The single biggest mistake that overseas property investors make and how to avoid it.

Overseas Property Investment without the emotions.

by Chris Mansfield · 0 comments

You are not rational, nor am I, no humans are.

In my first post we covered how to sift through marketing.

This is one thing you should know before even setting
eyes on marketing literature.

We all act based on emotion all the time, it’s just
how are brains our wired.

There are many examples of this but one of the most
persuasive is the case of Elliot.

In the early 80′s a psychologist called Antonio Damasio
began studying a patient named Elliot who, because of a
brain tumor, had no emotions. He was quite literally as
logical as Mr Spock himself, a perfectly rational human
being.

You’d think this would make Elliot a master of decision
making, because he can elucidate perfectly and make the
most rational decisions.

Instead, Elliot was pathologically indecisive. Simple
decisions like what to eat for lunch would take hours.

Emotions guide us to pick between choices. We can
come up with many reasons as to why we should or
shouldn’t pick a particular course of action but those
reasons detached of emotion do not allow us to make a
decision.

In fact, scientists have discovered that we make our
decisions based on emotions FIRST and then post
rationalise our decision making with reasons.

So, relating this to overseas property investment,
when people see pictures of a lovely tropical holiday
home it triggers a powerful emotion.

That powerful emotion can often lead them into the
first stages of picturing their dream tropical
property and taking ownership of it.

So this is how people who want a holiday home can
easily convince themselves that their dream property
abroad will also work as an investment.

When it doesn’t, it becomes a burden to them
financially or unprofitable due to the fact that they
just end up subsidising their friends and families
holidays.

When recently vetting an investment product in a
tropical location, I saw some marketing for this
product which I particularly disliked.

It was marketing every piece of land as ‘the best
location, best returns’.

When confronted about the fluffy, nonsense marketing,
they said it was, and I quote, “That sells the dream,
it’s a thing we need to do.”

So we know that marketeers like to sell the dream,
sometimes in preference to the truth.

The power of loss.

If I offer you a bet, on the flip of a coin, where you
have to pay me a pound if it’s heads. But I have to
pay you £1.25 if it lands on tails would that be enough
for you to take the bet on?

Most of you would say no, because you are focussed on
losing the £1.

Surveys have proved that most people would only
take the bet if you upped the gamble to £1.75-£2.00.

As betting goes, there’s a 50:50 chance that the pay off
is better for you and for little risk (only £1).

Even at £1.25 it’s a gamble worth taking.

This reveals the innate human quirk we all possess that
the pain of loss is greater than the pleasure of gain.

This is why people will start acting irrationally and
taking all kinds of risks they would never normally take
to avoid loss.

A step that marketeers will often take is to encourage
prospects to take ownership of their products. This is
called ‘The Endowment effect’

When somebody has been endowed, with an item, to then
give it up would mean suffering a loss.

All of my clients who have gone on inspection trips
arranged by my company have gone ahead with the
investment afterwards.

I believe that’s because they take ownership of their
investments while they’re away, it confirms that the
product is suitable for them and they experience no
pressure whatsoever because if the job is done properly
there’s no need.

All my products are sold in a transparent manner to
people who can afford them, but for companies that
don’t share my due diligence and transparency it could
will be all about the inspection trip!

That’s why you will always be able to get inspection
trips for heavily subsidised prices where property
investment overseas is involved.

Developers know this works on emotional level!

Building a sensible guide

So now that we are a bit more aware of ourselves as
decision makers, what can we do to exercise logic and
rationale?

The answer is simple, be 100% clear about your
objectives from the start and then do not stray from
them.

If we do stray from them, then ask- Am I acting
irrationally for fear of risk aversion?

When people approach me who are interested in one of
my vetted products, and I ask them their objectives,
more often than not they stumble and can’t list them
straight off.

With correct decision making, you can use overseas
property investments to achieve financial freedom,
turn around a failing pension (SIPP route) or buy a
holiday home.

These are all very different objectives but
sometimes they can dovetail.

I’ve created a simple but powerful series of
questions that you can ask yourself to clarify your
objectives. You can find it by clicking here.

I’d like to thank Derek Halpern of Social Triggers
where he covers these topics by interviewing
Jonah Lehrer here.

I’d fully recommend that you listen to the
podcast, it will change the way you think about
buying for good.

You don’t have to fill out the questions on my
form, you could just write them out on a piece of
paper or copy them into a word document.

Whatever you do, make sure you write them down
and keep them in sight.

For everyone who decides to fill out
this online form or wants a bit more guidance, I
will reply to each and every person, giving them
my experience and thoughts as to whether or not their
objectives are achievable.

Just remember this, if it can’t be achieved, then
don’t do it! And try NEVER to act out of fear of
loss.

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