By Guest Expert December 6, 2019

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Property investor traps: Insight from wealth creation expert Michael Yardney

Property Investment
Property investor traps: Insight from wealth creation expert Michael Yardney

At EBM RentCover, we want to make sure our landlord clients are armed with the knowledge needed to best protect what is important – their investments and incomes.

So, we chatted to one of Australia’s leading property and wealth creation experts about what makes a successful investor.

In part one of this interview, Michael Yardney shares what not to do when it comes to property investment.

In part two (coming soon) he gives insight into the traits of a good investor and chats about the importance of protecting assets with insurance.

Trap He just turned 67 (FUN FACT: by 2023, this will be Australia’s new pension age).

However, Michael Yardney doesn’t appear to be slowing down any time soon… in fact, with more than 45 year’s experience in property investment and development, here is hoping he continues offering advice and guidance to budding investors and never throws in the towel!

Let’s start at the beginning… Michael bought his first investment property in his early 20s, with a $2,000 deposit and little-to-no understanding of how the real estate market worked.

Today, he has a multi-million dollar property portfolio (one he manages in his spare time) and is the founder of Metropole Properties – a company that gives its clients strategic property advice and that has reportedly bought, sold, financed, developed, advised and project managed more than $3 billion worth of property transactions.

So, where did this passion for property stem from?

Michael moved to Australia at the age of three.

His parents were immigrants and worked hard.

But it was the friends of his parents – the wealthy ones who had investments and high incomes – that inspired Michael to learn the tricks of the trade when it comes to property.

“I discovered that a lot of the wealth of my parents’ friends was made through property and at a very early age I decided I wanted to replicate that wealth through property for myself,” he says.

“I bought my first investment property in the early 70s in Melbourne, paid $18,000 for it and got $12 a week rent which I was excited about. But I made all the mistakes a lot of first time property investors make and made emotional decisions like buying close to home and without doing much research.”

Michael says it wasn’t until he started making decisions based on logic and fact that he realised the true value of property and how to make the most out of property investment.

Let’s talk more about the mistakes first time property investors make…

Michael says there are four big mistakes first time property investors make:

1. They are undereducated

One of the biggest mistakes investors make is they do not educate themselves.

“There are 25 million property experts in Australia because everyone who has lived in a house or rented a property thinks they know about the real estate industry,” Michael says.

“But that doesn’t give them the experience or depth of knowledge to go out there and be a successful investor.”

Research shows 50 per cent of people who buy investment properties fail in the first five years because they sell up their properties.

And, interestingly, of those who stay in the market, most do not get past their first investment property.

“One of the biggest risks in property investment is not the property, it is the undereducated investor.”

2. They are emotional

Even if they are well educated in property matters, some people still tend to buy emotionally.

“While we think we are rational, we do not act rationally because there is this fear of missing out,” Michael says. “People will still overpay, despite being informed and educated about what is the best long-term decision.”

3. They are greedy and impatient

Property investment is a long-term gain.

“It is understandable that people see others doing well and want to replicate it, but they try to get rich quick,” says Michael.

“Residential real estate is a high growth, relatively low yield investment; it usually takes 25-30 years to become financially independent through property. So instead of making rash decisions, you need to know what you are looking for and understand the objectives behind it; the why.”

4. They are naïve

Nowadays there are a bunch of people trying to sell you something and take advantage of naïve investors. They say things like: ‘this is going to be the next hotspot’ or ‘you are going to get guaranteed growth’.

“The property investment industry is still unregulated – that is something that needs to change because people take advantage of naïve investors,” says Michael.

Now we know what not to do, what are the traits of a good property investor? Michael shares his top tips for investors in part two of this interview – coming soon!

Guest author:

Sharon Fox-Slater is the Managing Director of EBM RentCover and was part of the core team that helped launch one of Australia’s first landlord insurance policies into the market. As the first woman in Australia to complete the Advanced Diploma in Insurance Broking, she is well equipped to educate property investors about protecting what is important – their properties and incomes. For more info, visit RentCover.com.au

About Guest Expert Apart from our regular team of experts, we frequently publish commentary from guest contributors who are authorities in their field.