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Our property investing clients are a diverse group of individuals. They come from all walks of life, have different life experiences and have different goals they want to accomplish.
One thing that many of them have in common is a drive to create wealth for themselves and their families. That drive led them to seek out advice and information about property investing. As you’re reading this right now I’ve no doubt you possess that drive as well!
Simply put, an off-the-plan strategy allows us to “buy time” in the market. We put down a small deposit and then after the market grows we get to enjoy the gain in equity which can then be used to either pay down debt or purchase another investment property.
Over time I’ve come to notice that in addition to the desire for success, many of our clients started their property investing journey with a few bad habits and misconceptions that were stopping them from reaching their goals.
Skim over the following list. Do you recognise any mistakes you may be making? If so, take heart. Many of our clients faced the very same issues themselves when they first began investing in property. They have since fixed their mistakes and are on their way to great success, living their dream of financial independence.
1. Poor Financial Habits
I know that it can sometimes be a bit scary to sit down and work out where you are financially – especially if you’ve put off doing it for years – but it must be done in order to understand your situation and to establish some goals for your future. There’s no hiding the fact that if you’re living beyond your means, you can’t simply print more money to resolve the issue.
What do individuals do when they can’t meet their monthly bills? They ‘charge it’ of course, adding insult (high rate interest and fees) to injury, resulting in a spiraling cycle of debt, more debt, stress, worry and a lot of other issues that go with these problems.
Grab a pen and paper and sit down with all of your bills, receipts and paystubs. Determine what is going out and what is coming in. Create a spending plan or seek a financial counsellor if you need more help. If you’ve never attempted to create a budget one of the first things you may notice is that a lot of cash just seems to disappear into the category titled “miscellaneous”. In fact, you might be surprised just how much goes to that annoying little category.
While this can be frustrating, consider it a great opportunity because you’re likely to find your financial freedom hidden within the “miscellaneous” category. Don’t believe me? Take a closer look at all of those receipts you used to create that category. How many of them were for your daily cappuccino – or a pint (or two, three…you get the idea) with the guys after work?
Now this is where it gets down and dirty. Choose where you’ll cut but remember even though sacrifices may have to be made, it won’t hurt much. I’d bet that after a time you wouldn’t even notice it.
One of the first things you’ll want to do after creating a realistic budget – and sticking to it (not forgetting about it a few days later, you know who you are) is to work out what you want to do with all of your “found” money.
Since you’re still reading this – persistent, aren’t you? – you’re probably interested in property investing as a means of wealth creation. Since you’ve got some spare cash it’s time to put it to use by saving it until you’re ready to buy your first investment property.
Let’s say you want to save $5,000 in a year’s time. Calculate how much you need to save each week to get there. It works out to $96.15, just in case you don’t have pen and paper handy.
So how do you raise that $96.15 each week? Here’s where that lovely miscellaneous category comes in. Yeah, I know I said it was annoying – and it is annoying, but it’s also very useful as well. Take a look at some cuts you could make to reach your weekly savings. For example, cut out one coffee a day and you’ll have saved about $1,277.50 a year. See what I mean?
2. Lack of Long-Term Planning
Property investing is a long-term venture, one that shouldn’t be undertaken lightly. As it’s not a “get rich quick” kind of strategy you’ll want to be in a good position financially before committing to it.
Stay for the entire property cycle, otherwise you’ll miss all the fun! Seriously though, property investing doesn’t always result in a gain. Sometimes values go down, but more often they go up. If you can’t stick around for the long haul, you won’t be able to enjoy the best financial gains.
One key way to be able to stick it out is to plan well. Always have an exit plan and make sure you have a good solid buffer before you buy an investment property.
3. Waiting For The “Perfect Property”
Sometimes the ‘ugly duckling’ property deal will become a beautiful swan, but you’ll never know if you keep looking for the ‘perfect’ property. Keep your eyes and your mind open when looking for a great opportunity and don’t cross a property off your list until you’ve crunched the numbers.
For example, perhaps all the property appears to need is a few renovations. Dig a little deeper, running a feasibility report before tossing it in the discard pile.
Simply put, there is no such thing as a perfect property. It simply does not exist.
4. Getting the Wrong Finance
This mistake will cost you time as well as money. If you get stuck in the wrong finance you can get stuck, unable to release your equity to purchase another investment property or finance renovations – whatever it is you need to move forward as a property investor.
Seek out a finance broker or property coach who is knowledgeable and experienced in matters of finance, especially if this is your first venture into property investing.
5. Being Idealistic
There is no room for idealistic thinking in property investing. A smart strategy is to prepare for the worst while expecting the best. Property investing is not without its share of risks, but with smart, realistic planning you can mitigate most potential problems.
For more tips and strategies about these and other topics, come along to one of our FREE Property Investor Nights. They’re held all across the country in all the major capital cities so look for one near you.