Key takeaways
As a seasoned property investor, I've witnessed firsthand the intricate dance of the property markets and learned that most investors fail to achieve the financial freedom they are looking for because they don't know what game they're playing.
The property market is an intricate dance of various investment styles, and there are many marketers, buyer's agents, so-called strategists and advisers out there who just happen to have the one "ideal strategy" or that "perfect property" just for you.
There is no one size fits all property strategy, and if you want to build a substantial property portfolio over the long term, you need to invest for capital growth. If you invest for cash flow, you will never build a portfolio large enough to give you financial independence.
Property investing isn't like sport, where everyone plays the same game. You have to accept that different market participants have different priorities and methods, and avoid thinking that your approach is the only right one.
As a seasoned property investor, I've witnessed firsthand the intricate dance of the property markets.
Over the years I’ve come to appreciate that property investing is a complex affair and despite all the podcasts, blogs, webinars and so-called “advisors” the fact is that most investors fail to achieve the financial freedom they are looking for.
I’ve also learned that the various market participants are playing a wide range of games, each with their own unique goals, attitudes, timeframes, risk profiles and incentives.
The problem is most investors haven’t figured out what game they’re playing.
Maybe they have a vague idea of their game, but they haven’t clearly defined it.
And when they don’t know what game they’re playing, they’re at risk of taking their cues and advice from people playing different games, which leads to risks they didn’t intend and outcomes they didn’t imagine.
The diverse cast of property investment players
The fact is…the property market is a fascinating stage where multiple players come together, each with a unique approach to investing.
These players include first-time homebuyers, beginning investors, experienced investors, property developers, real estate agents, property marketers, “spruikers” and many others.
Each of these participants has distinct goals, motivations, strategies and time frames, making the property market an intricate dance of various investment styles.
If you think about it, the type of property that makes a great investment for me at my age and with a very substantial and diversified property portfolio under my belt, would not be considered a great investment for somebody at the beginning of their investment journey.
Yet there are so many marketers, buyer’s agents, so-called strategists and advisers out there who just happen to have the one “ideal strategy” or that “perfect property” just for you.
Understanding different investing games
Let me be clear... there is no such thing as a one size fits all property strategy or the ideal investment to suit everybody.
Instead of treating property investing as a singular game, we should view it as a collection of games, each with its own objectives and skills.
For example, a beginning investor who wants to build a substantial property portfolio over the long term, one that will eventually give them financial freedom and choices in life should invest for capital growth, because if they don't, they won't be able to build a portfolio of properties.
The problem is many beginning investors play the wrong game and invest for cash flow, and while cash flow is important and keeps you in the game, buying the wrong type of property means you will never build a portfolio of sufficient size to give you financial independence.
You can't buy the next property in the next one out of the cash flow from your rent.
You need capital growth and asset appreciation to get the next deposit.
ATO statistics clearly show that 92% of investors never get past their first or second property and this just isn't enough to give you sufficient cash flow to live off.
What I'm getting at is that beginning investors should be playing a different game to those who already have a substantial property portfolio and are at the next stage of their investment journey where they're going to start to lower their loan-to-value ratios.
These investors should be playing a different game and it may be to consider adding commercial properties to your portfolio.
And those investors nearing retirement should be playing a different game, investing in other assets that will deliver cash flow rather than just property.
To achieve success in the ever-evolving landscape of real estate, one must acknowledge this diversity and adapt one’s investment strategies accordingly.
Yet many blogs, podcasts and advisors lump everyone into a category called "investors," and inadvertently set them up for failure.
It's essential to recognize that each investor has their own unique set of circumstances, priorities, and goals, which means the best course of action for one person may not be suitable for another.
By appreciating the complexity of the property market, you can avoid the common trap of trying to force a one-size-fits-all strategy onto your investments.
That's why at Metropole, even before discussing the next property, we build each client a personalised, customised Strategic Property Plan taking into account their distinct goals, motivations, time frames and risk profiles.
There is no one size fits.
We recognize that each investor has their own unique set of circumstances, priorities, and goals, which means the best course of action for one person may not be suitable for another.
At Metropole, we have no properties for sale but have access to time-tested frameworks I have personally fine-tuned over 5 decades and with which we have helped clients outperform the market for over 20 years, and by taking into account detailed research we can build personalised and flexible investment plans that account for the ever-changing dynamics of the property landscape.
Property investing isn’t like sport
In sports like golf, rugby, and soccer, players around the world adhere to a specific set of rules, ensuring everyone plays the same game.
However, investing is a completely different playing field.
As I’ve explained different market participants play different games.
Embracing the diversity of investment strategies is essential for a healthy market - it means there will always be some people that think it's the right time to buy and others who think it's a good time to sell.
Of course, recognizing that other investors have different priorities and methods can help you maintain an open mind and avoid falling into the trap of thinking that your approach is the only right one.
While it's essential to define your game and stick to it, it's also crucial to be adaptable to changing market conditions and personal circumstances.
That’s why at Metropole we conduct regular client reviews and reassess their strategy to make sure it’s still appropriate.
As our clients learn and grow, their investing game may evolve to align better with their changing goals and risk tolerance.
My mistake
Early in my investment career, in the late 1970s, I bought 2 factories in Dandenong, an industrial hub in Melbourne.
They were well leased to a furniture manufacturer, and I received great rents but I had minimal capital growth because their growth was in line with the increasing rents which were pegged at around 3% per annum.
I bought these factories because I thought commercial real estate was the way the big boys played and I wanted to get into that game as well.
However, it was too early in my career and the lack of capital growth hindered me from moving forward and stopped me from buying more properties.
I eventually sold those factories and used the funds to buy high-growth residential properties which allowed me to buy even more properties and their increasing rent allowed me to fund my mortgages.
I guess I just didn't know what game I was meant to be playing at that time.
Some words of advice
So here are three thoughts for investors…
- There is no one right way to invest, no one optimal strategy, and no one universal goal. Different investors have different time horizons, risk preferences, income levels, personal values, emotional biases, and expectations. They also face different constraints, opportunities, and challenges in their lives and markets. Therefore, they play different games with their money.
- Figure out your own game and stick to it: Clearly define your investing game and focus on playing it. Be cautious of taking cues and advice from those playing different games, as this may lead to unintended risks and outcomes.
As a property investor, understanding your game and staying true to it will empower you to navigate the complex world of investing with clarity and confidence.
By acknowledging that there isn't a one-size-fits-all approach, you'll be better equipped to make informed decisions that align with your unique goals and circumstances.
