Money matters can make the best of us feel anxious from time to time. We’ve all seen what happens when stocks crash. Despite the fact that the company could very well recover, many panicked investors, rather than risk losing any more of their money than they already have, sell and jump ship instead of holding on to hope.
As investors, this anxiety around our money tends to turn us into knee-jerk reactors to a great many things.
Psychologically speaking, it actually feels worse for us to lose money than it does to earn it. We would much rather act to avoid the perceived embarrassment of financial failure than to take risks for financial gain.
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So there’s no surprise that there are some things that just make real estate investors panic. There are things we don’t like, things that deeply trouble us, and things that, if we’re not careful, can lead us to make emotional decisions out of anxiety and fear.
These are three things that, as a turnkey real estate investor, you may be tempted to panic about—but you don’t have to. And we’ll tell you why.
3 Nerve-wracking Situations Turnkey Investors Don’t Have to Fear
1) A market downturn.
We’ve been living in an “up” market for so long now that it’s easy to forget what a “down” feels like. For many, the recession is a distant memory, even if you were involved in real estate at the time. For Memphis Invest, we actually started our business during a “down” market.
During these periods, it can be difficult to scale and grow. You can’t always rely on help from your bank. It’s a season of uncertainty for sure, but a market downturn is no reason to panic. Why?
Because you are, by nature, a buy-and-hold investor. Remember, the real estate market is always moving in a cycle. The pendulum will swing back up in due time. The question of whether or not you will weather a "down" all depends on whether or not you have the right framework in place to handle it all.
You have to be level-headed. You’ll likely have that knee-jerk impulse to get out while the getting is good. Instead, though, have a strategy ahead of time. Build up those resources to see you through a downturn. Know what your absolute baselines are for cash flow and what your exit strategies are.
You’ll likely have to adjust your strategy and you won’t see the same growth and profit you do in an "up" market: but that doesn’t mean it’s all a wash. Smart investors can still thrive in lows and, at the very least, they can persevere and make it through to the other side.
2) An unexpected tenant change.
Investing in real estate often comes with the unexpected. Usually, this comes in the form of your tenants. There will be unanticipated situations that can cause an owner plenty of stress and anxiety. Bad tenants can drastically impact your cash flow, whether by property damages, stopping their rent payments, or running up legal costs.
You may also have to contend with bad luck, like a string of vacancies.
Why shouldn’t a turnkey real estate investor worry? If you have a skilled, trusted turnkey provider in your corner, they’ll deal with tenants. You don’t have to. Bad tenant situations can be costly, it’s true. But if you have the right people in the right places and performed your due diligence when selecting a turnkey provider to work with, you also investigated their property management company.
That means that you should have peace of mind. A bad tenant won’t be around long, your property will be set right, and your team has been on top of finding a new tenant long before the lease was up.
While tenant issues are among the most stressful you can contend with as a real estate investor, having the right team in place to handle it is the assurance you need to keep calm and collected.
3) When risk becomes reality.
In real estate investment, we all take on some level of risk. No investment comes without it, we just hope that it stays minimized through our due diligence and strategic efforts. If we’re lucky, our risk will never become a reality. Unfortunately, that’s just not really how investing works most of the time. Because risk is inevitable, something will inevitably go wrong.
While, if we’re diligent, we’re not likely to lose everything, we will likely lose something along the way. Whether it’s an unexpected property issue, a bad tenant, or a natural disaster, sometimes things just go wrong.
Here’s the key to not panicking when risk becomes reality: have the plan and resources in place to absorb risk.
Every real estate investor must be prepared to handle risk if they want to protect their cash flow and, ultimately, their net worth. That means having a financial safety net, a network of contacts at the ready, and a solid, experienced team who can handle anything risk throws at them. It means having a diversified portfolio that can carry you through a tough spot.
If you have these pieces in place, you don’t have to worry that disaster will ruin you—it will merely be a bump in the road and an opportunity to gain experience.
Ultimately, the common issues that can push an investor's panic buttons need not push yours. If you anticipate issues before they happen and guard against them with careful planning, risk management, and a trustworthy team, you have nothing to fear.
As a turnkey real estate investor, you can pursue financial freedom with peace of mind.
Do you know what makes a good turnkey company? Find out on this episode of the Experience Matters podcast: