As with just about everyone, real estate investors can fall prey to hype. While the tried-and-true ways to invest still reign supreme, there are new trends constantly popping up—flavors of the week that don’t last and rarely deliver on their promises.
In real estate investment, hype can look like a lot of different things...
A Must-Have Renovation
Promises that a particular trendy overhaul will bring in a great return on your investment, despite the fact that the style will be dated in a few years’ time.
A Hot New Market
Skyrocketing demand in a market is a beacon calling out to every real estate investor, promising hefty returns beyond your wildest dreams! Never mind that the competition will be ruthless, the pendulum will likely swing, and time has not adequately tested the market’s staying power.
A Technological Revolution
A new innovation has given investors a new, streamlined way to invest, promising returns with decreased effort, or a smaller barrier to entry, or a smaller learning curve, or some similar promise of making life easier.
It’s these sorts of things that hype can grow around, to varying degrees. And that’s only positive hype. Nevermind the negative hype and doom-saying that can happen. So how does a real estate investor keep a level head and keep from getting swept up in the hype that, let’s be honest—is rarely worth it and never delivers?
In fact, hype often leads to knee jerk decisions based on dreaded FOMO (fear of missing out), which means you’re throwing rational decision-making skills out of the window. That never bodes well for your investments!
If you want to let cooler heads prevail and make the best decisions for your investments, you’ve got to overcome the hype machine that wants you to get on board without thinking everything through first.
1. Wait for Proven Results
You wouldn’t buy an investment property without running the numbers. So don’t hedge your bets on an investment strategy, a market, a technology, or anything else that can’t prove itself with numbers and results. If it’s too new to have results, wait. It might sound amazing in theory, but that’s all it is.Theory.
If you really think it’s going to be revolutionary and you believe in it, sure—do your research, go with your gut, and maybe invest. Just don’t sink your nest egg into it. Don’t play with your real money unless they numbers are there.
2. Wait for Regulation
When real estate investment crowdfunding first came onto the scene, one of the biggest questions was and is that of regulation. Crowdfunding as a whole is a relatively new concept and platform and, as a result, the legal details can be a little fuzzy. When it comes to newer concepts and technologies, don’t get so swept up in the hype and the possibilities that you jump into something unregulated.
While that doesn’t necessarily mean you should stay away from it entirely, it does mean there are some clear pros and cons worth weighing. Hype tells you to go all in and to ignore all the possible drawbacks. Reality tells you to consider it from all angles first. Be patient and play it safe.
3. Weigh it Against Your Long-Term Goals
Lastly, hype will convince you that you need it, no matter what. If you want a real estate investment strategy that works, it means you need to stick to your goals and keep that vision in mind. Don’t jump into a new method of investing, a market you aren’t actually that interested in, or a platform that doesn’t fit with what you’re doing just because of the hype.
Hype in real estate investment is like hype in anything else. In shopping, we impulse purchase and wonder why we bought something we didn’t even want in the first place. It’s not so different in real estate investment, except unwanted real estate investments are a lot more difficult to get rid of.
Ultimately, it all comes down to patience.
The willingness to delay your gratification is the secret. Too many would-be real estate investors are looking to be part of a get-rich-quick scheme, and a lot of hype that gets generated takes on a similar flavor. Even for serious investors, it’s hard to ignore the language. After all, who doesn’t want fast, easy money?
But at the end of the day, having the patience to wait, step back, and evaluate the situation with objectivity will serve you, your investments, and your bank account well.