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12 Important Lessons All Property Investors Should Remember in 2018…

I see every year as a time for learning and personal development. property build puzzle

That’s one of the best parts of being involved in the property markets.

I’m also learning from the property markets because they are so dynamic that you never quite “solve the puzzle” because the puzzle is always getting reshuffled in front of you right when you think you’ve got it solved.

I’m learning from my clients, both the successful ones and the not so successful ones; I’m learning from my professional colleagues and mentors and I’m learning from my own successes and failures.

Having now invested for over 40 years I’d like to share a few of the lesson I’ve learned (often the hard way):

1. Don’t let emotions drive your investment decisions

Market sentiment is a key driver of property cycles and one of the reasons why our markets overreact, overshooting during booms and getting too depressed during slumps. 

investor-enquiry-form

So an important lesson is to never get too carried away when the market is booming or too disenchanted during property slumps.

Letting your emotions drive your investments is a sure-fire way to disaster because we tend to be most optimistic near the peak of the cycle, at a time when we should be the most cautious and we’re the most pessimistic when the media is full of the doom and gloom near the bottom of the cycle, when there is the least downside.

Yet market cycles mean each boom sets us up for the next downturn, just as each downturn paves the way for the next boom.

The lesson is that even as you take advantage of our booming markets, get prepared for the next phase of the property cycle.

2. Take a long-term perspective

The property market moves in cycles and even though there are a few years of flat or falling property prices every decade, well located real estate has increased in value on average by around 8 per cent per annum over the long term.

Imagine if you could buy the house your parents bought at the price they paid thirty or forty years ago; how many properties would you have bought then knowing what they would be worth today?

3. Property investment is a game of finance rather than real estateproperty mortgage finance money

This has never been truer than in the last few years as we experienced a credit squeeze with banks restricting finance to property investors as A.P.R.A. tightens credit extension.

Put simply: If you can’t get more finance you can’t buy more properties.

Smart investors use an investment savvy finance broker to help them through the maze of different lenders as well as only holding “investment grade” properties to  ensure their borrowing capacity is being optimally utilised.

4. There is not one property market.

While many people generalise about “the” property market there are many submarkets around Australia.

Each state is at a different stage of its property cycle and within each state the markets are segmented by geography, price points and type of property.

For example, the top end of the market will perform differently to the new homebuyers’ market or the investor segment or the median priced established property sector.

And it is likely that both the Sydney and Melbourne property markets will again outperform in 2017 driven by their strong economies, jobs growth and population growth.

5. Not all properties are “investment grade”

While there are currently around 250,000 properties for sale in Australia, in my mind less than 2% of these are “investment grade.”Property-Investment-Checklist-300x199

Of course, any property can become an investment – just move the owner out, put in a tenant and it’s an investment, but that doesn’t make it “investment grade”.

On the other hand, investment grade properties:

  • Appeal to a wide range of affluent owner occupiers.
  • Have a level of scarcity.
  • Are in the right location – one with strong prospects on long term capital growth.
  • Have street appeal and offer security.
  • Have a high land to asset ratio – this is different to a large amount of land. I’d rather own a sixth of a block of land under my apartment building in a good inner suburb, than a large block of land in regional Australia.
  • Have the potential to add value through renovations.

6. Follow a system

Let’s be honest, almost anyone can make money during a property boom because the market covers up most mistakes. propertyupdate investment

But when the market turned, like at the end of the mining boom, or during the GFC, many investors without a system found themselves in trouble.

Warren Buffet said it succinctly: “You only find out who is swimming naked when the tide goes out.”

In other words, if you aren’t following a system that works in all market conditions you will be caught naked when the market changes.

Strategic investors follow a system to take the emotion out of their decisions and ensure they don’t speculate.

This gives them consistent profits and reduce their risk.

I suggest you make your investing boring, so the rest of your life can be exciting.

7. Get Rich Quick = Get Poor Quick

Real estate is a long-term investment yet some investors chase the “fast money.”money

They’re often influenced by the latest get-rich-quick artist with a great story about how you can join them and become stupendously wealthy.

They often pander to the wishes of people who would like to give up their day job to get involved in property full time but, in reality, it takes most people many years to accumulate sufficient assets to do this.

Patience is an investment virtue.

Warren Buffet said it right when he explained that: “Wealth is the transfer on money from the impatient to the patient.”

8. Beware of Doomsayers predictions

Fear is a very powerful emotion that the media uses to grab our attention with messages, particularly from overseas “gurus”, of why property values will plummet.

While some people missed out on the opportunity to develop their financial independence because they listen to these messages, over the 43 years I’ve been investing well located properties have kept doubling in value every 10 years or so making many ordinary Australians property millionaires

9. Treat Property Investment like a Business

The successful investors I know have grown a substantial asset base by treating their investments like a business.

They do this by surrounding themselves with a great team of advisors, getting the right finance, setting up the correct ownership and asset protection structures and knowing how to legally use the taxation system to their advantage.

10. There will always be a reason not to invest

Every year brings its own set of crises and lots of reasons not to invest.  news bad economy

You can go back as far as you like in history and there won’t be a crisis free year.

