Whether you're a first-timer or an experienced investor, it pays to ask yourself whether your own fears are getting in the way of your success.

The idea of buying your first investment property can instill a paralysing fear. It seems so much could go wrong! Indecision might be a far more appealing option. So you tell yourself, "I'll get around to it one day".

As a more experienced investor, you might be over that initial hurdle. But are you nervous about investing in commercial property or shares? "I don't know enough", you might convince yourself.

Fortunately, fear is a state of mind you can control, once you're aware it exists. So take a moment to ask yourself two very important questions: What do I fear about investing? And how justified are those fears? Here we examine some strategies for keeping common fears in check.

Tip number one

Only listen to people who know what they're talking about.

If you're easily influenced by other people's opinions, then be careful who you listen to. "There's a lot of pressure on people not to invest," says Peter Spann, property author and CEO of Freeman Fox financial services. "Their friends and parents are all concerned that they're going to make mistakes."

Your loved ones may genuinely want to protect you, but Spann suggests they may just be trying to rationalise their own inaction. "Everybody knows that they should be investing. But they may not know where to, or how to start," he says.

Tip number two

Don't feed the fear.

The media has a habit of being very sensationalist when it comes to the property market. "In my seminars I often used to put up two very strong headlines," Spann says. "One used to be something like 'Property market set to boom' and the other was 'Property market in the doldrums'. And I'd say, 'what timeframe do you think there was between those two headlines?' And people would say, 'a few months? A couple of years?' Well, they were in the actual same newspaper.

"People are very susceptible to (the media) and they've just got to relax. Generally most of the press isn't irresponsible, they're just not well informed," he says. Spann doesn't read the general press or watch the news. He only reads the Australian Financial Review and specialist magazines.

Tip number three

You don't need as much knowledge as you might think.

"People think they need a lot of knowledge. They think it's complex," says Spann. "And they don't know where to get that knowledge, and what is a trustworthy source. And the fact is you don't really need a lot of knowledge to invest in the share market or property."  To get started, Spann suggests a beginner should find a friend who owns three or four properties who can help them through the basics.

"If they've got three or four (properties), they just need to find somebody who's got ten," he says. There are also plenty of books available. Some instill paranoia about being ripped off at every turn. Others are extremely optimistic. Spann suggests sampling both schools of thought and realising that reality is somewhere in between.

However, he emphasises that the best knowledge is actually gained by doing something, rather than studying the theory. This echoes the view of international best-selling author Napoleon Hill: "Knowledge will not attract money unless it is organised and intelligently directed, through practical plans of action… Lack of understanding of this fact has been the source of confusion to millions of people who falsely believe that 'knowledge is power'."

However, if this all sounds too hard, you can always pay a reputable buyers agent to find a property for you.

Tip number four

Risk management will help you sleep at night
(a) Interest rates
The easiest way to end your fear of interest rate fluctuations is to opt for a fixed rather than a variable rate.
Property author Jan Somers says three-quarters of the rates for her loans are fixed.
"Whether interest rates are high at the time or low at the time, I will always fix them," she says.

(b) Income protection
If you're concerned about the possibility of being jobless, you can take out income protection insurance. However, it can be expensive. And it only insures you in the event of illness or injury. There's typically no cover if you lose your job for other reasons. Somers suggests some people might be better off putting aside money they'd otherwise be paying in insurance.
"The best income insurance really is to set yourself up; always have cash on hand, and always have access to a credit line," she argues.

(c) Landlord's insurance
Landlord's insurance can cover you for damage to your property or unpaid rent. (Check that your policy covers malicious as well as accidental damage).
In all his years of investing, Spann has only ever had one serious incident of property damage by a tenant. But he claimed the damage on his landlord's insurance.
"I ended up with a really nice reno!" he says. "Even with basic vetting you can't go too far wrong. The average Australian is not trying to destroy the property that they (live in)."

Tip number five

It's okay to make mistakes.

Spann points out, "When you go into (an investment), your view should be to hold that property for a long period of time… so if you make a mistake it's all going to be dealt with in the wash in 10 years anyway."

For example, Spann has friends who bought a property through a marketer 10 years ago in Brisbane's outer suburbs. The purchase price was tens of thousands of dollars above market value.

"That property went nowhere for eight years. And they persisted, persisted, persisted. And then in two years it tripled (in value)," he says. "Was that a smart investing decision? Well, probably not. In other words, if they'd taken their $80,000 and put it somewhere else, they would have got a better return or a faster return. But it still sorted itself out in the wash, in the total (property) cycle."

Tip number six

Inaction is the biggest risk of all.

"Inaction is the greatest risk," argues Spann. "The government is determined to make people responsible for their own retirement. Your real wealth, if you do nothing, will actually decline. The risks of not investing, to me, significantly outweigh whatever mistakes you're likely to make in actually having a go."

This article was first published in Australian Property Investor Magazine and is copyright and reproduced with their permission.

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