Key takeaways
Pretend investors chase hotspots, while genuine investors buy properties that fit a proven, long-term strategy.
Pretend investors respond to headlines and predictions, while genuine investors concentrate on economic and demographic fundamentals.
Pretend investors focus on price and rental yield, while genuine investors understand the importance of location, scarcity and future capital growth.
Pretend investors continually monitor short-term market movements, while genuine investors give quality assets time to compound.
Pretend investors blame the market when things go wrong, while genuine investors accept responsibility and manage the risks they can control.
Property ownership alone does not create wealth. Successful investing requires the right assets, finance, structures, buffers and behaviour.
Do you remember playing pretend when you were little? Maybe you were a superhero, a dinosaur or a princess.
Of course, that was normal when you were little, and it was usually harmless.
While most children know the difference between pretending to be a superhero and jumping off the roof thinking they can fly, adults often forget - while we may stop pretending to be superheroes, a lot of us pretend to be investors.
And that’s dangerous.
You see...plenty of Australians own an investment property, but that does not automatically make them successful property investors.
Some people buy because their friends are buying, a salesperson promises easy riches, or a suburb has appeared on a list of the next “hotspots.”
They may have an investment property, but their decisions are still being driven by hope, headlines and emotion.
Real property investors behave differently. They treat property as part of a long-term wealth creation strategy, make their decisions using research and professional advice, and recognise that their behaviour will have an enormous influence on their results.
1. Pretend investors chase the latest hotspot
Pretend investors tend to believe that successful property investment means finding the next suburb that is about to boom.
They follow social media commentators, property forums and annual hotspot reports, hoping somebody will reveal an overlooked location where prices are about to surge.
This approach makes investing sound easier than it really is. If a location is being widely promoted as Australia’s next boom market, thousands of other investors have probably heard the same story.
The problem is that many hotspot predictions are based on recent price growth or a short-term event, such as a new infrastructure project, rather than the long term factors that support sustainable capital growth.
Real investors take a much broader view. They look for locations where people’s incomes are rising, the population can afford to pay more for housing, owner-occupier demand is strong and the supply of desirable properties is limited.
They also recognise that a good suburb does not automatically make every property in that suburb investment grade.
Two properties a few streets apart can produce very different results because of their position, land component, floor plan, scarcity and appeal to future owner-occupiers.
Note: Real investors begin with a strategy and then select a property that fits it. Pretend investors usually find a property first and invent a strategy to justify buying it.
2. Pretend investors allow the news cycle to drive their decisions
There is always something for property investors to worry about.
Interest rates may rise, taxes may change, an election may be approaching, overseas conflicts may intensify, or an economist may forecast a fall in property prices. When one concern disappears, another quickly takes its place.
Pretend investors treat every headline as actionable information. They postpone buying after a gloomy forecast, rush into the market when prices are rising, and reconsider their entire strategy whenever the government announces a policy change.
Real investors understand that property markets move through cycles and uncertainty accompanies every stage of those cycles.
They also appreciate that the media is designed to capture attention, while sound investment decisions are based on evidence, personal circumstances and long-term objectives.
Of course, changes to interest rates, taxation, lending policies and property legislation matter and should be considered as part of your risk assessment, but they should not become the sole reason for abandoning a well-constructed strategy.
Real investors ask whether anything fundamental has changed in their financial position, borrowing capacity, cash flow or long-term goals. They make changes when their circumstances or the underlying investment fundamentals warrant them.
3. Pretend investors continually check what their property is worth
Online property estimates have made it incredibly easy to check the supposed value of your home or investment property every few weeks.
Pretend investors can become obsessed with these estimates. If the algorithm says their property has increased by $25,000, they feel successful; if it suggests the value has fallen, they begin to question their decision.
Yet residential property does not have a precise daily price. Its value is ultimately determined when a willing buyer and seller agree to transact, and automated estimates cannot fully account for the features that make one property more desirable than another.
Real investors know that wealth is created through the power of compounding over many years. They review their portfolio's performance periodically, but they do not conflate constant monitoring with active wealth creation.
Tip: It is a little like planting a tree. Digging it up every few months to inspect the roots will not help it grow any faster.
