Starting a property investment portfolio is, without a doubt, one of the most significant financial commitments you can make – and in monetary terms, potentially even more significant than buying your own home. There’s no doubt that it’s a daunting leap: in fact, it’s so daunting that many prospective investors turn away even before buying a property, even though it may make logical and financial sense to do so.

Why is this? Why do some people make the leap, while others walk away – and is there anything you can do to make sure you’re one of the former?

Making the first step

Property investor and blogger Tracey Lunniss reckons that simple, plain old fear is the stumbling block for the vast majority of prospective investors.

“Many people don’t invest purely because they’re afraid of the ‘what ifs’,” says Lunniss. “Their finances may be sorted, they may have their deposits ready to go, and they may have looked at innumerable properties, but they just can’t make the jump. They’ve got a blockage, and they can go no further, because of fear.”

In order to tackle that, says Lunniss, prospective investors need to address as many sources of fear as possible, and remove them from the equation by planning for the worst-case scenarios.

“For example, you should put landlord insurance in place, to remove the fear that problems with tenants could lead to financial loss,” she explains. “Another big fear is that you may not be able to afford an extra mortgage, especially in the case of unexpected circumstances like losing your job. My response to that would be to ensure you buy in an area where you know you can sell the property if you have to, so that you’ve got a ‘get-out’ clause if you really can’t afford to continue. I’ve been buying investment properties since the early 90s, and I’ve sold them when I’ve needed to.”

Lunniss argues that, by addressing sources of uncertainty one by one, prospective investors can address their (often irrational) fears, and rationalise them. She also acknowledges, however, that the fear will never entirely go away – and sometimes you just have to square up to it.

“Every time my husband and I go to buy a property we still get worried about the ‘what ifs’ – we look at each other and worry about whether it’s the right choice. We’ve found that, if we’ve found a good property, it’s often better not to think about it too much, as otherwise we’ll talk ourselves out of it and miss out on a good deal,” she adds. “Once it’s got to a few months after we’ve bought the property, we invariably realise our fears were generally unfounded.”

Michael Yardney, director of Metropole Property Strategists and one of Australia’s leading commentators on the psychology of wealth creation, agrees that fear is a major factor preventing people from investing – but he argues that it goes much deeper than practical concerns about the downsides of investing.

“Much of what prevents people from investing – or derails them once they’ve bought one property – comes back to the patterns that have been programmed into us as children,” says Yardney. “Many Australians are told from a young age that owing money is bad, and that money is scarce – ‘money doesn’t grow on trees’, for example. Many of those messages have been reinforced during the GFC.”

Those messages, instilled from a young age, create an ongoing impact on how people view wealth in general – particularly the overall level of wealth with which they are comfortable holding (or ‘net worth’). Yardney has nicknamed this ‘the financial thermostat’.

“If your financial thermostat is ‘set’ at a low level, you will generally only be comfortable with a low level of net worth, regardless of how much you earn,” he comments. “Wealthy people’s thermostats are set much higher, and they are comfortable with a much higher level of net worth.”

Yardney’s reasoning is that, as property is ultimately an appreciating asset, if an investor’s thermostat is ‘set low’ they will much more rapidly become uncomfortable with the asset’s worth, and will reach a ceiling beyond which they are not willing to move. For many people, even the idea of generating net worth more than a few thousand dollars is too much, and as a result they sabotage their plans to invest, whether through making excuses or otherwise.

“While they consciously want to increase their wealth, their subconscious is holding them back,” adds Yardney. “It’s like driving a car with one foot on the accelerator and one on the brake.”

However, Yardney stresses that the ‘financial thermostat’ is just a manifestation of how you view the world, how you think and therefore how you act – and this can be changed. In effect, you can reset the thermostat to a higher level if you wish to.

“Recognising that you see the world in a certain way is the first step,” he continues. “It’s not a bad thing that you’ve seen the world in that particular way – after all, it’s an outcome of how your experiences have shaped your perceptions. But, once you take a step back and see what your beliefs are, you can see what’s holding you back – and you can replace any ‘disempowering’ beliefs with ‘empowering’ beliefs.”

Yardney suggests that the most efficient way to do that is to find people who have already done what you aspire to do – in effect, a mentor or mentors. He admits, though, that the issue is finding someone you can rely on – especially in the world of property. Finding other people that you can rely on can also help to minimise gaps in your knowledge or personality, and as such make you a more effective investor, he adds.

“The common perception is that risk is in the market: it’s not. The real risk is within yourself in terms of your knowledge and your experiences, and recognising where you might be lacking.”

Psychologist and author of The Extra One Per Cent: How Small Changes Make Exceptional People, Dr Rob Yeung, agrees that you can learn more from a 30 minute conversation with the right person than from a week’s research from books or online.

 “There’s good research that shows ideas are contagious,” explains Yeung, who specialises in coaching businesspeople and entrepreneurs. “Studies have proven, for example, that being around obese people make individuals more likely to be obese, and the same goes for smokers. Therefore, if you’re surrounded by successful entrepreneurs, there’s a good chance you’ll become ‘infected’ with good ideas.

Like Catherine Lezer and Michael Yardney, Yeung suggests that you should gravitate towards people who are already successful, arguing that while you may feel comfortable with a support group of aspiring investors, but if none of you know how to invest, it’s not necessarily useful. The right people can keep you grounded, too.

“It’s important to be around people that you can trust to be candid,” comments Yeung. “After all, family and friends aren’t necessarily the best people to tell you when you’re being stupid, and sometimes you need someone to point you in the right direction if you’re headed the wrong way. That doesn’t mean family and friends can’t support you – but sometimes you also need barebones honesty.”

Ultimately, property investing is a daunting thing: not only does it involve significant financial risk, it also invites the risk of social ridicule if things go wrong – or better than expected.

Even seasoned investors are intimidated from time to time: Yardney, who has been investing since the 1980s, admits that he still gets scared at certain proposals

 “People ask me, why I don’t go into the centre of Sydney and build high-rise blocks. It’s because that scares me!” says Yardney. “We all have our ceilings, and our comfort zones. For some, they reach that with the idea of investing; others reach it with their first property; others reach it at a higher level.

“The key is to see what your personal barriers are, what’s boxing you in, and how you can break through that. Yes, I’d probably feel uncomfortable moving outside my comfort zone, but in the end that’s the only way you’ll develop – and ultimately reach your financial goals.