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!