This long-term perspective does not mean investors should ignore an underperforming asset forever. A strategic portfolio review may reveal that a property has limited growth prospects, excessive expenses or a structural weakness that cannot be fixed.
The difference lies in the quality of the review.
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Real investors make decisions using meaningful evidence and professional advice, rather than reacting to a computer-generated valuation or a slow quarter.
4. Pretend investors focus on cheap properties and high yields
Many inexperienced investors assume a cheaper property represents less risk.
Others concentrate on rental yield because it is easy to measure and creates the reassuring impression that the property is “paying for itself.”
However, a cheap property can remain cheap for good reasons. It may be located in an area with weak economic growth, low household incomes, limited owner-occupier demand and an abundance of developable land.
Similarly, a high rental yield may be compensation for poor capital growth prospects, greater tenant turnover, higher maintenance costs or additional risk.
Real investors understand that most of the wealth created through residential property comes from capital growth.
Rental income remains important because it helps service the debt and hold the asset, but income alone rarely creates the financial freedom investors are seeking.
They therefore focus on the asset's quality and scarcity. They favour established locations where affluent owner-occupiers want to live, where amenities and employment are readily accessible, and where the right properties cannot easily be replicated.
They are prepared to pay a fair price for an investment-grade asset because they appreciate that the cheapest property is rarely the one that produces the best long-term result.
5. Pretend investors talk about property more than they prepare for it
Pretend investors are often eager to tell you about the suburb that is going to boom, the bargain they found, or the enormous return they expect to achieve.
Yet behind the confident language, they may have no written investment plan, inadequate financial buffers, the wrong ownership structure and little understanding of how the purchase fits into their broader portfolio.
Real investors are usually more measured. They recognise that one successful purchase can involve months of preparation, including setting goals, reviewing cash flow, structuring finance, researching markets and conducting detailed due diligence.
They also surround themselves with an independent team of advisers. That may include a property strategist, finance broker, accountant, solicitor and financial adviser, with each person contributing expertise within their field.
This preparation can seem less exciting than attending auctions or scrolling through property listings, but the decisions made before a property is purchased will often determine its eventual performance.
Real investors also understand the value of saying no. They may reject dozens of properties before buying because they are more concerned with securing the right asset than simply adding another address to their portfolio.
6. Pretend investors blame the market when things go wrong
When an investment underperforms, pretend investors commonly blame interest rates, the government, the bank, the tenant or the property market.
External factors will always affect investment returns, and many of them sit beyond an individual investor’s control. However, blaming those factors does little to improve the portfolio.
Real investors focus their attention on the risks they can manage. They maintain appropriate cash flow buffers, avoid overcommitting financially, obtain suitable insurance and hold their properties through structures that support their broader wealth plan.
They buy the best assets their budget allows, review their finances regularly and avoid taking on so much debt that a temporary setback forces them to sell.
Perhaps most importantly, they manage their own behaviour. Fear can keep investors on the sidelines for years, while greed can tempt them to overpay, speculate or take shortcuts with their research.
Tip: Markets will occasionally move against them, tenants will leave, repairs will arise, and governments will change the rules. Real investors expect these challenges and build enough resilience into their strategy to deal with them.
Owning an investment property is only the beginning
Property investment is a process rather than a single transaction.
Buying a property may make you a landlord, but becoming a successful investor requires a sound strategy, investment-grade assets, sensible finance and the patience to allow compounding to work.
It also requires humility. The property market has a habit of teaching expensive lessons to people who believe one successful purchase has made them experts.
Over my many decades of investing, I have seen numerous booms, downturns, credit squeezes, recessions, policy changes and predictions of an imminent property crash. The investors who built substantial wealth were rarely those who made the boldest forecasts or completed the most transactions.
They were the people who owned quality assets, protected their cash flow, ignored much of the short-term noise and remained invested through several property cycles.
So, if you want to assess whether you are behaving like a genuine property investor, look beyond the number of properties you own. Consider whether every property has a clear role within your wealth strategy, whether you have sufficient buffers, and whether your decisions are being guided by fundamentals or emotion.
That honest assessment may be more valuable than any hotspot report or market forecast.
