What does it feel like to buy your first investment property?

Andrew la Fleur: What does it feel like to buy your first investment property? We’ll talk about that on today’s episode.

Speaker 2: Welcome to the True Condos Podcast with Andrew la Fleur, the place to get the truth on the Toronto condo market, and condo investing in Toronto.

Andrew la Fleur: Hi, and thanks for listening to the podcast. Once again, your host Andrew la Fleur here, from TrueCondos.com, and I really appreciate your time to listen to this podcast day after day, week after week, and for your support, your sharing of these episodes, and all your emails, and phone calls, and texts. Thank you very much.

As I said in the intro, today’s episode, I want to talk about, “What does it feel like to buy your first investment property?” Obviously, this is primarily speaking to somebody who is buying an investment property for the first time, but there’s certainly lessons here as well if you’ve bought condos before. If you’re a seasoned investor, maybe you’ve bought many condos, 10, 20 condos before as an investor. You’re still going to want to listen to today’s episode. I think there’s some great takeaways for you from this podcast today.

Let’s jump right in. Again, what does it feel like to buy your first investment property? Or maybe another way of looking at it is, “What should it feel like?” Because often, there’s a lot of uncertainty around the emotional side of things. The thinking and the feeling side of buying investment property is something that we don’t talk about as much on this show, but it is a very important aspect as well. We talk a lot about the dollars and the cents, and why you should buy, and why it makes sense, but at the end of the day, we are still human. We’re still emotional creatures, and that is a very important aspect of life and of investing. Let’s talk about that a little bit here today.

This podcast was inspired by a video that I saw from my good friend of the show and been a guest on the show, the boys over at Rock Star Real Estate, Nick and Tom Karadza. I don’t know if you know them, but you’ll definitely want to follow those guys and watch their videos, subscribe to their stuff. They put out great content as well about real estate investing. They’re focused on buying homes in southern Ontario, not so much condos, but looking at sort of traditional home buying as an investment. Student housing, duplexes, triplexes, that sort of thing. If you’re into that side of it, those guys are great to follow as well. Nick and Tom Karadza from Rock Star Real Estate. I’ll include a link to the video that I’m talking about in the show notes for this episode.

By the way, you can always get the show notes for this episode and every episode at TrueCondos.com/podcast. That’s where you’ll find where this podcast lives online, other than iTunes and Stitcher, of course. Hopefully you’re subscribed on iTunes or Stritcher- Stitcher, excuse me- on your devices. Anyways, getting a little bit off track there. Let’s get back on the track. The video basically … Well, I’ll include a link to it. You can check it out and see, but you’ll see how it inspired this one.

How does it feel to buy your first investment property? Well, I can tell you how it felt for me, and I can tell you how it feels for a lot of my clients, and is a very common sort of a thing, and that is when you buy your first investment property, and when you’re building up, when you’re thinking about it, when you’re planning for it, when you’re saving money for it, when you’re getting excited about it, you’re researching, you’re talking to your real estate agent, you’re talking to me. We’re having conversations back and forth. You’re getting questions answered. You’re preparing yourself to buy that investment property. It’s very exciting. It’s a very positive sort of experience. You’re on an emotional sort of upward trending high.

But as is often the case, when you actually sign that contract to purchase that pre-construction condo, in many cases- that’s what we’re talking about here, the pre-construction condo- that is, something interesting happens, and that is you often will sort of feel low. You’ll often feel down. You’ll feel, in many cases, or you’ll think that you are making a bad decision. Your brain sort of kicks into a self-protection mode, as is often the case with any major decision, and you start second-guessing yourself, and you start going through a range, a weird up and down sort of variety of emotions, which is in stark contrast to, as I said, as you’re preparing to do the thing, you’re very excited. Everything is going up, up, up. Then when you actually do it, everything starts to feel a little different, and you’re going through these ups and downs, and you’re saying, “What about this? What about that?” And these voices are coming in your head, and voices are coming out loud. People that you know, your family, your friends, they start throwing in their two cents. You start doing Google searches at all hours of the right for, you know, “Is the condo market going to crash?” You know, “Toronto condo bubble.” Whatever. Your brain starts to go to dark places, and your emotional state starts to go into dark places, which is very different from before you signed the contract.

Sort of the overall general sense after you sign that contract and do the deal is, a very common feeling with many people, myself included, when I was buying my first investment property, you feel like you’re getting ripped off. You feel like you overpaid. You feel like it’s too much. Your brain starts to look to rationalize this idea that it’s okay to escape, you should run away from that. As you start to feel these negative sort of emotions, your natural reaction is to protect yourself from those things by running away and canceling the purchase, and going the other way.

Again, this is not the case for everyone, but this is a very common sort of feeling that you have, is you’re feeling like you got ripped off, feeling like you overpaid. This is a very common thing. First of all, I just want to put that out there and say if you’re feeling that, if you have felt that, breathe easy. Relax. Rest. Understand that that is normal, that that is a completely normal way to feel after you’ve purchased your first investment property. It’s just sort of the normal process that our minds go through when we’re going through a major decision, to sort of self-protection sort of a thing. To ensure, and to sort of … It’s a double check, sort of triple check sort of system built into our minds to make sure that what we’re doing is the right thing, and that what we’re doing makes sense, and that what we’re doing is going to make things better for you, as opposed to make things worse for yourself.

That feeling like you overpaid is completely normal. Everybody, for the most part, feels like they overpaid when they buy a property. It doesn’t matter whether the market’s up, whether the market’s down, whether the market’s sideways. You always feel at the time that you should be getting a better deal. It’s kind of like … An analogy I find is like in sports. If you’re a sports fan, this will make sense to you. Right now we’re in the summertime, so it’s free agency season for a lot of sports. Basketball and hockey in particular. Free agent time, so contracts are up. A player becomes available, and they’re free to sign with any team. A very common expression in sports, and with this sort of thing, is that you overpay for a free agent. Free agents out there, they sign these massive contracts that are way higher than anybody ever expected. All the talking heads and the pundits come out there and they say, “Oh, this team overpaid for that player. Oh, that paid way too much. Oh, they’ll never make their money back from that. Oh, so-and-so player is not worth that kind of money. Oh, they’ll never get out from under that contract. This is the biggest contract in history.” Those kind of comments you see all the time.

Here’s the thing. That’s just the nature of free agency in sports. Everyone always overpays a free agent. That’s just how it goes. Free agents are always overpaid by definition, because it’s a supply and demand situation. There’s only limited supply of free agents in any given year, and obviously those top free agents are going to be in most demand. There’s only a couple of them, and in most sports, you’ve got 30 teams. Everybody wants a piece, so by definition, these free agents are always overpaid. It’s a natural thing. It always is that way.

The interesting part here, and what I’m getting at, is what happens next. The person’s overpaid in the moment, everyone says, and everyone sort of supposedly agrees on that. Of course, except the team that signed them would never say that. The team that signed them obviously is going through a lot of those emotions that we talked about in the beginning. They’re sort of wondering, “Are they overpaid? Did we do the right thing?” What happens next? Well, time goes by. A season, two season, three seasons go by. The player performs. Usually they perform as good or better than they did previous to getting the contract. That’s usually the case.

Over the course of a few years, there comes a point where the person, the contract goes from being … The player goes from being overpaid to being underpaid, to being cheap. The player goes from being considered, you know, untradeable, or sort of an asset that is just an albatross kind of a thing. “How can we ever get out from under this contract?” To, “This player is a trade asset, because they’re so cheap in comparison to the contracts that are being signed today.” Huge inflation, obviously, in sports contracts, and just like in real estate. Players’ salaries have gone up tremendously, and they continue to go up, and up, and up every year. The overplayed player of 2012 is a trade asset, is an unbelievably valuable piece to trade in 2017, because five years later, they are making half the salary of what free agents are signing for today, but they’re still performing at 75%, 80% of the performance level.

A similar thing occurs in … And I should say, and all those talking heads who said the person was overpaid, they come back a few years later, and they don’t say, “Oh, I was wrong.” They say, “Oh, you know, this person is underpaid. They should trade this asset for this and that, and they should get this and that.” Or, “They should never trade this guy, because he is underpaid.” That’s just the nature of the beast, is these talking heads never go back and issue corrections of their opinions of the past. A similar thing happens in real estate. The property that you think you’re overpaying for today, and that people are telling you you’re overpaying for today, five or 10 years down the road, one thing is guaranteed, is that you always are going to look back and say, “Wow. That was such a deal compared to what properties are going for today. Wow. I can’t believe the price that I got that property for at the time. I can’t believe I thought at the time that I was paying too much.”

The number one regret is, “I wish I had bought more. I wish I had bought more.” That is the number one regret that is consistent with all of my clients over the last 10 years, is looking back, they all say the same thing. That is, “I wish I had bought more.” And the number one regret of anybody who signed a contract to buy a condo but they decided to cancel that purchase during their 10-day cooling off period, the number one regret is, “I wish I hadn’t have bailed. I wish I had kept that condo.” Every single person. Every single person over my 10-year real estate career who signed for a condo, who decided to cancel that condo during the 10-day period, every single person has regretted that decision. Every single person financially would have done amazing if they had have followed through with those purchases, and just stuck to what they already signed and agreed to. Again, that’s a very small percentage of people who actually sign a contract for a condo, and cancel and bail out during the 10-day period, but that is within everyone’s right to do that in Ontario. That’s the number one regret, there.

How do we sort of get over this? What do we do with these feelings as condo investors, particularly as first-time condo investors? How do we get over this hump? Well, it goes back to something called the four Cs formula. The four Cs formula, I talked about this in a podcast last year I believe. I went over this in more detail, so I won’t go over it in big detail now. I’ll include the link to that podcast in the show notes as well, about the four Cs and how they work. But essentially, they are something that I did not create, but a guy by the name of Dan Sullivan created this framework of thinking. It’s a way to think through any major decision, any major action that you have to take in your life or in your business. You can apply it to many different things, but it basically says, “How do you sort of overcome these challenges of doing something new, something you haven’t done before?” Well, you go through the four Cs.

The first C is commitment. Commitment is the idea that you make a commitment in your mind that you’re going to do something. You decide you’re going to invest in a condo. “I’m going to do this,” is what you tell yourself. The second thing is courage. The second C is courage. Courage means, when you’re doing something new, it always needs courage to do that thing. There is fear involved with anything new, and so you need courage to act in the face of fear. You’re going to require that courage, and you’ll do something, and that is courageous to do something you haven’t done before. The third C is capability. Capability means that once you’ve done that thing that you haven’t done before, you acquire a new capability. You’re now able to do something, and proven that you’re able to do something that you haven’t done before. You have a new skillset. You have a new challenge, a new thing that you’ve overcome. You’re doing something you haven’t done before. You’re buying a condo. You’re buying an investment property, that you’ve never done that before, so you figure out how to do that, and you actually have done it. You have a new capability, and now you’re on your way, you’re on the first step of becoming an expert in that thing. You’ve started to develop that new skillset capability.

The fourth C is, what happens when you have a new capability? You get confidence. The fourth C is confidence. You’ve done it. It’s something that you have proven to yourself it can be done, and it was done, and you did it. You get confident, and so you’ve purchased that investment property, you’ve signed the paperwork, you’ve given the checks. They’ve cashed your check. You’ve done it. There’s tremendous confidence that naturally is a natural byproduct of having that courage to act and do something new, to get that new capability, and from that comes new confidence, and it’s a loop then. It goes back to the first C of commitment. When you have that new confidence, now you can go back and make new commitments to do more new things, and to take more new actions in your life or in your business. Commitment requires courage to act, and that creates a new capability, which is a byproduct of that new capability is confidence.

That is sort of the framework of how I think about it, and how I find it’s useful to help people understand how to get past the sort of feelings, those natural feelings in your mind, your thoughts in your mind when you’re purchasing your first investment property. You’re going to have those doubts, and you’re going to have those negative thoughts and feelings. Totally natural, but, “How do you overcome them?” Is the real question, and that tool there is a way to do that. Another way to do it is, again, just to simply say to yourself, “You know what? What I’m feeling right now is totally normal. These thoughts in my head? Totally normal. Everyone goes through them. It’s a normal process of the human brain. But I’m going to stick to my original commitment that I made to do this thing. I know that it’s the right decision. I’m going to move forward with it. It’s going to require courage, but I’m willing to do it, and when I do that, I’ll have a new capability which will give me a newfound confidence moving forward to do this again, but not just this, to do other things new as well.” Whatever that might be for you.

There you go. Now, here’s maybe the takeaway for, as I said at the beginning, people who aren’t first-time condo investors, but it’s also for everybody, whether you’re first-time or not. This is the biggest secret I find with regards to this whole thing of how it feels when you’re buying a first investment property, or when you’re buying an investment property. The biggest secret- drum roll please- you ready for it? Drum roll. The biggest secret is that that feeling that you get never goes away. It never goes away. That feeling of uncertainty, those feelings of doubt, “Am I doing the right thing? Am I crazy? Am I overpaying? What am I thinking? Is the condo market going to crash? I’m going to lose my shirt.” That feeling never goes away. Again, I’ve purchased many properties over the years. Houses, condos, pre-construction resale, in Canada, the US. Many properties I’ve purchased, and I can tell you, and I can tell you from my other clients as well who have purchased many properties, that feeling never goes away. It’s always going to be there. It’s a natural sort of part of our human existence and our brain. It doesn’t go away.

The only thing that changes over time is how you deal with those feelings, and how you respond to those feelings and thoughts when they come. That’s where the four Cs again comes in, when you understand that sort of framework. You’ve been through this before. Your brain will adjust, and you learn to deal with those feelings better, and because you have more confidence. You have more confidence, and with confidence comes more trust in yourself. When you trust yourself and you trust your decision making process, then you’re able to overcome that hump much, much sooner. I know with many first-time buyers I’ve dealt with over the years, first-time investors, they’re agonizing in some cases. It just feels like agony and pain, which is funny, but it’s true. It’s just money. It’s just a contract, but it feels … It can feel very painful and agonizing while you’re in the moment of actually having to do it, and that’s the courage-fear thing going on, where, “Are you going to go for the fear side, or are you going to take the courage side and actually step forward and do it?”

That’s that crux in the road, where you gotta make a decision. Which side of the road are you going to go down? Are you going to listen to the negative voices in your head, or are you going to trust yourself and have confidence in your thought process, in your ability, and your thinking that led you to this point in the first place? When you hit that, you always are going to hit that crux in the road with every property that you purchase. As you do it more and more, you learn to trust yourself more and more. You have more and more confidence in yourself, and that sort of gut feeling or whatever you want to call it in your gut will help you get past that hump, and get through that fork in the road, and take the courage route, and not take the fear route, faster and faster and faster.

Whether it’s your first time, and as I said, people agonizing over it for days and days. So often with first-time investors, they wait until the ninth or the 10th day of their 10-day cooling off period. It’s very interesting how the psychology works in our brains. They agonize and agonize, and they feel this pain, pain, pain, sort of mental sensation, mental feeling, for those nine or 10 days, and then at the very last minute they bail out and they cancel, or in some cases, they go ahead with it, and they do take the courage road and not the fear road, so to speak. But again, as you do it again and again, as you have more confidence, and as your capability grows, then it becomes faster and faster. Maybe you agonize over it for an hour instead of a week, after you’ve done it three or four times, and each time it just sort of gets easier and easier.

The final reminder here is that, again, if this was easy, everyone would be doing it. If real estate investing was easy, if making money through buying investment properties was easy, if busting out your checkbook and writing $50, $100, $200,000 checks for properties, if that was easy, then everyone would do it, okay? But everyone doesn’t do it. Statistically, only about 5% of the population is ever going to own an investment property. If you have done that, or if you’re on the path to doing that, just take a moment and think about that and acknowledge that. You are doing something that is not easy. Congratulate yourself. Give yourself a pat on the back, and just stay on that path, you know? My encouragement to you is just keep going on that path, and keep doing it. It is the right thing to do. It is not the easy thing to do, but it is the right thing to do, is the thing that’s going to grow your wealth and make you …

Your future self is going to be so much better off, and your future self is going to thank you so much for taking the courage path, not taking the fear path, trusting yourself, having confidence in yourself, and moving forward with your decision to invest in property, whether it’s your first property, or whether it’s your 20th property. Your future self is going to thank you, and it’s not easy. It’s never easy. It always takes courage to do it, but it is so worth it, and it is so amazing, the effects that it can have on your life, and the amazing future that is ahead of you, if you do have the strength to take that courageous step and courageous action to investing.

Okay. This podcast hopefully was useful to you. It’s gone on a little bit longer than I thought it was going to, but I don’t know. I enjoyed this. I hope that this concept was useful to you, and I hope that whether you’re listening to this now or in the future, or you want to come back to this episode, I hope that it continues to be an encouragement to you as you’re on your investing journey. Again, whether it’s your first or your 20th property, it’s amazing. Yeah, so congrats to you for being a real estate investor. It’s not easy. Very few people ever go down the road that you’re on, but very few people ever reap the rewards and have the lifestyle and the benefits that you will experience because you’re going down this road as well.

That’s it. Until next time, happy investing, and I hope you have a great week. We’ll talk to you soon.

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