Nothing in life ever comes to you by chance, and don’t believe anyone who tells you otherwise. Every decision you’ve made has led you to where you are today.
Don’t expect sugar coating of every piece of property knowledge I pass on to you. I will tell you as it is, so you can then make well informed decisions and stay in command of how you reach the lifestyle goals you’ve set for yourself.
On the go? Here’s 30 seconds of key take outs:
- All the most experienced, most successful property investors will have had their share of mistakes, downturns and pitfalls. You can learn heaps and protect yourself, by learning what to look out for.
- You’re in full control of your investment strategy. By adopting some key investor mindsets, you can stay in control and keep steering in the right direction to get closer to achieving your goals.
- Where there is a property investment pitfall, there is a solution to break the fall and help keep you steady, ready for the next upturn.
Keep going >>
Straight up, here are some of the mindsets you need to start practising if property investing is what you want to do:
#1 Do your homework
Become a life-long learner starting now. With the internet available from almost any device you own, you can do your research while you’re on the go. There are no excuses for this one. And we’ve got loads of tools and resources available to you at Capital Properties.
#2 Be prepared to put in the hard yards
You’re going to need to change the way you used to do things, maybe get a little uncomfortable at times, but you need to know that growing equity in property investing is not a passive hobby, but a career.
#3 Manage your investing
Nuh-uh. This property investing trade of yours won’t just look after itself you’ll need to manage it along the way. Along the way you’ll learn how to do this in an efficient (and effective) way.
#4 Adopt a proactive mind set
Don’t ever ‘hope for the best’. Make the best happen. If you want to know how, go back to points #1 to #3!
#5 Get resilient
Don’t get concussed by one blow or set back and hastily sell up because you’re worried about it happening again. Know that there will be good times, and not so good times. As with everything in life, you’ll have to ride through the down times by focusing on what is in your control, what isn’t and how you can make the best of the current situation.
#6 Be discerning if you’re asking for help or advice
When it comes to knowing who will get behind you and support you reaching your goals, you’ll need to identify those mentors, friends and property experts who can give you the right help and advice. The right help and advice comes from expert knowledge and experience in property investment, or from people who you know really want you to do well in life.
Don’t stick your head in the sand when things don’t go as you’d expect. You have an obligation in this trade to take responsibility. The easy option is to blame someone or something else. The harder option is to suck it up, weigh up your options and continue on your way.
If you are in property long enough here’s what you’ll experience for sure:
- long term tenancies
- short term and extended vacancies
- great tenants; and
- the worst tenants.
At the same time, you’ll make mistakes. But you’ll learn from them. Read my blog article 10 property mistakes I made, so you won’t. In fact, the most successful investors make mistakes. It is how they go about correcting them that makes all the difference.
Download this handy PDF reference and keep it visible [print out a copy and pop it on the wall of your study or office] to remind you what not to do:
Capital Properties > 10 common property investor mistakes
Hope for the best but plan for the worst
… as they say in the Military! It’s a good mantra to follow when it comes to investing in property.
Here are the major pit falls to be aware of so you can be prepared, and plan ahead.
Property pitfall #1: assuming property values always go up
Like with any investment in assets there will be growth phases and contraction phases in the property market. Generally, property is cyclic; meaning there are fluctuations but generally the downs eventually flatten out and start appreciating again.
Understanding the nature of property cycles and where the market is at any point in time, will have a massive impact on how you approach your investments.
Capital growth is a key factor when investing and everyone [worth their weight in the property trade] always tell me that investing for the long term is the key to success.
Hold, don’t sell is the successful investors’ hymn.
Property pitfall #2: affordable shouldn’t mean starvation
When investing for the long term is your preferred approach, you’ll need to get real. Ask yourself if you can truly afford the loan and holding costs? On paper you can certainly make it look like you can, by just cutting back your spending. But how realistic is that really. Are you truly going to never eat out again just so you can buy this particular property?
