8 Things Every Successful Property Investor Had to Learn

By
Expert Advice with Sam Saggers 12/09/2016
 

“Being ignorant is not so much a shame, as being unwilling to learn.”
- Ben Franklin
 
No matter how long you live on this earth, there will always be something to learn. I learn every day, and I know that you do as well.
 
Following are some things that savvy property investors have had to learn to achieve success:
 
1.    Know the market fundamentals
When you know what signs to look for you will have better results than if you simply buy the first property that suits your budget.
Take a look at the six key market drivers to spot a potential opportunity:
  1. Population - a growing population will often need more houses to support that growth, depending upon existing supply.
  2. Economics - look for a diverse number of employers, paying attention to the income levels to help determine the viability of the market.
  3. Infrastructure - do you see a significant number of projects, both planned and in the works, funded by private industry as well as government?
  4. Supply/Demand - how much land is available for release? Is there a high vacancy rate, indicating an abundance of housing options?
  5. Demographics - study this one well. It will reveal who your prospective tenants are; their economic capacity, the types of properties that appeal to them, etc.
  6. Suburb yield - Strive for a yield that’s 5% or more, but if the capacity to increase value is possible, you have the option to drive up the yield by forcing value.

2.    Think beyond the first property
You won’t achieve financial freedom by purchasing a single property. This is why it’s important to think of the next property - or two - that you’re going to buy after you purchase the one you’re looking at now.
 
The goal should be to obtain a short return on your deposit - hopefully within six to 18 months time - and then recycle those funds to buy your next property.
 
3.    Ignore your emotions
Yes, you will have an emotional feeling strike you when you first see a property. There’s really no way around that, but what you’ve got to do is squelch those emotions.
 
Once you’ve done that, you can proceed to run the numbers to see if the property represents a potential profit.
 
If it does, then great - make your offer.
 
Otherwise...walk away.
 
4.    Practice makes (nearly) perfect
There’s a good reason your teachers made you do page after page of the same maths.
Mastering a new skill takes time, lots of practice and repetition.
Learn how to crunch numbers and you’ll be much more comfortable when it comes to the ‘real deal’.
Search a number of property sites to make it more realistic and pull the numbers. Sit down and figure out calculations such as your ROI, cap rate, expense ratios, etc. to see which deals are potentially viable.
Pick a wide variety of properties - even some you can’t imagine buying, either for financial or strategic reasons - and run the numbers anyway!
Do this on a consistent basis and you’ll spot overpriced properties, but sometimes you’ll spot a deal. You’ll also get a good feel for where good opportunities can be found.
 
5.    Make lots of offers
After you’ve analysed a lot of properties you’ll begin to see patterns. Choose a property that suits your strategy and your price range and put out your offer.
Then, find another one, and then another one, etc. and do the same.
Don’t be afraid to bid low - it never hurts to ask.
The more you put yourself out there and bid on properties, the more comfortable you’ll become with it.
 
6.    A budget is crucial
Think of your budget as the foundation of your property investing.
 
Without a budget, savings and buffers built into your investing, you’ll always be struggling to make ends meet and you will miss the mark in your investing strategy.
 
7.    Don’t skimp on due diligence
Due diligence is non negotiable.
 
As I mentioned earlier, we never stop learning, so the better you understand what drives a market (and the expected behaviour of the market demographic) the more you’ll find properties that will deliver good results.
 
When searching, obtain information straight from the source rather than second (or third) hand.
 
Some sources include:
 
  • ABS
  • ATO
  • district and council websites
  • data information websites like CoreLogic, f/k/a RPData, Residex, Todd, Heron & White, etc.
 
Once you’ve narrowed down your options to one or more suburbs, calculate the estimated cash on cash return of each property you’re looking at.
 
Eliminate those properties which represent an opportunity cost in that it will take too long for you to recycle your deposit.
 
8.    You never stop learning
Property investing is not something you learn in a day, or even a year.
 
It takes a lifetime.
 
Learn everything you can from books, seminars, webinars, etc., but make sure the educators are successful property investors, preferably ones who are actively investing.
 
Then search for a mentor who can help you follow through with everything you’ve learned! Speak with several different ones until you find someone who is both a successful investor themselves, and who has the teaching and mentoring style that works with your personality.
....................................................................................................
 
Sam Saggers is CEO of Positive Real Estate and Head of the buyers agency which annually negotiates $250 million-plus in property. Sam's advice is sought-after by thousands of investors including many on BRW’s Rich 200 list. Additionally Sam is a published author and has completed over 2000 property deals in the past 15 years plus helped mentor over 2200 Australian investors to real estate success!

Read more expert advice articles by Sam
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.

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