15 Unfortunate truths about property investing

Easy Investing In Property AustraliaDespite what some people will tell you, property investment isn’t easy. 

But it’s simple. Now that isn’t a play on words.

What I’m trying to say is that if you do what most property investors do, you’ll get the same results as most property investors get — and that’s not pretty.

And that’s partly because the way most Australians think about investment is wrong.

On the other hand, you’ll be heading in the right direction if you understand the following truths about real estate investing.

Sorry, but…

1. Property markets go through at cycles. Property Cycle

The value of well located properties increase over the long term, often doubling every 10-12 years.

But there are times every property cycle when values stagnate — sometimes for a number of years. And there are short periods when the value of your properties will fall a little. Get used to it. It’s just what they do.

2. Saying “I’ll be fearful when others are greedy and I’ll be greedy when others are fearful” is much easier than actually doing it. Greedy

Being a countercyclical investor isn’t easy.

Most investors are overly optimistic during booms when they should be cautious and most pessimistic during downturns when they are surrounded by opportunities.

3. No one really knows what the property market will do in the medium termProperty Market

While in the long term our markets are driven by fundamentals, in the short term human emotion and crowd psychology play havoc with the best laid forecasts.

Then every year an unknown X factor comes out of the blue to surprise us — sometimes on the upside, but more often on the downside.

4. Real estate investment is a game of finance with some properties thrown in the middle

Strategic property investors buy themselves time in the market by having financial buffers in place to see them through the ups and downs of the property cycle.

5. Property investment is meant to be boring  

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If you’re looking for excitement go bungee jumping or trail bike riding.

Make your investing boring so the rest of your life can be exciting.

6. There is more free property information available today than ever before, but much of it is useless 

Keep your eye on the big picture and the long term and avoid being distracted by the white noise and the fake news.

The majority of market news is not only useless, but it is harmful to your financial health.

7. Be careful who you listen to

Most of what is taught about property investing is theoretical nonsense.

Very few of the current property educators are independently rich from property.

Rather than listen to the get rich quick stories, it’s worth listening to those who talk about their mistakes and avoid the spruikers who don’t — theirs are usually much bigger.

8. There is virtually no accountability for the many property gurus and their hot spot predictions Guru

I find it interesting that people who have been wrong about everything for years still draw large crowds of followers looking for the next get rich quick scheme.

9. The more “comfortable” an investment feels, the more likely you are to be taken by marketers or sales people 

Avoid rental guarantees or promises of certain returns.

10. Despite what most would like to think the biggest difference between ultra-successful property investors and the rest is not their property strategy or their investment “secrets.” Mindset

It’s the way they think — their “mindset” and their Rich Habits.

11. If you have credit card debt and are thinking about investing — stop 

You will never beat 20% annual interest that you’ll get paying down your bad debt.

Become financially fluent before you start investing otherwise the significant debt you’ll take on buying property will most likely overwhelm you.

Despite what the average person believes, debt is good. As long as it is used to buy appreciating assets.

12. Residential real estate is a high growth, relatively low yield investment, so don’t buy real estate for cash flow Residental Property

Of course, cash flow is important to keep you in the game, but it’s capital growth that will get you out of the rat race.

13. There are 3 stages of your property investment journey 

You first go through the asset accumulation stage which requires leverage and owning high growth properties; then you slowly reduce your loan to value ratio; until you can eventually live off your “cash machine” of properties.

14. However many properties you think you’ll need provide cash flow for your retirement, double it 

Now you’re closer to reality.

15. It takes the average investor 30 years to become financially independent through property

Most investors waste the first ten years making mistakes and learning what not to do. 30 Years

The next few years are taken up selling underperforming assets and getting their financial house in order.

Then it takes two or three good property cycles to become wealthy through property.

Of course you can shortcut this by getting the right mentors early in your journey.

Metropole Property Strategists

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Michael Yardney

About

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


'15 Unfortunate truths about property investing' have 6 comments

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    June 12, 2019 Nick P

    I do enjoy reading your articles Michael. Wise words indeed, especially number 7. We have a number of clients who have been burned by commission greedy marketeers and not listened to the warnings we have given them.

    Reply

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    June 10, 2019 Ronnie Jones

    Michael a very timely warning, having 50 years of experiences within the Property Development Arena, we are still at it even though we are in our eighties. We can see trouble ahead, thus for the first time in our (3 Brothers) life, we are not committed to holding “future blocks”.
    We feel it will not be too long before the Mathematics of the World actually return to believing that 2+2 will only add up to 4 and not to 5 or 6 as they are trying to now.
    Your advise to Newby Property Investors is so timely, some seem to forget that current Interest Rates are not permanent and you and I have seen them at 17%, not that I see them going there, however, it is quite likely they could rise to double today’s rates and those struggling with a mortgage at today’s “So Low” rates will have their property taken from them. I hope this never happens, but if you wish to call yourself an “Investor” you have to make yourself aware of the big one “RISK” and with nearly 40% of mortgages nearing a Stress State, the current market should be left to the professionals amongst us, until we all know just which way the Investment World will travel.
    I admire the work you do for the lower end Property Investment Participants and we all started there and the warnings you are passing on as to the ACTUAL CONDITIONS today. Your warning on “Investment Gurus” is so current, I am, right now, trying to get a young woman out of a situation she has been placed in, by listening then acting on advice given her by a “Guru” where she invested into a market where the current Mortgage Stress is the highest in the State. Such Investors never ask the questions that matter, please keep up the great work you do, and you other “Professional Investors” should be letting our new starts to be more wary of the Guru Go-Getters (for themselves) remember folk, they are enjoying the commissions earned from your poor judgement, while you are struggling to keep those monthly payments up, for you only need a stutter in your employment picture, or a stutter in the Rental Payment and the whole picture of property investment takes on a very different and horrible stage and we know for early in our “professional property life” IN THE MID-SEVENTIES AND EIGHTIES we found ouselves in a current dollar Half a Billion drop, we worked our way out of it without going bankrupt but it taught us just how fast the situation can change.
    A message to first time property investors LISTEN TO WHAT MICHAEL IS TELLING YOU AND GET HIS ADVICE AS TO WHAT TO DO AS OF RIGHT NOW, plus find an extra source of income to protect your Monthly Payments for the next three years, just as Michael warns you to do, good on you Michael, if those selectors for the Queens Honours knew the real stuff, they should have out your name on the list.

    Oh and folks, Michael and I have never met or talked, regards Ronnie Jones

    Reply

      Michael Yardney

      June 10, 2019 Michael Yardney

      Ronnie – thank you so much for taking the time to leave those kind words about me and sharing your perdpective about property

      Reply

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    May 14, 2018 Christopher Howes

    “Now” is always the best time to start…..as “Some Day..Never Comes..”

    Reply


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