If the answer is ‘no’ the property may simply not be the right one for your circumstances.
Keep in mind that you’ll always need to have a buffer to protect yourself and your investments. A buffer is having some funds on the ready in case something pops up that needs you to sink some funds into. Keeping a buffer is an important factor for the long-term property investor.
“We are defined by what we do repeatedly therefore excellence is a habit, not an act.” – Aristotle
Property pitfall #3: making the wrong turn in a downturn
As highlighted earlier, once you’ve been investing in property long enough you will experience a downturn.
How do you factor a downturn into your strategy knowing that it will be part of your investment adventure? What is the right move to make?
Here’s a #Investor Planning Tip for you. You can reduce the risk of a down turn by purchasing in the major capital cities.
When we look at the historical cycle of the major capital cities the average growth patterns are 8% since the 1980’s and the major capital cities experienced [on average] a 4.74% correction when the downturns occurred over the same period.
What’s the lesson here? Above all else stick it out through the downturns.
Hold. Hold. Hold. Resist the urge to sell in a depressed market or a ‘buyers’ market’.
It simply doesn’t make logical sense to sell in a down turn. Think about it. There will be more stock on the market – meaning more choice for buyers or other investors – all the more challenging to get the price you want.
If you really want or need to sell, hold on and sell in a rising property market or ‘sellers’ market’. The thing is, once you reach this point in the cycle, you’ll want to hold on and leverage the equity instead so you can grow your portfolio.
Buy and hold. That’s where the biggest gains are made both in terms of capital gains, and rental income.
Property pitfall #4: a vacant investment property
What do you do if you’re facing into an extended vacancy where there doesn’t seem to be a suitable tenant anywhere in sight?
Typically, in a down turn there are more properties on the real estate and property rental market. This means more competition, which can drive down the rental income tenants are expecting or are prepared to pay. So, how can you minimise the time your property sits vacant.
Here’s another #Investor Planning Tip for you. You need your property to stand out from all the rest on the market.
Use the vacancy as an opportunity to square away any maintenance items. Consider:
- Does the property need a general garden tidy or something to lift street appeal?
- General wear and tear can affect the appeal of your property to prospective tenants. Is it time to replace the carpets, or freshen up with an interior paint?
Spending money to aesthetically improve your property may not be what you wanted to read [remember, you’re spending money to make money] particularly when the property is sitting idle. But a little bit of investment could give you the edge you need to soldier on through to the good times.
The quickest and easiest way to attract good tenants in a competitive rental market is to reduce the rent by around $10 to $20 below market expectations.
Property pitfall #5: tenant problems
Are your tenants giving you, and your property manager, grief? It may be that they constantly need to be chased for payment, or they’re completely disrespectful of property and have caused damage to your asset.
What to do? Well, I was straight up with you at the beginning and warned you that stuff happens when you’re an investor. By adopting the right mindset and gathering the right support around you, you can get through almost any investment hiccup.
In the case of tenancy issues, typically your property manager will notify you within a few days, along with a solution. The few days in-between becoming aware and giving you a heads up, gives them time to remedy the situation on your behalf.
Here’s another #Investor Planning Tip for you. Choosing a good property manager from the outset, a manager who puts you first and chooses the right tenants can be the most effective way to minimise your risks.
At the same time, as a landlord you need to know your rights and have the right insurance cover while getting good advice from your property manager. A good property manager will flow all the correct protocol your way.
Additional information to help you smooth out investor bumps
How to choose the right insurances for your investment property
Capital Properties > Blog > How to choose the right insurances
How to find quality tenants
Capital Properties > Blog > How to find quality tenants
How to deal with problems with tenants
Capital Properties > Blog > How to deal with problems with tenants
How to keep good tenants eager to renew their lease
Capital Properties > Blog > Keep good tenants
Your property investment mentors at Capital Properties are always eager to help through the ups and the downs. Phone us on 02 9222 9444.