about what money is work to us.

Many of us were taught to follow the heard – the safe heard. This means that most of our financial blueprints are ingrained with the goals of getting a good education, buying a home, paying it off and beginning to save again for retirement.
Usually, this blueprint encourages people to guard their money and spend it only on things near and dear to them. Taking a risk by investing in property – even if it is a calculated educated risk – does not usually fit into safe-herd psychology. This fixed route can directly influence and limit a person’s ability to grow their wealth and achieve financial independence. For most people, what determines their psychology of property investing is their route or path in life. Like a river in the earth, this path is ingrained in us. In life we have choice, so automatically we follow the path we trust - work, make money, spend money and work some more. We dream of perpetuality, but many of us never achieve this.


Tips for kick-starting your property investor attitude

1.Develop a genuine desire to be successful
2.Be willing to work hard
3.Don’t questions your ability
4.Place yourself in an environment that is supportive
5.It’s okay to take one step backward to go forward. You can sell two properties to stay on top of your finances, but keep going
6.View property investment as being long term – things will go wrong as well as go right
7.Commit to being successful property investor

An innate psychology

The psychology of great property investors comes from an instinctive and innate point which could exist in anyone. In fact, the most interesting element of the psychology of property investors is the ‘randomness’ of the success of some investors and the failure. It comes down to the individual itching to be motivated by different things. For some, it may well be the views of their parents, but some come out of the left field and have fascination with property investing. To some extent, this almost ‘obsession’ is innate, and there is an individual predisposition to succeed if you have the right psychology for property investment.

I liken my theory that the psychology of property investors are similar to the makings of an elite athlete. For some, a successful athletic career can be influenced by a sporty family, while for others it could just be a ‘rogue gene’. For those who invest in property, this rogue gene could compel them to reach their personal goals, and they see property as a rational was to get there. For these people, it’s part-time means of financial independence. They will work at property investing every weekend, scanning newspapers, building spreadsheet, and go for that Sunday drive to feed their obsession and view properties.


You life stage

This ‘almost obsessive’ psychological approach toward property investing can be developed at any life stage and doesn’t necessarily depend on age or experience. There’s no less interest and intensity in somebody aged 26 than somebody aged 66 with property investors, even time and life to accumulate a great portfolio. However, those approaching retirement naturally tend to approach investment with a cautious mindset. Baby Boomers approaching retirement now are more experienced with life’s up and downs, and know that property can fall. There’re aware that their time in the workforce is running out and, if they do invest, they can’t screw it up by making the wrong investment. The succeeding generation is much more comfortable with credit and debt, and see them a pathway to prosperity.

Those under 35 like me who are looking to grow a successful property portfolio are more inclined to take bigger risks to meet their goals. These investors don’t know about the Depression, and only have a perception of the world where interest rates are lower than 10% and where property prices rise. At this age, you’re not building your retirement fund so there’s less risk,” he explains.

Homebuyers trends across decades

The psychology of property investing is not only confined to the lives of individual property investors. It also resides in generation of homeowners. The ever-evolving choices and trends of homeowners have the power to influence the psychology of investors. Soldiers returning from World War II in the 1940s viewed inner city terraces as dark, cramped, congested and did not consider them to be modern. Yet 60 years later, the psychology of homebuyers has changed, and savvy property investors have different views which fit this demand. Interestingly, the psychology around the perception of beauty and the ideal suburban lifestyle-being away from the inner city-prevailed from the 1950s onwards to the 1980s. Then there was a shift in the psychology. Inner city living kicked off around the 1990s and has matured into a sexy thing now. The demographics are changing. Singles, couples, gays, divorces and expats all require a different lifestyle to what is on offer out in the suburbs.

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