Despite 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.
1. Property markets go through cycles.
The value of well-located properties increases 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.
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 short term
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.
And I’m not talking about major disruptions like COVID-19, which is a once in a decade event – because the world will “break” once every 10 years or so.
However, there are always unexpected X factors that come out of the blue each year.
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
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
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 salespeople
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.”
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 the 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
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 to 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.
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.
Now is the time to take advantage of the opportunities the current property markets are offering.
Sure the markets are moving on, but not all properties are going to increase in value. Now, more than ever, correct property selection will be critical.
You can trust the team at Metropole to provide you with direction, guidance, and results.
Whether you’re a beginner or an experienced investor, at times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that’s exactly what you get from the multi award-winning team at Metropole.
We help our clients grow, protect and pass on their wealth through a range of services including:
- Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family. Planning is bringing the future into the present so you can do something about it now! Click here to learn more
- Buyer’s agency – As Australia’s most trusted buyers’ agents we’ve been involved in over $4Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney, and Brisbane bring you years of experience and perspective – that’s something money just can’t buy. We’ll help you find your next home or an investment-grade property. Click here to learn how we can help you.
- Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
- Property Management – Our stress-free property management services help you maximise your property returns. Click here to find out why our clients enjoy a vacancy rate considerably below the market average, our tenants stay an average of 3 years, and our properties lease 10 days faster than the market average.
Subscribe & don’t miss a single episode of Michael Yardney’s podcast
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
Need help listening to Michael Yardney’s podcast from your phone or tablet?
We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.
Prefer to subscribe via email?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.