We live in an interesting world, don’t we?
Particularly if you’re an investor.
Every time the world’s economic woes seem to have sorted themselves out, or we think Australia's economy is on the move again or we feel Australia's property markets seem to be steaming along nicely, a new set of challenges pop up for us as investors.
If I had told you this time last year that unemployment levels would have a 3 in front of them, but inflation would be around 7% and interest rates were rising strongly and the property downturn that started in early 2022 would be over, there’s not a chance you would have believed me.
Yet, here we are.
There's the likelihood of uncertainty ahead for some time yet, so I’d like to share 7 tips for building wealth in the current “interesting” economic times.
You see..., in my experience, times of economic change always create opportunities.
So what should an investor do?
I'll explain at the end of this blog, but first some tips...
Sounds obvious I know, but many investors commit hundreds of thousands of dollars to buy a property yet have gained their property investment knowledge from watching videos on YouTube, listening to podcasts or reading a book.
The first step for most investors should be to invest in themselves.
Invest in their knowledge.
Get a mentor.
But be careful who you learn from.
There is currently there's a swag of new property gurus willing to take your money to teach you their “newfound” knowledge.
Instead find a teacher who has achieved what you want to achieve, has invested through a number of cycles and has kept their wealth.
I guess what I’m saying is it is better to learn from someone else’s mistakes rather than your own.
If your property investment mentor hasn’t had some challenges and failures along the way and hasn't invested in at least 3 full property cycles find someone else.
Most property investors don’t have a plan or a proven property investment strategy to adhere to.
In fact, they spend more time planning where they're going on a holiday than they do planning their financial future.
If you don't have an investment strategy to keep you focused, how can you hope to develop financial independence?
Adhering to a proven investment system will give you more predictable results, and will help you make more consistent and less emotional decisions.
Let’s face it…it's too easy to get distracted by all the "opportunities" that keep cropping up.
Unfortunately, many of these supposed opportunities don't work out as expected.
Look what happened to those investors who bought off the plan or in the next "hot spot" or in mining towns, only to see the value of their properties underperform.
Successful investors surround themselves with a good team.
This may consist of a property accountant, a proficient finance broker, a lawyer and an independent property strategist.
However, you must become your own most trusted investment advisor—no one can do it all for you.
Too many investors make the monumental mistake of thinking that success is a matter of choosing the right investment advisor to handle their wealth.
It costs them dearly!
No one—no one—will be able to manage your wealth as you can.
Yes, you need good advisors, but you need to have the sophistication to filter and use the best of your advisors.
This means you’ve got to invest the time, energy and money to master the skill of managing your own net worth.
Smart investors don’t only buy properties; they buy time to help them ride through the ups and downs of the property cycle.
After all…one thing that is certain about the times ahead is that there will be uncertainty.
- Also read:What makes an A-grade property?
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- Also read:Sydney property market forecast for 2024
- Also read:Boom to bust: What makes property prices rise and fall
Over the next few years, we’ll have some good times and some bad.
And while interest rates are near their peak, there are no doubt interest rates will remain high for some time.
Savvy investors will protect themselves by having financial buffers in place to see themselves through difficult times.
A great quote from Warren Buffett is:
“The trick is, when there is nothing to do - do nothing.”
Yet many investors get itchy feet and want to do more, put another deal together or buy another property.
There are times in your investment journey when it is best to sit back and wait for the right opportunities because wealth is the transfer of money from the impatient to the patient.
Successful investors specialise. That’s how they become successful.
They find something they are good at and do it over and over again, rather than moving on to the “next shiny toy”.
Do you know a specific area and have a network of contacts that gives you information advantages?
Of course, if you are investing in publicly traded securities you have to be wary of trading on “insider information”, that is information that is not publicly available.
This is one of the reasons I like investing in property; not only do I get paid for my “insider information”, but it is totally ethical and legal to trade on this privileged information!
What are your advantages?
What contacts, expertise, and experience do you have that you can leverage?
If you aren't in that position yet then get a great team around you - one that takes a holistic approach to property investing
To secure your financial future in these you’ll need much more than just a property strategist or a buyer’s agent.
My team at Metropole offers a 360° holistic approach to ensure you Grow, Protect and Pass On your wealth.
We customise a solution to meet your specific needs through a time-tested 360° system for acquiring wealth and helping beginning investors buy their first property, experienced investors add to their portfolio and sophisticated investors manufacture capital growth by becoming property developers.
Investing is a serious business and if done correctly can, over time, replace your personal exertion income.
I’ve seen some property investors, those who treat their investments like a business, become very, very rich by growing a multi-million dollar investment property portfolio.
They do this by understanding “the system” and getting the right type of finance, setting up the correct ownership and asset protection structures and knowing how to legally use the taxation system to their advantage.
They also hold themselves accountable for their own success.
If history repeats itself, and it most likely will, most people who get involved in property investment will not become financially independent.
Many will buy the wrong property at the wrong time or in the wrong location.
And currently, most properties on the market are not investment grade
However, if you have a system, a great team of advisors, your finances organised and the right knowledge now could be a great opportunity to buy good properties that will appreciate in value over the long term.
In fact, now is a great time to buy counter-cyclically.
Thinking strategically, this means that there is currently a window of opportunity for savvy investors to really amplify their wealth position.
No one is going to ring a bell when the market bottoms (but there is strong evidence that we have already passed the bottom of this cycle) but the average homeowner or investor won’t hop back into the market until there is more certainty.
They are waiting to hear that property values have increased strongly, auction clearance rates are higher and the Australian economy is back on its feet.
This means those who take action and secure their next home or investment property now will be purchasing at the bottom of the cycle.
They will also be competing against fewer other buyers, which is the ideal position to be in.
But eventually, most home buyers will realise that interest rates have peaked and inflation is on the way down and when this occurs greed will overtake fear, and they will hop back into the market.
So take advantage of the current window of opportunity.