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The Psychology of Real Estate Investment

Despite the hammering dealt by recessionary trends, real estate has continued to be a preferred investment zone for some investors. Buying preferences and home ownerships dynamics have witnessed many changes in the recent past. However, some individuals will always have a penchant for owning more than they need. Here, we would like to concentrate our discussion about such investors who aren’t affected much by market sentiments. These are not aspirational buyers. Their property-purchasing decisions are not governed by the usual consumer sentiments. They are often ready to pay higher-than-expected price.

As a real estate professional, this buying demographic should be of key importance to you. Why? Simply because it presents an always-fertile and somewhat market-immune buying segment that isn’t likely to dry-up anytime soon. For such investors, the Starbucks-type of property always looks like a sensible investment. Here, the definition of “good deal” often means an enviable reputation—unquestioned “premiumness” of the property. As a real estate agent, you should understand these unique, buying tendencies that have been explained below:

The Premium World of Real Estate is a Bit Different

Higher pricing gives some investors a sense of assurance that a first-class property will stick to its reputation and command a higher-than-usual price in the near future too. This might not always be the case, but such is the mindset among some investors that there is no room for pessimism. These can be referred to as high net-worth investors who abstain from buying cheap or lower-priced properties. Anything that even remotely smells discounted or base-pricing is bound to make them suspicious. Even trying to convince them otherwise seldom works. For such buyers, paying more induces a sense of security about their purchase decision. Their ROI aspirations are strong but not hurried. They are quite likely to patiently wait for a sale that is worthy of a celebration.

The Not-so-Sensible Buying Cycle Apprehensions

This is something that often perplexes us—every time the real estate market witnesses a buying wave, no matter how small, some investors rush to buy. They are ready to purchase across widespread locations and regional demographics. Sometimes, the buying cycle is rather short-lived and overestimated. Despite gaining clarity about the over-hyped market situation, these buyers don’t refrain from spending more.

Their psyche is perhaps driven by the thought that every buying phase should be accounted for with a decent purchase. They wait for similar phases to unload their purchases. The smallest hints about real estate prices skyrocketing can set alarm bells ringing for such investors. This is the perfect example of a psychological trigger—the scarcity of investment options is just in their minds.

Real Estate isn’t Immune to the Branding Effect

For a moment, consider real estate as just another retail segment and serious investors as common consumers. Consumers are driven to branded stores despite knowing that the product is expensive and not-so-great. This example illustrates a simple buying psychology—reputations affect buying behavior. Paying more might translate into lower returns, but some buyers are ready as long as the property has a unique reputation.

The Perennial Dilemma: Real Estate and Quality

We might be getting a bit poetic here, but this is important—quality is a commonly-discussed aspect of buying decisions. When buying premium apparel, we seek the assurance of sturdy and comfortable material that won’t lose its charm. However, the definition of quality is very different for real estate. High-quality properties might boast of historical importance, being the abode of many celebrities, an enviable location, or renovation work of utmost grandeur.

What does this have to do with you? We forgot to mention that quality in real estate is also associated with the customer service, interaction, and quality of property management. Some investors are heavily influenced by ego-polishing interactions. They might not seek justification for the high price as long as they feel that the property in question is “premium”.

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