Let’s face it, if creating a property portfolio were easy, everyone would be doing it (and they’re not)!
As it is, according to Australian Taxation Office data for 2018-19, around 10% of Australian taxpayers have an interest in one investment property, just under 3% have two, less than .1% have three, and so on into oblivion...it truly isn’t easy to invest successfully and sustainably in property!
The biggest reason most investors underperform is they ignore 80% of the (hard) work. Instead, they focus on the final 20% – the challenges involved in sourcing the property, and the financial and legal technicalities surrounding the actual purchase.
So, following on from our recent article covering the top ten questions we hear from first time property investors, here are the top five tips that any investor should be on top of to improve their property game.
Number 1 | Know your goals
Understand why you’re investing in the first place (this isn’t as simple as you might think).
Most investors don’t achieve optimal results because they put the ‘how’ ahead of the ‘why’. They dive straight into the details around planning and strategy (assuming they bother to think about planning and strategy), before they consider what they want to achieve, and why.Once you’ve defined your underlying motivations, you’ll have a clear understanding of your purpose for investing. And – whatever your reasons – this will help you remain committed to the pursuit of your goals. You’ll have the determination and courage needed to help you overcome any obstacles (like a major hiccup in the property market).
Number 2 | Create a long-term plan
Investing in property isn’t a ‘get rich quick’ option, nor is it a ‘scheme’ or a ‘scam’, no matter what the media headlines are saying about landlords right now. It’s slow and steady, and sometimes you need nerves of steel to stay true to your course. It takes hard work and dedication – and you need a plan to do it properly! You need to fit your goals to your vision, define where you are today, then plan the steps to get you to your tomorrow. Sounds easy, right?
Except we’re not just talking about a financial plan backed up by boring spreadsheets – rather, it involves outlining the exact steps needed to achieve your ‘why’. It’s actually exciting and inspiring!
So, make a list your specific financial and personal goals, then insert achievement dates, and estimate what each goal will cost. This requires a lot of thought, and quite frankly it can make pulling together your financials look easy by comparison!
The pay-off is, when you know exactly what you want to do, what it will take, and when, you can make informed choices about your career and your lifestyle, and how much you need to save to secure your next one, two or ten properties along the way.Number 3 | Know where you’re starting from
Why? Because once you have clarity around ‘what you want to achieve’ and ‘why’, all you need is an understanding of the gap between where you are now and your ideal position, and you can define and refine the steps to get you there!
Now’s the time to thoroughly review your financial position – don’t just leave this up to your mortgage broker. And while we’re at it, do use a broker to shop around on loan packages; don’t just rock up to your current bank and take out a loan straight off the rack!
It’s worth noting right now that having a vague understanding of their financial position is generally the only area the average investor actively considers – frankly because they need to or they won’t get far with obtaining a loan!
So you should start by ensuring your finances are in order. Analyse your income, debt, equity and superannuation. Make a list of all of your assets, like property, shares, superannuation and savings; and liabilities like credit cards, loans and personal debts. This will help your lending broker establish your investment capacity and determine what and how you can afford to invest. You should also have a good credit score (you can check this out online for free through various sites), little or no bad debt, and a financial buffer for those things that don’t go exactly according to plan.Number 4 | Know what type of investor you are
The choice for any investor is: Do you want to continue making the same (largely avoidable) mistakes, or are you looking to enhance your learning experiences and increase your investment results?
Are you looking for big or small results from your investing efforts? Are you happy investing in property as a hobby, and satisfied with relatively modest results? Or, are you seeking outstanding results and willing to treat investing as a professional business by putting in the corresponding time and effort? Keeping these questions in mind, take a step back to establish what type of investor you are.
Take a good hard look at yourself. Assess your ability to stick to your plan. What are your weaknesses? What are your strengths? Where could you use assistance?
Regardless of what traits you find in your character that are holding you back, rest assured you aren’t alone! In fact, the one thing that adversely affects most investors is fear. The trick is to work out what that fear is, and tackle it head on. It’s likely your own fears will fall into one (or more) of the following categories:
Fear of losing moneyFear of not having enough to investFear of missing outFear of repeating past mistakesFear of looking stupidFear of asking for helpNumber 5 | Assemble (and use) a team of experts
Now you understand your weaknesses, it’s time to build your personal team of property experts. Because in property it’s just as often who you know, along with what you know, that can make all the difference to your results.
So don’t be tempted to try and do everything yourself, because you can’t be an expert in everything. Your team of property professionals should have the skills and knowledge to fill in your knowledge gaps, and provide you with results-driven advice. Your go-to team should include an accountant, financial advisor, mortgage broker, solicitor, conveyancer and property manager. Their skill bases will combine to make your life easier!
If you’re serious about moving beyond investing in property as a hobby and want to treat it as a profitable enterprise, then think about building your team as a way of employing the right people to help you build your business.
Bonus tip | Invest in your yourself and your education first!
Like most things in life, investing in property is a skill that needs to be both learnt and practised to generate the best results. And let’s face it, you’ll pay for your education one way or another, so it’s better to invest in your learning up front instead of investing precious time in making costly mistakes.
Ideally, you’ll spend just the right amount of time in upskilling to allow you to move from your current level of knowledge to being able to achieve better results sooner, safer and more predictably.
Importantly, don’t allow the pursuit of education to lead you into procrastination and delay.
It can seem overwhelming to consider all the things that you need to do to become a successful property investor, so don’t let that stop you in your tracks. Instead, allow expertise to guide you.With your goals documented, your strategy in place, an understanding of your limitations and your team at the ready, it’s time for action! You’ll soon see that the technicalities of property investing – while important – are secondary, and that successful investing is a skill that can be learnt.
Remember that any journey worth embarking on will carry its own set of challenges and rewards. Remember, too, whatever it is that you want in life there has probably been someone else who has already been there and done that. Surround yourself with the right team and reap the rewards!
If you’re ready to improve your results, book in a free discovery call with one of our property experts to find out how we can help.
