The 5 Mindsets of Real Estate Investors

Last Updated on by Jay Castillo | Filed under: - 30 Comments

I was inspired to write this after inspecting several properties. Although they were not foreclosed, they surely looked like the typical foreclosed property that badly needed repairs. I have to admit, they were so damn ugly. Anyway. the owner mentioned something like this:


Iba talaga pag investor ang tumitingin ng property, nakikita yung potential. Pag hindi investor, maririnig mo “Ang pangit naman…” (Investors really have a different perspective, they see a property’s potential. For non-investors, you will only hear them say… “this property is so ugly!”)

I guess this is very similar to how people see a glass of water, depending on their mindset.

half-empty-or-half-full-mindset

A typical scenario

A foreclosed property looks ugly because it has not been maintained for quite a long time. It obviously needs repairs. It’s dirty and it stinks. It’s an ugly house that does not belong to the neighborhood (which can actually be good if the neighborhood is “nice”.). The surrounding houses look okay, and they are all very similar in terms of house design and structure.

What follows next depends on what real estate investor mindset you have, and I have listed 5 of the most common below.

Real Estate Investor Mindset 1…

“This foreclosed house stinks, this is such an ugly house and I will not buy it. Real estate investing sucks!”

He then goes home, watches TV, etc, and then goes to sleep, ready to get back to the rat race the next day.


Real Estate Investor Mindset 2…

“This foreclosed house stinks, this is such an ugly house, this would take lots of money and time to clean-up and repair. Why bother?! Real estate investing sucks!”

He then goes home, watches TV, etc, and then goes to sleep, ready to get back to the rat race the next day.

Real Estate Investor Mindset 3…

“This foreclosed house stinks, this is such an ugly house, this could take lots of money and time to repair. What the heck, I’ll get an estimate for repairs.”

After getting one estimate, he says “What the… this is so expensive!”. This will never work, real estate investing sucks”

He then goes home, watches TV, etc, and then goes to sleep, ready to get back to the rat race the next day.


Real Estate Investor Mindset 4…

“Hey, this foreclosed house stinks, this house is so ugly, but I can see an opportunity here! Sure, this needs time and money to repair but let me check how much would be the After Repair Value (ARV) of this property”

He then gets comparables or comps from the other houses in the area and proceeds…

“I’ll check if the cost for repairs will have reasonable returns, especially since this looks like a nice neighborhood, I might get a high enough ARV which would justify the cost for repair. Maybe I can use the repair costs to get a discount from the bank.”

After analyzing the numbers using repair estimates, comparables, projected monthly cashflow, and the asking price of the bank, etc, he realizes that the numbers don’t look promising and says

“This will not work as is but let me see… how can I make this work?!”

He also knows that

“If the numbers don’t work,  it’s okay… I’ll find another one soon…”

He continues searching for a way to make the numbers work either for this property or the next… or the next…  until he eventually finds what he is looking for! The cycle continues…

Real Estate Investor Mindset 5…

“Hey, this foreclosed property looks good on paper, but I don’t have time to do my due diligence…”

He then proceeds and bids on the property without doing proper due diligence, and wins. When he inspects the property after the auction, he finds out it has a lot of issues… and realizes he should not have bought the property.

Aside from newbies, even seasoned real estate investors experience this once in awhile, buying a property just for the sake of buying one, or it’s just plain carelessness and stupidity… face palm!


How about you?

Which of the real estate investor mindsets above do you have right now?

If you ask me, I have had all of the above mindsets at one point or another, and I still do at times. I just wish that Mindset #4 will always be the mindset that prevails. 😉

To our financial freedom!

Jay Castillo
Real Estate Investor
Real Estate Broker License #: 3194
Twitter: http://twitter.com/jay_castillo
Facebook: Foreclosure Philippines fan page

Text by Jay Castillo. Copyright © 2015 All rights reserved.

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