Asking a successful person what they would have done differently on their investment journey knowing what they know today, their answers include :
Learn what you don’t know you don’t know
The common theme is making mistakes when they should have
listened to successful mentors but at the same time learning from their
mistakes by moving forwards wiser. It is only a setback, learn from it and try
again.
An unconscious incompetent is someone who ‘doesn’t know that
they don’t know’. We are all in this place over many subjects and only discussion
with others or reading will move us from being unconscious to conscious incompetents.
To move from a conscious incompetent to a conscious competent
we take on mentors, consult with professionals, do our research, and seek
advice from successful people. To the point where we can make informed
decisions.
Most investors invested not knowing what they didn’t know
and probably have done Ok but could have achieved a whole lot more if they had
worked with someone who has competency. Getting your investment decision right
from the outset is vital and could amount to -$500,000* over ten years and other lost investment
opportunities if the banks told you to come back when you had more equity or a
higher cash flow.
Your thinking
Read any psychology book and the profession will tell you
that how you act outwards is based on your internal thinking of how you see
yourself. This is why poor people remain poor and have less as they feel they
don’t deserve to be better off and this is why wealthy people get richer as
they carry the self-belief of having more and wanting more for themselves and
their families.
Your attitude and your thinking will determine your actions.
The people you associate with will also dictate your attitude. Successful
people mix with other successful people and behave and learn to think and act
like a successful person, they break their mould and aim higher. This is
healthy and financially rewarding. You have the opportunity of thinking
successful so that you can establish financial independence for yourself and your
family and create generational wealth for your next generation.
Have you been told it is more important to have your health
than money or that too much money is evil? Write this on a piece of paper and
burn it! Adopting a mindset of abundance
is far healthier than being average and way better than being poor. Aim high
and if you are successful and create more than you need, give it away. Create a
legacy which will be around long after you have gone. This is a healthy mindset;
can you imagine all the good you could do if you had more than you need? Wow!
How great is that.
Understand your “Why” you want to Invest and set your goals accordingly
Your why will allow you to get off the hamster wheel of
life!
When you have purpose and an emotional reason why you want to
invest, such as not having to work until past retirement as your parents or parents
peers have to do, or a burning desire to establish your financial independence,
or aim high to leave a legacy and the world in a better place. If you have the
burning desire, you will take action.
Set goals, put in place a strategy and match the investment
vehicle (the property) to your goals and strategy. Avoid the comfortable
investment in your neighbourhood and seek out capital growth opportunities with
strong rental yields where major infrastructure investment is under
construction or planned and budgeted for.
Not all property is investment grade, in fact very few
properties are. Meaning the investment has to be soundly underpinned by strong
market fundamentals and the numbers which will drive your investment have to
stack up to your goal and strategy. A mentor can point out which properties
lend themselves better to being an astute investment and what to avoid.
Surround yourself with experts
As stated above, your investment strategy could be more
easily achieved by working with professionals who have your interest at heart.
Surround yourself with a good team of industry professionals which include a
mentor, a finance broker, a solicitor etc. Making an informed decision requires
experience, knowledge and skill.
Be Fearful of NOT committing to yourself
A massive subject we could talk for hours on, many books
have been written on this subject and you need to dig deep way beyond how you
were brought up by your parents, teachers and friends. Fear will hold you back
from your dreams, fear forces you to look for the reasons why it won’t work for
you instead of focusing on the reasons why it will work. Fear is illogical and
debilitating, work out why you are fearful and focus on your reasons Why you
want to achieve your goals and know that you will be uncomfortable in
overcoming your fear and taking action; this is normal.
If you have surrounded yourself with a team of professionals
who have your interest at heart and you know, like and trust them go with their
guidance and focus on all the reasons why their advice is sound whilst understanding
potential risks which can be avoided or mitigated.
Some people fear failure or have experience previous failure
and this becomes your fear. Analyse why you fear failure or why you previously
failed, get up with the help of a good team and focus on success and you will
be successful. Successful people learn from failure and move forwards smarter.
Invest with Strategy
When you understand the outcome you want from your
investment, you will then be able to put in place a strategy with your mentor
to work towards achieving this strategy.
Some investors look to buy, fix up and flip at a profit. Or
they may look to buy, demolish and manufacture equity by building more than one
dwelling on the property then sell, hold or hold one and sell other to maximise
their returns and go again.
This strategy is not investing in property but a business
strategy to manufacture equity and take a profit and go again. It works for
some and proves a risk and loss for many when they have not foreseen the curve
balls coming their way. It is a business and like all business comes with risk,
work with a professional to mitigate your risk.
The other strategy most investors elect to implement is to
secure quality investment properties and to build a portfolio which they hold
onto.
This is achieved using leverage, rental income and through
tax savings then using equity and cash flow to invest again and again. At a
given time you will now have choice of what to do with your portfolio.
Choice gives you financial freedom and independence and
allows you to live the life you deserve and want for yourself and your family.
When you get the strategy right it also allows you to positively impact other
peoples lives whilst creating generational wealth for your next and next
generations.
