Linz’s Musings – The herd mentality…

I was talking, earlier this week, about changing your mentality and treating your property Investment as a business, rather than just an investor…

While this can be a massive change for some, it is just a small step for others, particularly when looking at overseas markets, this generally is a different class of investor.

There is however, another mental change to make, and this can be all the more harder to shake…

And that is to avoid the ‘herd mentality”.

So, what’s that, I hear you ask.

Well, the past 12 months have been classic examples of it…

Herd Mentality, by definition from the Oxford Dictionary, is “the tendency for people’s behaviour or beliefs to conform to those of the group to which they belong.”

That is, when most advice (media, property groups, peers, your uber driver etc) suggest it is a good time to buy, investors buy… or vice versa.

As an example, lets take this time 12 months ago… Pandemic had hit, HARD, and most of the evolving markets throughout the world were caught up in FEAR.

Australia/New Zealand/U.S. was set for recession (at best) or depression (likely) and ask anyone if it was a good time to buy property, you would have been told “Are you Crazy??!!”

When in fact, that was a perfect time to buy…

Now, markets have rebounded (strongly) and in the U.S. alone, are up over 10% year on year.

So, ask ‘Alex from Facebook’ now, and the consensus will be “What, haven’t you bought yet??  Why not?!  Hurry or you will miss the wave…”

When really, now is the time to be cautious.

These past 4 – 6 weeks, I have not got many properties under contract, not because of a shortage of options (so-called ‘deals’ are being sent to be every-which-way) but because many are priced too high.

And while this may seem to sound easy, it is in fact difficult.

Who has been to an auction, and had a price in mind they had determined to pay for a property, but got caught up in the heat of the moment and paid too much in the end?

Yes, most of us have…

To go against the herd, or the flow is difficult.

This is such an important point, I will go into more detail on this in the coming weeks, keep an eye out!

Even as the famous Warren Buffet said:

“We simply need to be fearful when others are greedy and to be greedy only when others are fearful.”

If everyone is doing it, maybe it is a good time to pause and reflect…

If the deal is great, then grab it… but is it really?  Careful not to get caught up in the herd.