The study of human nature can be quite interesting – and in some cases downright entertaining! I mean, who doesn’t enjoy a bit of “people watching” now and again? In fact, some individuals make a nice living at it (e.g. criminal profilers).
So what does this have to do with property investing? Plenty. At its core, the real estate market is driven by human nature. Sentiments such as fear and greed, among others, are behind various movements in the financial markets – including real estate investing.
When you improve your understanding of what makes people “tick” – what motivates them – you improve your capacity as a property investor.
Consider the human tendency to desire “more” of something. Often, we strive for that “bigger and better” car, job, home…whatever it might be. This fact, in and of itself is not necessarily a bad thing – it just “is”. It’s this tendency that often contributes to growth in a marketplace, so don’t discount it when you’re doing your “due diligence”.
Mo’ Money Means Mo’ Money
Income growth is a strong market driver. When studying the macro and micro drivers of a marketplace, take a close look at the capacity for income growth in the core industries that individuals are employed in.
This driver will, of course, go hand in hand with other factors, however when there is the potential for income growth, the human penchant for “more” can lead these individuals to buy more, simply because they can afford it.
As the population grows along with incomes in an area, prices will rise as affordability improves, leading to more sales and increased capital growth.
While lifestyle factors are important, equally important is the ability for individuals to affordably live in the suburb of their choosing. Happy tenants means…well…tenants – and higher yields!
Where The Rubber Meets The Road
Not only can an understanding of human nature help you spot a great property investment opportunity in the market, it can help you during negotiations – and who wouldn’t like some help during negotiations?
Entering into a dialogue with the seller and/or his agent can be either intimidating or exhilarating, depending upon your particular personality, however it does get easier with time – and practice.
In fact, just like any worthwhile endeavour, the more you study and learn how to invest in property – and human nature – the better your investment property locating and negotiating skills will become!
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Sam Saggers is CEO of Positive Real Estate and Head of the buyers agency which annually negotiates $250 million-plus in property. Sam's advice is sought-after by thousands of investors including many on BRW’s Rich 200 list. Additionally Sam is a published author and has completed over 2000 property deals in the past 15 years plus helped mentor over 2200 Australian investors to real estate success!
Read more expert advice articles by Sam
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.
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