The 5 Pillars of Smart Property Investing

Just because you’ve taken the leap from homeowner to property investor, doesn’t mean your financial fortune is assured.

In fact, it doesn’t even mean that you will start making a profit in the short term, or that you are on your way to owning a sizeable portfolio.

The reality is around 20% of those who get involved in property investment sell up within the first year or so and close to half sell their property within five years.

Of those investors who stay in property, around 90% never get past their second property.

So how do you ensure that you avoid all the mistakes that those before you have made, and become one of the few property investors who goes the distance and grows a portfolio that generates real wealth?

There is no short road to success, but the property road is well worth the scenery and potholes, if you stick around long enough to get to the good stuff.

 You just have to be a smart about it

Here’s your new investing acronym to live by:

S: think Strategically

M: Manage your risks

A: invest Against the grain

R: Review regularly and

T: work with a Team.

1. A smart investor thinks Strategically

strategy

Fail to plan and you plan to fail.

Savvy investors take this mantra seriously.

They know exactly what they want to achieve and make sure their investment decisions work towards that goal.

Instead of being driven by their emotions, a lucrative offer in their inbox or chasing the latest “hot spot”, smart investors remain focused by sticking to a strategy with a long term proven track record.

For a sophisticated investor to bite, each property they buy has to fulfill the criteria they’ve set themselves through their chosen strategy and it must get them one step closer to their end goal.

They have a strategy for choosing the right properties that relies on location but is framed by patience and timing.

This may take some of the excitement out of their investing – but I’ve often suggested not to look for excitement through investing – it should be boring so the rest of your life can be exciting.

A smart investor knows that knowledge is power and they work hard to educate themselves and stay on top of their game.

They know their options for making a profit from real estate and can determine which properties will help them achieve their particular goals.

2. A smart investor Manages their risks

A smart investor knows that sound finance strategy is just as important as sound property strategy.

This includes making sure they don’t over-leverage as well as building in sufficient financial buffers in their lines of credit or offset accounts to see them through the ups and downs of property investing.

They build in a cushion to cover negative gearing costs as well as the flat stages of the property cycle. They also have an exit strategy in place for poor performing investments.

Smart investors not only manage the financial risks that come with property investment, but work at minimizing their risks.

They seek good advice for the best ownership structures for asset protection and to legally minimise their tax.

They become financially fluent and understand the ins and outs of the taxation and the financial advantages they can enjoy as an investor and ensure their investments are set up in the most efficient way.

A smart investor knows it really isn’t about how many properties you own in your portfolio, as tempting as it may be to build a big portfolio.

They understand that, at the end of the day, it’s the size of their asset base and how hard their money works for them that is more important in the long run.

3. A smart investor invests Against the grain

A smart investor understand that the property market moves in cycles and appreciates the power of counter cyclical investing, so they don’t usually follow the crowd.

They don’t paying attention to the marketing hype of overnight get-rich-quick property schemes or get caught up in the next hot spot to buy – even if everyone else seems to be flocking in that direction.

Instead, the smart investor is content sticking to their tried and true strategy knowing that the crowd is usually late to the party.

crowd group individual motivation fish win contest race diffferent

They would rather study the macro economic fundamentals to understand the cycle, stay ahead of it and wait it out if need be.

While most people diversify which leads to “averageness”, smart investors  realise that it’s okay to stick to a niche in their investing.

They know you’ll never become an expert by trying a hundred different things once and realize you become an expert by doing the same thing a hundred times over until you can get reproducible results.

4. A smart investor Reviews their portfolio regularly

Smart investors never rest on their laurels.

They regularly review their portfolio and analyses its performance.

They know there’s more to successful property investing than a good property purchase and the ability to hold on for dear life; in reality it’s fluid and needs updating regularly.

Each property in a savvy investor’s portfolio undergoes review on an annual basis to determine:

  • How the property has performed over the past few years in terms of capital growth
  • Whether this property is likely to outperform the averages over the next decade
  • If there is anything they could or should do to improve this property and get a better return on investment
  • What is happening in the local market of that property including any changes in the demographics of the suburb
  • Whether it is worth riding out the slump or selling and investing elsewhere

A smart investor does not get complacent. They keep learning by reading blogs and books and attending seminars to improve their skills.

5.  A smart investor surrounds themselves with a Team

They know that they are only as good as their team; in fact if they’re the smartest person in their team they’re in trouble.

They realise they don’t have all the answers and instead surround themselves with successful, proven property investors.

They don’t try to wear all the hats in their investing business and employ a team of independent professionals to help them including a property strategist, finance broker and accountant at the very least.

At the same time, smart property investors are cautious

They have the experience to know that while many people seem to have well meaning advice that they are itching to share, they only listen to those with the results to back up opinions.

Successful investors can also red flag a sales person in a sea of supposed advisors.

stacks of coins on  graphs and charts

They know that for someone to make the cut and be on their team they have to be independent and represent them (the buyer), not the seller or developer.

As a result, smart investors are prepared to pay for advice.

They don’t cut corners to work with someone who’s cheap or free for the sake of it.

They are building their business under the guidance of their advisors and are ruthless in ensuring they have the best people in the business on their side.

Now that you know what it takes, become the S.M.A.R.T investor that you always wanted to be.

Go the extra distance and come up with your plan for success today.

Here’s what you can do about this…

If you’re looking for independent property investment advice to help you become financially independent, no one can help you quite like the independent property investment strategists at Metropole.

Remember the multi award winning team of property investment strategists at Metropole have no properties on the market to sell, so their advice is unbiased.

Whether you are a beginner or a seasoned property investor, we would love to help you formulate an investment strategy or do a review of your existing portfolio, and help you take your property investment to the next level.

Please click here to organise a time for a chat.

Or call us on 1300 20 30 30.

When you attend our offices in Melbourne, Sydney or Brisbane you will receive a free copy of my latest 2 x DVD program Building Wealth through Property Investment in the new Economy valued at $49.



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Michael Yardney

About

Michael is a director of Metropole Property Strategists who create wealth for their clients through independent, unbiased property advice and advocacy. He's been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'The 5 Pillars of Smart Property Investing' have 9 comments

  1. November 7, 2014 @ 4:50 pm Vern

    Hi Michael,
    I am concerned by your saying “knowing that the crowd is usually late to the party”. It kind of sounds like you’re advocating property speculation. I’m not sure that treating the property market like the stock market and speculating on potential growth areas is really the sort of thing that “smart” investors do. People who do this are always going to be at the mercy of the market (which is not known for it’s mercy). The “Smart” approach is surely manufacturing growth, developing, or even (once you’ve chosen a stable area) to renovate the right property to create a higher value. This is not only a faster strategy but also much more reliable than waiting for the whim of the market and the economy.

    Reply

  2. November 7, 2014 @ 5:22 pm Adam

    Hi Michael,

    Great post – We’ve been inadvertently following your strategy for years, buying good quality properties in central ring Auckland suburbs which offer a high capital return (13% last year!) with lower (3% – 4.2%) rental yield.

    Unfortunately, we are unable to get any additional lending due to the lending rules currently applied by NZ banks. I assume that similar rules apply to your subscribers across the ditch?

    Our current plan is to wait for rental returns to rise over time, and/or the banks to relax their lending criteria. Each scenario will allow us to get additional lending and buy another property.

    That being said, we’re struggling to see when our investments will become a cash machine!

    I’m interested to hear what you would do in our situation, and offer the following real-wold example for you to review publicly as a case study for your subscribers… if you wish to do so:

    Reply

    • Michael Yardney

      November 7, 2014 @ 9:07 pm Michael Yardney

      Adam
      Growing a large asset base through property takes time -probably 12- 15 years.

      Sometimes the right thing is to do nothing – just wait for the magic of leverage compounding and time to work its magic. You jsut can’t keep adding properties every year

      Reply

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