Sure, some years are worse than others but there is always bad news and much of it is unexpected.

Where investors get into trouble is that rather than focusing on their long term goals, they see these crises as once in a generation events that will alter the course of history, when in reality they are just the normal path of history.

11. You know less than you think you know

There is a nearly insurmountable amount of material to learn about in the fields of property, finance and economics.

The big lesson is that I know so much less than I think I know.

The markets will humble you if you don’t check your ego at the door.

Always continue learning.

12. Don’t mistake money for wealthproperty invesment finance

I’ve often said that any problem money can solve isn’t really a problem.

While this means money will make your life easier to a certain degree, if you let money own you it will make you miserable.

I became a lot happier about 25 years ago when I realised that money isn’t true wealth. (And I learned it the hard way!)

True wealth is what you are left with when they take all your money and properties away – your health, your family and friends, your knowledge and mindset, your spirituality and your ability to contribute to society.

These are my 12 lessons, please let me know what you learned in the comments below.

 And here’s to hoping that we learn a lot together in 2018.

The more I learn, the less I seem to know.

Maybe next year I’ll have 13 things on this list for you.

What are you going to be doing in 2018? 
1-percent

Are you going to take advantage of the property markets in 2018 or are you going to get caught by the traps ahead?

If so and you’re looking for independent advice, 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 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 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 is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'12 Important Lessons All Property Investors Should Remember in 2018…' have 14 comments

  1. Avatar for Property Update

    February 16, 2015 @ 8:42 am Chris

    I spent 530K bought an off plan 2b apartment in Risehill on main road before came cross your blog and book. What should I do now while realizing this is at least an unwise investment? Regards Chris

    Reply

    • Avatar for Property Update

      February 16, 2015 @ 7:30 pm Michael Yardney

      Chris
      I can’t give you advice over the internet and I don’t know your circumstances.
      Sometimes the right thing to do is sell and use your money more effectively. For other investors the right thing to do is wait for the market “to work its magic” and increase the value of your property

      Reply

  2. Avatar for Property Update

    January 30, 2016 @ 11:12 am Caroline

    I’ve learned that wealth (the spectrum of) comes from me aligning my focus in life and activities with my values. Doing this involves awareness, choices, discipline and sometimes tough decisions. The benefits far outweigh the challenges.

    Reply

  3. Avatar for Property Update

    February 16, 2016 @ 8:47 am Alex

    Thanks Michael for your wisdom and help. I started investing this year while I aplroach my 50s birthday. My concern is that I don’t have too much time to accumulate wealth should I make this decision 10 or 20 years ago. What’s your advise to people like I?

    Reply

    • Avatar for Property Update

      February 16, 2016 @ 10:30 am Michael Yardney

      Alex – you’re right you should have started 20 years ago, but the second best time is today.

      You don’t have the luxury of time on your side, so I suggest you get a good mentor and learn from him or her – rather than making the mistakes others make.
      This comes at a cost – but it’s an investment in your future – why not check this out: http://michaelyardney.com.au/

      Reply

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      January 20, 2017 @ 3:22 pm Jan Berry

      I started investing in property in 2003 when I as 54. I am now 67 and have 15 properties and have been retired since 2013 so it took ten years to become financially independent. It’s never too late to start.

      Reply

  4. Avatar for Property Update

    February 16, 2016 @ 11:47 am Alex

    I’d like to come, Michael, do you plan any events in ACT though?

    What is your opinion on effects of negative gearing proposed change?

    Reply

    • Avatar for Property Update

      February 16, 2016 @ 12:07 pm Michael Yardney

      Alex

      No I have cut back my travelling commitments – I’m not coming to canberra

      Reply

  5. Avatar for Property Update

    January 19, 2017 @ 11:21 am Matt

    Hi Michael,
    Watched a lot of your videos, but I think this is one of the best. Very thorough summary of some points that would takes years, or a whole career to learn. Condensed epiphanies. I liked the pace at which you delivered the information also nice and slow. A lot of mind chocolate there thankyou.

    Reply

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      January 19, 2017 @ 7:10 pm Michael Yardney

      Thanks for the kind words Matt. They really made my day

      Reply

  6. Avatar for Property Update

    January 20, 2017 @ 11:46 am Peter Fritz

    Every buddy property investor should print this on A3 and stick it on their fridge and their bathroom mirror. Very few people will follow this advice, which is why there are very few professional (and successful) investors. The foundational blueprint is right here on this page.

    Reply

  7. Avatar for Property Update

    February 7, 2018 @ 4:33 am Marcua

    Hi Michael. My name is Marcus, and I’m from Malaysia. I love the consistency of your content, wisdom and ideas. It inspires me to do further thinking & reflection too. Just wanted you to know that you’ve got a pretty loyal fan from across the ocean :) Cheers.

    Reply

    • Avatar for Property Update

      February 7, 2018 @ 6:16 am Michael Yardney

      Marcus
      Thank you so much for that lovely comment – it has really made my day:-)

      Reply


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