Did you know that majority of property investors fail but are too embarrassed to admit?
Did you know that 50% of investors sell up their properties in the first 5 years and of those who stay in the market, 90% of investors never get past their first or second property?
Did you know that less than 4% properties currently on the market is what we call “Investment grade” that will produce wealth, yield and rate of returns?
Wealth as we see it is the transfer of money from the impatient to the patient.
Any property can become an investment property – just kick out the owner and put a tenant in place and it becomes an investment property. Property investment is part science and part art. you need to understand and interpret data (science) but you also need on the ground perspective to employ that data (art.)
Today we will discuss 20 property investment lessons that I have learned over numerous property cycles.
1- The economy and our property markets move in cycles. Booms never last forever, neither do busts. That’s mainly because most of us get swept up in the optimism or pessimism of others. Don’t be surprised when they come around and don’t overreact. This will help you avoid being sucked into booms and spat out during busts.
2- Even though WE are armed with all the research available in today’s information age, economists never seem to agree where our property markets are heading and usually get their forecasts wrong. Buy with fundamentals and ensure to never follow investor sentiments!!
3- Every year we get hit by an X factor – an unforeseen event or situation that blows all our carefully laid plans away. Then every decade or so we have a major event and the world “breaks.” People will tell you otherwise but trends are important!
4- There are multiple property markets in Australia. And even within each capital city there are multiple property markets divided by geography, price point and type of property.
So when somebody tells you the Australian property market is doing this, or the Sydney property market is doing that, don’t pay attention because this type of information is of no use.
You need to examine what is happening to property markets at a more granular level.
Property investment is risky in the short term, but secure in the long term. It is definitely not a way to get rich quickly.
Since property is a long-term game, don’t look for “what works now.” Instead look for “what has always worked.” History shows that this year’s hotspot becomes next year’s not-spot. Don’t make 30 year investment decisions based on the last 30 minutes of news or 3 hours of research 🙂
5- At times of poor or no capital growth, strategic property investors “manufacture” capital growth through property renovations or development
Residential investment is a game of finance with some houses thrown in the middle.
6- Taking on debt is not a problem. Not being able to repay debt is an issue, meaning cashflow management is a critical part of wealth creation. And it’s important to understand the three types of debt
bad debt against depreciating items;
necessary debt, such as the non tax deductible debt against your home; and good debt against appreciating assets like income producing residential real estate. Dont get confused when people force you to prioritise bad debts over good debt.
7- Successful investors have a long-term strategy to grow their wealth and use the correct asset protection and finance structures as well as insurances to mitigate their risks.
8- Strategic investors not only buy properties, but they buy themselves time to ride out the cycle by having financial buffers in place.
9- The media and property coach is not there to educate you, but its job is to get you to click on their links so that they receive revenue from their advertisers. So don’t rely on them for investment strategy or advice.
There will always be someone out there telling you not to invest in property and vice versa
So understand their vested interests – they don’t usually have your best interests in mind.
10- one thing i can guarantee is that Investment costs are inevitable, either you pay them as mistakes along the way, or you will end up significant learning fee to the market or to the property coaches.
Savvy investors surround themselves with a great team and are prepared to pay their advisors – they see it as an investment not a cost. Pay for your mentors and join mastermind groups.
If you’re the smartest person in your team you’re in trouble.
11- listen to those who have kept their substantial property portfolio and returns in place through various property cycles. If someone has acquired wealth in the boom and is coaching you Steer clear from them. There are too many enthusiastic amateurs out their offering investment advice.
There are 25 million property experts in Australia – everyone seems to have an opinion about property. But you know what they say about opinions… they’re like belly buttons; everyone has one but they’re basically useless. So be careful who you listen to.
12- Be greedy when others are fearful and be fearful when others are greedy. Don’t follow the crowd because the “crowd” is either wrong or late to the party. Don’t listen to who most property investors listen to for investment advice.
13- The truth is successful investors know how to create wealth at any point in a cycle.
Have you noticed how some investors seem to do well in good times and do even better in bad times?
Market timing isn’t really important to them.
On the other hand, others do poorly in good times and even worse in bad times? Market timing seems to have very little effect on them either.
Interesting isn’t it?
14- There are only 4 ways you make money out of property:
Capital growth,
rental income,
tax benefits and
forced appreciation or manufactured capital growth through renovations or property development.
But these streams of income are not all equal. Tax free capital growth is the most important. Depending on where you are in your property Journey the Ultimate aim is to manufacture equity because you can do that in any property cycle
15- Cash flow is important to keep you in the property game, but capital growth will get you out of the rat race.
You will never get rich from rental income or savings.
You need your money working for you even when you’re asleep, so invest it in where growth can be manufactured and use the power of leverage, compounding and time to grow your wealth.
16- Location will do around 80% of the heavy lifting of your property’s capital growth.
17- Treat your property investments like a business. There is no room for emotions, track
.your cashflow, regularly review your portfolio’s performance and make your decisions based on evidence.
18- Diversification is for people who don’t know how to invest. You’ll never become an expert doing a hundred things once. However, you can become a master doing one thing a hundred times.
Having the right mindset is critical to investment success. Dont be afraid to keep all eggs in one basket if that basket has a tracker, is bullet proof, can secure the eggs and that the eggs are of gold 🙂
19- While knowledge is important, successful investors take action. Don’t fall into the trap of analysis paralysis – there will always be risks when making investment decisions.
There are always risks associated with investing. Don’t be afraid of failing, because the biggest risk is not doing anything to protect your financial future.
FearSometimes negative experiences, mistakes and failures can be even better than a success because they teach you something new which another win could never teach you.
20-Don’t waste your time worrying. Most things you fear will happen never do. They’re just monsters your mind. And if they do happen to most likely to be not as bad as you expected. Time spent worrying is time that you could spend identifying opportunities and taking action.
Never give up. You will have failures along the way – in fact I’m a real success at failure, but each time I’m knocked down I get up again.
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