I’m often asked what are the big lessons I’ve learned from investing in property for close to 50 years?
Probably the most important lesson I think we can learn is that the market is driven not only by the fundamentals but also by the irrational and erratic behavior of an unstable crowd of other investors and homebuyers.
So never get too carried away when the market is booming or too disenchanted when the market slumps, because letting your emotions drive your investments is a surefire path to disaster.
Today, I’ll chat with Brett Warren about some of the lessons I wish I’d known when I first started investing. If you can learn these lessons now, you can avoid paying some of the learning fees that I had to pay to the property market as I made mistakes.
Now today’s episode is part of what I call our summer series where apart from bringing you one new show each week we are replaying 2 previously published shows, and the foundational lessons I’m going to share in today’s show which was originally published a number of years ago will help you take advantage of the new property cycle that is appearing in front of our eyes in 2021.
Before we get into the main body of the podcast, I’d like to share two more lessons I’ve learnt over the years that I would’ve loved to have known when I first started investing.
The first is that every year there is an X factor, and an expected factor that comes out of the blue to undo my best laid plans.
Sometimes these are on the negative side and sometimes they’re on the positive side like the unexpected election win in 2019 that led to strong property markets at the end of that year.
The other big lesson that has taken me a number of decades to understand is that every 10 years or so the world breaks.
Think about 2020 with the Coronavirus creating a world pandemic and recession. Then look back at 2008-9 with the Global Financial Crisis and before that was the Asian financial crisis. Can go back every 10 years or so and I found the world breaks.
These lessons have taught me to be have a long-term focus and not make 30 year investment decisions on the last 30 minutes of news.
They have also taught me to ignore the doomsayers and be very cautious of who’s forecasts I pay attention to.
- The value of education
It’s easy to think you’re smarter than you are when you don’t know what you don’t know.
- Goal setting
Setting goals helps you focus because if you don’t know where you’re going, while any road may get you there, every road may also get you lost.
- Create a property team
Most people think they know a bit about property.
While property investing may be simple, it’s not easy.
You need to create a good team around you including mentors and advisors. If you’re the smartest person in your team, you’re probably in trouble.
- Think like a rich person
Develop the mindset of rich people and build the rich habits that will help you achieve wealth
- Have an abundance mentality
An analogy is to think of yourself as a cup.
If your cup is small you can only accumulate a small amount of money, any extra will spill over and you will lose it.
You simply cannot have more money than the size of your cup. Instead, develop an abundance mindset in which your cup is big and deserving of being filled with success.
- Delay gratification
To become rich, you must learn to delay gratification as wealth is the transfer of money from the impatient to the patient.
- Overcome your fears
Fear can prevent us from investing because we see it as too risky.
Form a sound investment strategy, and get a property team around you to minimize the risks. Don’t give in to fear
- Don’t let failure hold you back
We all make mistakes, but you can’t allow them to hold you back. Learn from them and move forward.
- Understand the power of compounding and leverage
The earlier you start investing and the longer you hold your properties, the more time your money has to grow.
- Property won’t make you get rich quick.
Having invested for nearly 50 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!
- Ignore white noise
It’s not the media’s job to educate you. It’s their job to entertain you and get you to click on their links. Keep your eyes on your long-term goals and don’t spend too much time worrying about short-term challenges in the market.
- Capital growth and cash flow are both important
Residential real estate is a high-growth, relatively low yield investment vehicle and the key to wealth creation is to grow a substantial asset base of “investment grade” properties.
However, while capital growth gets you out of the rat race, you need solid cash flow to keep you in the game.
- Location is non-negotiable
Remember that 80 percent of your property’s performance will be due to its location and about 20 percent because of the property itself– so never compromise on location.
- Develop financial discipline
To become rich, you will need to learn to spend less than you earn, save the difference, and eventually invest it.
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.
- Gratitude is important
But I’ve learned over the years that true wealth has nothing to do with how many properties, or how much money, you have.
- 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.
I believe it’s our responsibility to help others who are less financially fortunate.
Links and Resources:
Brett Warren – Metropole Property Strategists
Metropole’s Strategic Property Plan – to help both beginning and experienced investors
Some of our favourite quotes from the show:
“Today, there’s no shortage of information. I guess what there is a shortage of though, is perspective.” –Michael Yardney
“If you believe you deserve to be rich, if you believe you deserve to be successful, you will achieve that.” –Michael Yardney
“It takes probably 30 years to develop a significantly big asset base to start to live off of it.” –Michael Yardney
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