16 things I wish I knew when I started investing – part two


We would all do certain things differently if we had our time over again, wouldn’t we?

But that doesn’t mean that we should live our lives with regret. 5577

What I mean is that, because we can’t go back in time to change decisions that we’ve made, there really is little point in dwelling on them, is there?

Instead I prefer to learn from my mistakes and move forward smarter than I was before.

And in the world of property investing, there is so much to learn and unfortunately mistakes can be costly.

Yesterday I shared 8 things I wish I knew when I first started investing

In this second part of my story on things I wish I’d known when I started investing, I’ll outline another eight lessons to help prevent you making the same errors I made along my journey.

9. Understanding the power of compounding and leverage  

One of the big secrets to successful property investment is the power of compounding and leverage.

This means the earlier you start investing and the longer you hold your properties, the more time your money has to grow.

And with a long-term horizon, you don’t have to be overly concerned about the ups and downs of the market.

Fact is, a large part of your asset base when you retire will not be money have invested or your equity from the mortgage that you paid down, but will have occurred because of capital growth.

And a large part of that capital growth will come in the latter years of your property ownership.

That’s how compounding works.

10. It’s not a get rich quick scheme

Sure, Sydney’s property market has made heaps of money for investors over the past six years.

But for the 7 years before that the market was actually flat.

Having invested for over 40 years now, one of the many lessons I’ve learned is that property investment is not a “get rich quick” scheme.

It’s a get rich slow one!

As Warren Buffet said: “Someone is sitting in the shade today because someone planted a tree a long time ago.”

11. Ignore white noise 66667

You’re probably aware how the media loves a real estate story – particularly those that “predict” a property bust.

The truth is that a significant price falls in well located “investment-grade” capital cities properties is unlikely.

So learn to ignore the “white noise” and keep your eyes on your long-term goals while not taking notice of short-term market vagaries.

12. Both capital growth and cash flow are important

In my mind residential real estate is high-growth, relatively low yield investment vehicle and the key to wealth creation is to grow a substantial asset base of “investment grade” properties.

But I learned an important lesson during “the recession we had to have” of the early 1990’s.

I realised that while capital growth gets you out of the rat race, you need solid cash flow to keeps you in the game.

It’s much the same today in the current difficult lending climate.

That’s why investors should protect themselves by having a cash flow buffer to see them through the inevitable rainy days.

13. Location is non-negotiable

445Remember that 80 per cent of your property’s performance will be due to its location and about 20 per cent because of the property itself– so never compromise on location.

Rather than look for the “next” hotspot, find a location that has a long history of strong capital growth and one that will continue to outperform the averages because of the demographics in the area.

In general, these are the more affluent inner- and middle-ring suburbs of our capital cities where residents will have higher disposable incomes and will be able to afford to and be prepared to pay a premium to live there.

14. Don’t throw your money away money

To become rich you will need to learn to spend less than you earn, save the difference and eventually invest it.

Don’t underestimate the importance of this seemingly simple message.

The problem is that too many people throw away their money buying things they don’t need with money they don’t have to impress people they don’t like.

Like Robert Kiyosaki says: “If you don’t know how to care for money, money will stay away from you.”

15. Gratitude is important

Wealth means different things to different people.

But I’ve learned over the years that true wealth has nothing to do with how many properties, or how much money, you have.

True wealth is what you’re left with when they take all your money and properties away.

16. Give back to the community and charity

Apart from being grateful for what you have, you also need to give back to the community and charity.

One of the most satisfying parts of my life is supporting our community and various charities with my wife Pam.

Our successful property investments and business has made us extraordinary lucky so I believe it’s our responsibility to help others who are less financially fortunate. 34556

“If you’re lucky enough to do well, it’s your responsibility to send the elevator back down,” the famous actor Kevin Spacey says.

The lesson from all of this is that property investment is a long journey.

There will be market ups and downs and lessons learned, along the way.

But with the right education, and the right support, you can create and live a wealthy and grateful life.

And we can’t ask for any more than that, can we?

Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on


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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 one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media. Visit Metropole.com.au

'16 things I wish I knew when I started investing – part two' have 2 comments

    Avatar for Michael Yardney

    January 11, 2018 Preetha

    Hi Michael, I absolutely love your podcasts and the advice you are giving is absolutely priceless. I am so grateful for having coming across you and your teachings. I had a question on LMI. While I have been advised to put down a 20% deposit, I have been told by a few friends that I can get into the market by paying less deposit and LMI (reasons are to enter the market faster, the gains in a rising market will more than offset the LMI paid, and finally it allows the borrower to use more of the bank’s money than your own money) It is an interesting perspective, and one that I had not thought of before. The herd mentality is to pay the 20% deposit. Was keen to get your thoughts on this. I have recently put down 10% deposit on a place, which will be completed in mid 2019. Is it worth me saving up the other 10% deposit or can I pay less deposit, pay LMI, and then use some extra funds for other investments? Would love to hear your feedback on this.

    Many thanks


      January 12, 2018 Michael Yardney

      Thanks for the words of encouragement.
      Yes putting a 10% deposit down and using LMI makes your money work harder because of the higher leverage.
      But there is an underlying assumption there – that your property is increasing in value.
      Now it seems that you’ve bought a property off the plan and that really concerns me.
      I’m not sure which state you are in, but in many locations more than 25% of properties bought off the plan do not value up at the contract price on completion.
      In other words the owners have overpaid and have lost out – so they need to find more money to settle – just because the property is worth less than they paid doesn’t allow them to get out of the contract.
      But your big issue is most banks will only lend up to 70% in almost all of the postcodes where you can buy off the plan – because they’re also worried about values falling in these locations. So LMI doesn’t even come into question.
      My suggestion is to save as much as you can before settlement – you may need it plus more, and double check your purchase – was it the right one. Is there a way out.
      Like the banks, I’m very, very concerned about off the plan properties settling in 2018 and 2019


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