Property investment is about good investment choices, in an effort to capitalise and increase net worth, often with the goal of retiring with a good residual income.
It means treating property investment as a business – not just a hobby that you ‘take a punt’ with. It’s a huge investment – and so needs to be taken very seriously – especially to find and focus in on the wonderful opportunities that exist. There are some real challenges that investors face – and being aware of these can help you to make better choices as you progress through the business.
Here are some of the real challenges property investors in Australia today face:
Shortage of time
To invest well and profitably requires careful planning , organisation and a lot of market knowledge. Most people just don’t have the time to do this properly themselves – and they want someone who studies the business to help them through it – and make sure they are well organised and informed.
Emotional decision making
The risk here for investors is making decisions based on emotion and personal bias rather than numbers and pragmatism.
Imagining a property you like is the best investment is a common mistake – a coastal retreat in a beautiful area that seems wonderful may not be the best investment.
Making quick decisions
..without a solid plan in place, people will often purchase property based on an area they are familiar with – rather than the best place for that investment.
Giving up after one bad experience
..such as going through a situation like dealing with a difficult tenant – and rather than recognising that it is part of the process and keeping an eye on the longer term vision, cutting their losses, selling up and jumping ship.
Only taking advice from friends and family
Everyone has an opinion and their own experience – but are they the best qualified people to help you? As friends and family want to protect you, they may be worried about you taking any risk, which means you could miss out on the best opportunities.
A lack of quality research
There are wonderful resources available these days to help investors find the best opportunities – and as investors become ever more sophisticated and professional – Mum and Dad investors take a huge risk by not having asked the right questions, often limiting themselves and their returns. A great example would be restricting themselves to a particular city or even suburb –rather than understanding the national opportunities – this can lead to a dramatic reduction in potential and upside returns.
Importantly, your goals and the timeframe to achieve them need to be planned out in a well-considered property investment plan. You need to work out what you are working towards, and the best way to achieve it. Too many people jump in without considering all of the variables and numbers, opportunities, and without a proper risk analysis. This means most property investors end up with just one investment property, rather than building a portfolio and a broader base to build equity and net worth. This really restricts their overall upside, meaning that the dream of retiring from residual income from these investments remains just that – a dream. As the old saying goes, if we fail to plan, we plan to fail.
Not using equity efficiently
Many still spend 30 or more years paying off the family home, rather than accessing the growing equity and investing in more properties as the equity in it becomes available to use. Less than 8% of property owners own an investment property – meaning most only own the home they live in. Of this 8%, more than 70% own just one investment property. To generate a residual return of 100k or more – something you could retire on – a strategy and plan is required to determine how many properties will get you to that goal.
Property investment requires being bold, confident and prepared enough to be able to snap up great opportunities when they come along
So being organised, well-researched, inquisitive and good with numbers is a great start. On top of this seeking the right advice and remaining open-minded about where you are happy to buy also helps put you in the best possible position to face the real challenges that property investors face.
By having your risk profile and property plan sorted, you can be prepared and make confident decisions around profitable property purchases. With knowledge you will become ever more comfortable with your decisions, and confident to make them, putting you on the right track towards success.