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People often ask me what type of property they should buy, or what specific area is ideal to invest in so they can build wealth through real estate.
But I’d argue they are asking the wrong question: creating lasting wealth through real estate investing is not about the actual transaction or event of buying a property.
Rather, the concept of successful investing is about seeing property investment as a process – a journey that needs to be undertaken in the right sequence, in order to have the best chance of success.
In fact, the property should be the physical manifestation of a series of decisions you’ve made to implement the plan you’ve created to achieve financial freedom.
Getting past your first or second property
The average property investor – and I’m talking about 90%+ of investors – don’t get past phase one.
There’s a number of reasons for this, including the fact that life gets in the way.
We get distracted by kids and work and relationship ups and downs, and the goals we have for our property investments fall by the wayside.
Or sometimes, and this is often the case, investors don’t have clear goals for their properties from the outset.
They buy a patch of bricks and mortar because it seems like a good idea and they want a piece of the property investing action, but they don’t have any real, structured goals or milestones in mind.
So when times get tough – and they can, and do! – they decide the stress is too much, and they sell.
How to avoid jumping ship and build property wealth
Here’s the truth: most investors need at least 30 years to build a substantial property portfolio; I’m talking about one that is big enough to replace your personal wage or income.
But you can speed this up by shortening phase 1 below, by employing strategic advice, and not making the common mistakes others make.
Here are the 3 natural, maturing phases of a property investor, and how to maximise each phase:
Stage 1: Learning what NOT to do
This is the earliest phase, where property investors learn about investing by trying different strategies and listening to every point of view in the market.
The most likely outcome is that you are often not much better off financially than when you started investing, even if you have been investing for years.
Why? Because this is the phase where we make the most mistakes.
We panic buy (in a booming market).
We panic sell (when we are worried about money, or need a cash injection).
We try different things, take different risks and experience a range of outcomes.
This phase can take between 5-10 years for many property investors, although some, unfortunately, remain stuck at this stage permanently.
You can remain stuck for a long time – until you become aware enough to critically examine what you have done, and make changes going forward.
Another key to moving on from this step can be having someone external to you, objectively help you to review your past experiences and learn from them, so you can adapt your strategy and move forward.
Stage 2: Sticking to a winning formula
This is the next phase some property investors move into, if they have critically examined what works for them and what doesn’t.
By this phase, the property investor has gathered enough wisdom to stick to what works and stop listening to everyone else.
Now, while 90% of property investors are stuck in Phase 1, I’d say Phase 2 investors make up slightly less than the remaining 10%.
They are undoubtedly winners in the property investing game.
But Phase 2 investors would do much better if they could move themselves up to Phase 3, where their resources and capacity are allocated intelligently.
Stage 3: Moving towards a financial objective with a deadline
This is the phase where the investor’s asset base grows sufficiently, to allow them to leverage off their increasing equity and cash flow to buy more properties.
Strategic investors buy properties so they can buy more properties, not for cash flow.
They have an expert team around them to help them reach their goals, and they are in more control over their financial destiny than the previous two groups.
Interestingly, Phase 3 investors make up less than 1% of all the property investors.
So why don’t most property investors move out of Stage 1 easily?
Often, it is because they are not even aware that they are in it!
Awareness is 50% of the answer.
Stage 2 investors’ investing activities can still be subject to the market, but at least they have found a winning formula for themselves in property, even if that winning formula is still subject to market movements.
Stage 3 property investors are the only group that not only conquer the property market, because they have a winning formula in property, but they also conquer themselves as well.
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