Investors have many common traits that make them successful. There have been thousands of studies of the common characteristics of successful investors. They are similar whether in the stock market, business development or real estate. There is also a record of uniform behavior problems that most investors have and are rarely confronted.
One recent study trying to simplify the characteristics came up with these conclusions. Achievers were most likely to be:
1) Very confident in their ability to succeed.
2) They were driven by an inferiority feeling and a fear of failure.
3) They were uniformly sensitive to other people's feelings and were self-aware.
A list of other traits include: passionate, resilient, decisive, fearless, financially capable and knowledgeable.
The main bad characteristic of investors was overconfidence. That shows up routinely in stock market trading, fund management and every financial transaction. Real estate investors are more confident about their prospects than results show. The more the overconfidence, the worse the results. A 90% plus confidence level leads to a 40% error rate. Since real estate investors are often sole entrepreneurs, it takes confidence to get into the field. Overconfidence often takes people out of the field. Look around you with your friends and associates and yourself. I know it is true in my investment experience.
How do we enjoy the advantages of being a real estate investor and protecting our portfolio and our future? There are many things an investor can do such as "Making it big on little deals". That is John Schaub's mantra, book and the center of his teaching for many years. A bad deal will be painful but not fatal. A bad big deal could be the end.
There are other systems and procedures that could be implemented.
TRUSTS. These protect real estate and note investments. They also protect leases, options, contracts and all of our other activities. They deliver privacy and safety and firewalls to protect one bad investment from all the others. They are especially useful for the more speculative and risky ventures that could provide great rewards, if done properly.
OPTIONS. The greatest leverage and lowest risk can be obtained with options. They are invisible, portable, saleable, and exchangeable. They can hold great wealth but cannot be attached since they are a future interest. When markets rise option holders profit. When markets decline option holders do not lose. Option grantors will lower the option price to current market over 90% of the time. Therefore, there is little downside to options.
IRA ACCOUNTS. The creation of IRA accounts has created a grand opportunity for real estate investors to take advantage of opportunities that they see in the marketplace that are not available to anyone else. They can be legally optioned, purchased, leased, put under contract with IRA funds and the proceeds from the rent, sale, or assignment go directly to the IRA account. IRA funds can be held in a checkbook account controlled by the investor that is immediately available for real estate investments.
Take advantage of your positive traits and limit the damage of our negative ones.