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[Podcast] The Brutal Truths about property investment that no one else will tell you

[Podcast] The Brutal Truths about property investment that no one else will tell you
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Today’s podcast will be a little different.

Today I’m going to be brutal.  My Podcast #332

I’m not holding back and I’m going to tell you some brutal truths about property investing.

You'll learn some of the things that can go wrong.

You'll learn about the frustrations of being a property investor.

You will learn some of the ways in which slick marketing can lead you astray.

But stick with me. It's not all negative.

Understanding what could go wrong is one way of making sure things don’t go wrong and you can enjoy the success a small group of property investors enjoy.

The problem is most people who get involved in property investment don’t develop the financial freedom they’re after.

  • 50% of new investors sell up in the first 5 years.
  • Most investors never get past their 1st or second property.
  • Only 20,000 Australians own 6 properties or more.

Now, this is not the type of information most people tell you about property when you first get started.

That’s probably because many of the people you speak with are trying to sell you something – sometimes it’s a property – in other cases it’s their services (buyers’ agents).

This episode is my attempt to redress that balance a little bit and share some brutal truths about property that you don't often come across.

Despite what some people will tell you, property investment isn’t easy.

But it’s simple. Now that isn’t a play on words.

What I’m trying to say is that if you do what most property investors do, you’ll get the same results as most property investors get — and that’s not pretty.

You’ll be heading in the right direction if you understand the following truths about real estate investing.

Sorry, but...

  1. Property markets go through cycles. 
  • There are times every property cycle when values stagnate — sometimes for several years.
  • And there are short periods when the value of your properties will fall a little.
  • A-grade homes and investment-grade properties are less volatile – but property prices do fall at times, occasionally for several years in a row.
  1. You need a significant amount of money to invest
  • You do need money to invest in property.
  • If you don’t have the financial discipline to save a deposit, you shouldn’t be borrowing money to get involved in property.
  • You can get rich over the long term, but it is not a get-rich-quick
  1. It takes the average investor 30 years to become financially independent through property
  • Most investors waste the first ten years making mistakes and learning what not to do.
  • The next few years are taken up selling underperforming assets and getting their financial house in order.
  • Then it takes two or three good property cycles to become wealthy through property.
  • Of course, you can shortcut this by getting the right mentors early in your journey.
  1. Saying "I'll be fearful when others are greedy, and I’ll be greedy when others are fearful" is much easier than doing it. 
  • Most investors are overly optimistic during booms when they should be cautious and most pessimistic during downturns when they are surrounded by opportunities.
  1. No one really knows what the property market will do in the short term
  • While in the long term our markets are driven by fundamentals, in the short-term human emotion and crowd psychology play havoc with the best-laid
  1. Real estate investment is a game of finance with some properties thrown in the middle
  • Strategic property investors buy themselves time in the market by having financial buffers in place to see them through the ups and downs of the property cycle.
  1. Property investment is meant to be boring.
  • Make your investing boring so the rest of your life can be exciting.
  1. There is more free property information available today than ever before, but much of it is useless 
  • Most market news is not only useless, but it is harmful to your financial health.
  1. Be careful who you listen to
  • Rather than listen to the get-rich-quick stories, it’s worth listening to those who talk about their mistakes and avoid the spruikers who don’t — theirs are usually much bigger.
  1. There is virtually no accountability for the many property gurus and their hot spot predictions 
  • I find it interesting that people who have been wrong about everything for years still draw large crowds of followers looking for the next get rich quick scheme.
  1. The more “comfortable” an investment feels, the more likely you are to be taken by marketers or salespeople 
  • Avoid rental guarantees or promises of certain returns.
  1. Despite what most would like to think the biggest difference between ultra-successful property investors and the rest is not their property strategy or their investment “secrets.” 
  • It’s the way they think — their “mindset” and their Rich Habits.
  1. If you have credit card debt and are thinking about investing — stop 
  • Become financially fluent before you start investing otherwise the significant debt, you’ll take on buying property will most likely overwhelm you.
  1. Residential real estate is a high growth, relatively low yield investment, so don’t buy real estate for cash flow 
  • Of course, cash flow is important to keep you in the game, but it’s capital growth that will get you out of the rat race.
  1. There are 3 stages of your property investment journey 
  • You first go through the asset accumulation stage which requires leverage and owning high growth properties; then you slowly reduce your loan to value ratio; until you can eventually live off your “cash machine” of properties.
  1. However many properties you think you'll need to provide cash flow for your retirement, double it 
  • Now you're closer to reality.

Links and Resources:

Michael Yardney

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Some of our favourite quotes from the show:

“If you’re looking for excitement, go bungee jumping. Go trail bike riding.” –Michael Yardney

“Despite what the average person believes, though, debt is good. As long as it is used to buy appreciating assets.” –Michael Yardney

“The very fact that you exist means you’re lucky.” –Michael Yardney


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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.

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