Some people walk into a store, see a product they were looking for and buy it immediately. Others walk into a store, see the product and then start searching online or in the mall for the same product in another store, or a similar product, in order to compare prices and perhaps manage to buy it for less. For years I would come out frustrated when walking around abroad with my wife, as every time she had already found an item she liked she would leave the store because perhaps she would find a “better deal.” In most cases it ended in disappointment because no better deal was found, and because of how far the trip had progressed we could not go back to the store with that item, or if we did manage to get back there, it turned out it had already been sold.
Among real estate investors, too, I have learned over the years that a similar phenomenon exists.
Some investors receive details of an apartment or a deal, or see the apartment, think for a few minutes and immediately give a positive or negative answer on the deal. These are usually the experienced investors, those who have already bought an investment apartment in the past, or who know the area, country or city and understand the potential in the offer (provided it is an attractive offer). If the offer, apartment or investment suits them in terms of price and the goals they set themselves, they will answer positively at once and move ahead to purchase.
On the other hand, there are those investors who receive details of an apartment or a deal, or see the apartment, and now start running checks on local second-hand listing sites or on other projects, examine every aspect of the deal, and prepare a “pros and cons” table for themselves. By the time some of them decide, there is a chance the apartment or offer will come off the shelf and no longer be relevant.
“Impulsive investors are the ones who can make the most money, but they are also the ones who can lose the most.” - Robert Kiyosaki, real estate entrepreneur and author.
Impulsive investors are more inclined to take risks. They believe in their ability to identify profitable opportunities and to manage the risks involved. They act quickly. They want to seize opportunities fast in order to maximize their profits. They are driven by profit and want to make money quickly and easily. Some would call them sharks - fearless predators. They spot opportunities quickly, act with confidence and often win a haul of income-producing properties. The risk? As high as their appetite.
By contrast, cautious or hesitant investors are less inclined to take risks and prefer safer, more stable investments. They act slowly. They want to make sure they are making the right decision before investing their money. They are driven by security and want to invest their money in a safe and stable way. Some would call them sea turtles - taking their time. They research carefully, analyze every detail and only then dive into an investment. Their cautious approach ensures stability over time, but may lead to missing glittering opportunities.
A study conducted by the Urban Land Institute found that cautious investors tend to hold their properties for longer than impulsive investors. As a result, cautious investors are more likely to enjoy price appreciation in the real estate market.
No one type of investor is “better” than another. The decision about which type of investor to be depends on your approach to risk. The answer is up to you!
And most important: enjoy the journey!
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית