FoMO stands for “Fear Of Missing Out”, and is defined by Wikipedia as: “A pervasive apprehension that others might be having rewarding experiences from which one is absent”. This social anxiety is characterized by “a desire to stay continually connected with what others are doing”. FoMO is also defined as a fear of regret, which may lead to a compulsive concern that one might miss an opportunity for social interaction, a novel experience, profitable investment, or other satisfying events. In other words, FoMO perpetuates the fear of having made the wrong decision on how to spend time, as “you can imagine how things could be different”.
Are you the type of person who is getting frustrated because you cannot find a deal anywhere no matter how hard you look?
Do you find yourself writing offers that are quickly rejected?
Have you wondered why prices are so high right now, and does that alone make you want to buy now before they get any higher?
In this episode, I want to talk about the emotions of buying, the philosophy of fear of missing out, and how that affects us as investors.
There was a time that I used to write hundreds of offers per week (back when I was flipping houses).
All of the offers were basically the same; all I really did was change the property specific information and the price, and fire them off to the sellers
Although I did get a decent amount of accepted offers and bought a bunch of property, the quality of the deals was certainly not exceptional. I was getting offers accepted, but not really doing a good job in adding value to my portfolio. I was basically creating work for myself because I identified being “busy” with being “successful.”
The busier I became, the less important the details were, and the less profitable the deals ultimately were.
As my profitability decreased and my workload increased, I could start to see the writing on the wall. I knew that I had the ability to create great deals, yet I just was impatient and did not want to wait for them to happen, or invest the time in making them happen.
Fear of missing out is the phenomenon that involves people taking emotional action based totally on fear of loss or missing out. This is a very common affliction for real estate investors, especially in robust markets where there is little inventory available to choose from.
Back when I was a house flipper, I felt that having many jobs going at once and attending lots of closings was a sign of success. The market was screaming ahead in a bullish way, and I wanted to be sure I capitalized on that rush. In short, I could have been far more profitable if I had focused more on the quality of each opportunity instead of the quantity of transactions.
When I attend investor functions and observe what is going on around me, I almost always see someone being pitched a property to buy. I hear hundreds of stories where buyers grossly overpaid in markets like these because they feel if they don’t act now, they will miss out on an opportunity.
Buy Smart / Sell Smart and By The Numbers:
Take the time to do ALL the math, and be sure to enter and factor all of the expenses when making a buy decision. Don’t feel rushed or allow anyone to pressure you into making a buy / sell decision.
Wholesalers and Realtors:
These two types can fill up your inbox faster than you ever imagined. They now text, tweet, and post “deals” all over Facebook for consideration. Many wholesalers and Realtors will call repeatedly until you answer (a big pet peeve of mine). Nothing can waste away the hours of your day faster than people pitching you deals outside of your buying criteria. This is one reason it is important to establish buying criteria and stick to it; otherwise, your time will no longer be your own. These situations tend to push many buyers into making purchase decisions they otherwise would not have made had it not been for the fear of missing out on an opportunity in a quiet marketplace.
You can’t fully analyze EVERY opportunity that comes your way; there simply are enough hours in the day. This is where applying analysis shortcuts can be of huge benefit. I like to use a hurdle rate of 1.5% as a ruler to see where a property fits in my purchase criteria from a rent-to-price ratio.
Social Media Distraction:
Facebook, Twitter, LinkedIn, SnapChat and many other social media platforms have stolen the focus of Americans. We are all glued to our mobile devices during every waking minute it seems. I suffer from this myself; I can waste countless hours scrolling on Facebook or watching YouTube videos. It is that urge that comes from FOMO that keeps us engaged on social media platforms, and for many, locked in the financial shackles of life.
When dealing with people, try to organize your time to avoid unplanned time wasters from getting in your way and disrupting your focus. It is ok to let that phone ring, ding or chime. I promise you the person on the other end can wait.
Never buy based on speculation; invest in what you understand. Don’t let fear of missing out on a windfall profit based on someone else’s opinion impact your judgment.
Require anyone selling something to you to prove their claims. If they “project” a certain result or performance from an investment, make them prove that projection with historical fact.
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