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 we’d be in the midst of a recession and a global pandemic, with our borders closed, there’s not a chance you would have believed me.
Yet, here we are.
All this means is there is a heightened level of uncertainty about what the future holds.
Yet despite all this, our property markets have been resilient and it looks like our markets are bottoming out - but that doesn't mean there's a property boom around the corner.
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...
1. Risk comes from not knowing what you’re doing, so pay the price to learn what you’re doing!
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 attending a one day seminar 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.
Just like in previous property cycles, currently there's a swag of new property gurus willing to take your money to teach you their “new found” 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.
2. Adhere to a proven strategy
Most property investors don’t have a plan or a proven strategy to adhere to.
In fact they spend more time planning where they're going to 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 under perform.
3. If you’re the smartest person in your team, you’re in trouble.
Successful investors surround themselves with a good team.
This may consist of a property accountant, a proficient finance broker, a lawyer and a 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 like 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.
4. Have Financial Buffers in Place
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.
Over the next few years we’ll have some good times and some bad.
Some further periods of low interest rates and then they’ll rise (possibly considerably).
We’ll have some boom times and we’ll probably have another recession one day.
Savvy investors will protect themselves by having financial buffers in place to see themselves through the difficult times.
5. Sometimes it’s best to do nothing.
A great quote from Warren Buffett is:
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“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 stages in the property cycle and 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.
6. Become an expert
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.
Which is one of the reasons I like investing in property; since 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 help beginning investors buy their first property, experienced investors add to their portfolio and sophisticated investors manufacture capital growth by becoming property developers.
7. Treat your property investments like a business
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 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.
Here’s a bonus tip…
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 or at the wrong time or in the wrong location.
Even as the property cycle moves into the next phase, most properties will not be 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 the best time to buy counter cyclically in a decade or more because we’re setting ourselves up for a perfect storm in property.
Recently three major factors have underpinned the property markets and will contribute to a perfect storm that will have property markets performing strongly in 2021 and 2022.
- The first was the announcement of sweeping changes to remove overly restrictive lending rules.
This will give more people access to easier credit, enabling them to borrow more and get into the market.
- The other big gamechanger was the budget. It’s been calibrated to create jobs and promote consumer confidence, which will encourage buying and investing.
- Then more recently the RBA stated it will further lower interest rates and do everything it can to support jobs, businesses and our economic recovery.
Sure there are economic headwinds that will affect us and there will be a few challenges in the first quarter of 2021 as a number of small businesses close down.
But there will be a “perfect storm” leading to a period of strong property price growth in the second half of 2021 and into 2022 with a confluence of the following:-
- Federal Government spending, initiatives and infrastructure projects
- State Government spending and infrastructure initiatives
- Historically low interest rates making borrowing as cheap as it has ever been and therefore holding investments or taking out a home loan very affordable
- The security that interest rates will remain low for a number of years will encourage people to borrow
- Easing of credit approval criteria could allow many people to borrow considerably more than they could before.
- A return of international demand for Australian property
- A return of immigration and students to Australia is also possible
A window of opportunity
Thinking strategically, this means that there will be a window of opportunity between now and the second half of 2021 for savvy investors to really amplify their wealth position.
No one is going to ring a bell when the market bottoms, but in certain segments of Australia’s capital city property markets we are already passed the bottom and property values are slowly but steadily increasing.
However, 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, 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 in an uncertain market where they’re more likely to have the upper hand in terms of price negotiations.
They will also be competing against fewer other buyers, which is the ideal position to be in.
Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on
If you're wondering what will happen to property in 2020–2021 you are not alone.
You can trust the team at Metropole to provide you with direction, guidance and results.
In challenging times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that's what you exactly what you get from the multi award winning team at Metropole.
If you're looking at buying your next home or investment property here's 4 ways we can help you:
- 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! This will give you direction, results and more certainty. Click here to learn more
- Buyer's agency - As Australia's most trusted buyers’ agents we've been involved in over $3.5 Billion 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.