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BUYING a house here is not as simple as you think!

Warren Buffet said,  “To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights or inside information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.”

Good boy Micky, what else do you know?

Just because we believe we understand why we like one place and not the other, doesn’t mean we are set up to make the best decision when it comes to finalizing a property purchase.

It is common knowledge that even when buying just a pair of jeans, our emotions mix up what should be a simple thought process.  (does the new fabric need dry cleaning / do we need a branded item / does this style suit me or is it just following mode, etc.)

Now, how do we expat’s then go about buying something as complex as a house in Bali? 

Think your decision through, starting with if you really, really, really want to buy at all in Bali and if so,

h o w  on earth do you make your very own educated decision?  Is there someone who can help you to clear the fog? Maybe renting is better? Is capital gain an issue? Get passive income by sub-leasing, etc.

Oh, whilst still early on the issue I should say: ‘those of you, who are already firmly established here, just skip this letter’.  Better enjoy the presently balanced weather and go out before the rain is upon us.

Now, for the other good folks, who are searching for a new life style on their own future slice of Bali, here are a few basic reminders about what makes you click when hunting for your land or villa and what to keep in mind before being side-tracked.

Buying a home is a big deal and the decision making process is even more complex than you may think. We all know the logical questions to ask ourselves, is it the right price? Is this the right location? What we may not realize is the element of psychology that is present when deciding to buy a home. After months of research and deliberation the average housebuyer is confident that they are about to make a completely rational buying decision; however, the opposite is often true. Educating yourself on the psychology behind buying a residential home or one to rent out and absorbing these hidden details will empower you to make a more informed decision.

Residential home buyers need to understand that they are buying more than just a house or villa. They are purchasing a lifestyle and this concept should remain top of mind throughout the entire process.  This is also true, when the villa is meant to be for rent only. After all, someone who comes to Ubud has a similar mindset as yourself, otherwise they too would not choose to live here.

This is especially relevant for first-time property-buyer because their naivety has the potential to lead them away from their original goals. A main question for any buyer should be about whether this property will accommodate the lifestyle they want to live or the lifestyle of others who are liking the overall ambience of life near Ubud. 

For many buyers the surrounding community is equally if not more important than the property itself. Before making a decision, consider things like the school options if you plan on raising a family, recreation in the area and the surrounding location beyond the neighborhood itself.

While it is probable that you will feel an emotional tie to where you live, its important to keep in mind the logical reasons of why you wish to buy a property in the first place. For instance, you may think that purchase of a particular property will represent how you would like to be perceived, or you may fall in love with a house and dismiss the moldy smell by telling yourself it just needs airing out. You look at a house and begin to wonder what your neighbors will be like, and how they’ll be your friends, or you may imagine the community around it. Lots of influences come into play and that’s when you need to step back and rationalize your thoughts.

Often people feel that having too much choice can lead to inaction. So, if you’ve had a day of house hunting, take the time afterwards to run through what you’ve seen and can scratch off the list – after all, if you’ve seen half a dozen poor properties and then one decent one, you’ll assess the decent one as being better than it is.  It is a good idea to ask a reputable local real estate agent to help you searching. Then make sure he/she knows all underlying reasons for your preferences.  It may be that in the process the good agent even reminds you of what you were saying in the beginning about your preferences and put you back on track, if needed.

Warren Buffet said, “To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights or inside information.  What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.”

A good agent will be able to rationalize this process whilst helping you to find what your heart desires.

He will only propose properties which come very close to your search criteria and not confuse you with places out of your comfort zone in terms of prize, maintenance requirements or whatever else applies.

With a decision as weighty as a property purchase, one might think that buyers deliberate over all the pros and cons before they decide to sign on the dotted line. Yet studies show this is not the case.

80% of prospective buyers know if a home is right for them within seconds of stepping inside. The reason? Researchers theorize that our minds process far more information in less time than we think, so a lengthy deliberation process may be a waste of time.

You know already what you ideally want and you know about your budget. 

Oh yes, regarding the money, your money -  When you have money in the bank, you most likely feel that you have a high risk tolerance but when it comes down to your money actually being threatened then that attitude can change quickly and dramatically.  This is why it is worth also doing a risk assessment.

Anyone who suffers from a low risk tolerance may find it extremely hard to make a decision to buy.  I am sure you’ve heard of people who just can’t make the decision to buy.  They have the funds, they say they are keen to buy, they look at every house that falls within their price range, but at the end of the day they just can’t bring themselves to sign up. Why? It is because their fear is stopping them. They find one excuse after another to not purchase.

Once you have invested your money into real estate when you have a low risk tolerance, you may find yourself incessantly worrying about whether the property is dropping in value and if you’re going to lose money.   It’s natural.  Ask the agent about a realistic property appraisal and if you want to get this nice extra income from renting ask for a small feasibility study to ensure your risk tolerance is taken into consideration too.

The point is, whatever type of investing you do there will be some market developments. That means that the value of your investment funds will move over time. With property however, the upwards movements will in all likelihood ease your worries, if any.

Funny, it doesn’t matter how much we can afford to spend…  it’ll feel if we just could afford a little bit more, we would be perfectly happy with the choices.  Don’t fall into this trap. Stick to your budget and pick the best house you can afford.  A good trick is, to set your price limit just a little bit lower than you can really afford. Then, when you start feeling this way, you can spend up a bit, satisfy this feeling while still staying within your limits.

Finally, something unrelated to the psychology in buying a property. If you already bought via UbudProperty and disregarded my above advice to skip this letter, let me say this:

After over a decade of helping expats and locals to buy in Ubud, we don’t see most of ‘our’ buyers often any more.                                                                                                                                                 

Well, at the time we saw or spoke to each other almost daily. We shared tons of stuff together. We got used to each other and you, the clients and our staff ,almost became like part of a family.  It may sound exaggerated, but if you went through this you know exactly what I am talking about.

You know what!? You should give your sales person a call right now or simply come in. Bet he or she would love to hear from you.  Nice way to collect smiles . . .