Establish our goal, set your investment strategy to align
with the goal and focus your attention on investing armed with knowledge. It is
imperative that you get your investment decision right from the outset.
Take advantage of Compounding Returns on Investment
You would know the term compounding interest, but do you
really understand the power of how compounding your returns over the life of
the investment actually works?
A simple example is : if I play golf and bet 50cents
per hole on the first hole, then $1 on the next and $2 on the next then double
again to $8 on the next etc and I win all 18 holes during the game how much
would my 50cents be worth after just 18 holes?
Would you believe it grows to a staggering $131,035!
This is the power of compounding returns and it all started
with just 50cents
Property values in many cities has more than doubled every 7
– 10 years; lets assume a slow down to just 5% capital growth compounded over
say 10 years a $500k property in 10 years time could be worth $823,504
Markets will fluctuate over the ten years but so what, your
investment is still working hard for you over the 10 year period, compounding
growth is significantly maximised over the last 3 or 4 years, meaning take a
medium to long term view on your investment strategy.
Leverage into your Investment
You have the power in your hands to multiply your wealth and
success with the power of leverage.
Now if you take advantage of investing using other people’s
money (the bank) and Leverage into your investment with a 10% deposit; on this
same property of $500k you only put down $50k deposit and borrow the balance.
Through leverage you are actually earning capital growth on
the full $500,000 even though you only invested $50k, this is the power of
leverage.
If you invested the same $50k at 5% compounded after 10
years you will only have $82,350. Does this make investment sense to you?
Have someone else help you towards your financial planning goals
Making your money work smarter.
What we mean by this is over the life of your investment you
would have had a tenant(s) paying you a lot of rental income could be around
$265,731 over 10 years starting at $460 pw and escalating by say 3% rental
increases per annum. This is nothing to sneeze at
Next you are able to claim depreciation against the tax you
would otherwise be paying to the tax man, how good is that. This could amount
to around $50k over 10 years on a property value of $500k.
$50k tax that would have been paid to the tax man goes straight
into your pocket.
This is what we refer to as creating Passive Income.
Property is a 7 – 10 year investment
A professional will advise you not to speculate on property
and to play the long game. As per what we shared with you above the longer you
hold onto your investment, the stronger the compounded returns will be + the
more rent you will collect and the more tax you will have saved.
By no means is investing in property a get rich quick investment
strategy; you would want to invest astutely, set and almost forget whilst you
build your capital and equity so that you can invest again and again.
Capital Growth + Strong Rental yields are imperative when
analysing your investment opportunity. These days it is possible to achieve
both elements where previously you would have been told to focus on trying to
get a good growth or else try to focus on high rent for cash flow. Why focus on
one element when both are readily available?
Growth and Rental yield will allow you to secure your next
investment that much sooner. Banks lend more favourably to investors with
equity and good cash flow and not favourably when you lack one or both vital
elements.
Location, Location and Location
Heard this one before? But what does it actually mean?
Your property professional will educate you to look outside
of where you live so that you have every chance of maximising the investments
performance. A sound location is a non-negotiable and, in all likelihood, it is not in your neighbourhood.
Market statistics keep proving pundits wrong who are adamant
that you need to be within 10km of a major CBD for stronger growth.
Your chosen location should include all the required
fundamental which will soundly underpin your investment decision including the
creation of new jobs to attract population growth. Jobs are an engine driver
for a location.
If the government is investing heavily in a location, they
have done their research and want to make a profit on their investment, do the
same. Government invite industry to also invest into this area and industry
want a return on their investment. Both create jobs and jobs attract population
growth. Population growth places upward pressure on supply of dwellings. This
upward pressure tends to result in capital growth and strong rental yields.
Follow the money!
Be mindful of your investment strategy and match the
location and type of dwelling to your preferred outcome and chosen strategy.
Avoid seeking out negativity
There is so much unfounded noise being espoused by the media
in order to sell advertising space. So many negative wizards whose goal it is
to ensure you fail.
If you are ‘dabbling’ with the idea of investing naturally
you will look for all the reasons not to invest; however if you have purpose
and a strong desire you will look for all the reasons to invest!
RULE : If you have decided to invest, avoid reading the
media!
If you are going to invest, seek professional assistance and
read factual market reports put out by large industries who do not sell
property but earn their honest keep through providing analysis and fact. Invest
where a government is investing, they have done their homework. Invest where a
major retailer is investing in a new outlet, they have done their homework.
In Summary
Find your purpose and why; when you know this and are
passionate about it you will take action.
Seek out and surround yourself with industry professionals
you will get to like, know and trust. Work with them as they have your success
foremost in their hearts and will best serve you in your investment aspirations
and journey.
Be grateful for what you learn from them and offer gratitude
to them and to others you want to do better for themselves. Refer them into
your network so they too can achieve their financial aspirations.
Aim to dream big, bigger than you are comfortable with and
if you do achieve over and above your goals give back, pay it forward and leave
a legacy. Successful people support their local communities or a charitable
cause to make a difference to other people’s lives.
Think of how many lives you can impact positively if you had
more money! Is that good or great?
Lastly, remember that very few properties lend themselves to
being of Investment Grade!