Real estate fears: understand them but don’t be afraid to act

Do FOMO or rising interest rates keep you up at night? Here’s how you can overcome your property phobias.

It’s a time of fear, and not just for Halloween, as house prices surge.

I squeal like a baby if a huntsman spider gets within 50m of me, but have somehow remained calm as brown and tiger snakes slithered within centimetres.

And a tough mate of mine dry retches at just the thought of seeing or hearing about paddle pop sticks.

Fear does funny things to our minds, and our money.

Lists of people’s biggest fears typically contain dentists, the dark, snakes, spiders, mice, heights, enclosed spaces, thunder, public speaking and flying. If you can handle all of those without even a slight increase in heart rate, you’re more machine than human.

You’ll rarely find financial fears on these lists, yet money angst is one of the biggest barriers to people living a full life. Understanding how they make you feel, and the best way to react, are keys to conquering them.

So with Halloween just a few days away, it’s time to examine – and fight – some common real estate fears.

BIG DEBTS

Some people are so petrified by the thought of large debts they won’t go near real estate ownership or investment.

This fear also confronts many first-home buyers as property prices continue to surge.

But median house prices, and the debts that come with them, have always been climbing. Median house prices in most capitals today are four or five times higher than they were just over 20 years ago.

If you can manage the repayments at the start, buying real estate is one of the best long-term investments you can make.

Saltwater crocodile and Halloween pumpkin – now that’s scary. Picture: Julian Smith

FOMO

Fear of missing out (FOMO) is causing many buyers to rush into real estate. This is a key reason we’re seeing such strong price growth.

Fight property FOMO by researching an area comprehensively, understanding why its price are rising and where they are heading, having a long-term plan and setting spending limits.

FOMO also causes people to take dangerous shortcuts, with new ME Bank research finding 55 per cent of buyers spend less than an hour checking their property.

This had resulted in almost two-thirds of people discovering problems after moving in, ME found. The bank recommends buyers get a professional building inspection before buying.

RISING INTEREST RATES

You might be able to handle record-low interest rates of 2-3 per cent, but worry what will happen if they return to historical averages above 6 per cent – let alone those 15 per cent nightmare rates from decades ago.

Don’t stress – there’s no chance our economy can allow rates to climb that high quickly because people borrow so much more than they used to.

And our own Reserve Bank doesn’t expect to lift its official interest rate until at least 2024.

BAD TENANTS

This is a fear of potential investors. Tenants from hell might seem like the devil reincarnated, but the good news is you don’t have to dance with them.

There are ways to combat these concerns. First, remember property investment is a business decision, so don’t get emotionally attached to the home or its occupants.

Secondly, take out landlord insurance that will cover malicious damage, tenants skipping town and other rental nasties. The insurance premiums are tax deductible.

And thirdly, unless you want to deal with all tenant issues yourself, hire a professional property manager, whose fees are tax deductible too.