By Ian Hosking Richards
First published 28/11/2011
For the past few months most of my articles have been written with the aim of explaining in simple language various aspects of the mechanics of property investing. My aim has been to build the knowledge base of the reader so that they are able to take full advantage of all the wonderful opportunities there are to create wealth through property. The theory is that most bad investment decisions are made by people who do not have all the relevant information at the time that they make their purchase. So by ensuring that prospective investors know what questions to ask and how to assess a potential purchase hopefully many bad investment decisions can be easily avoided and anyone armed with this information can get started straight away with confidence.
However, life is rarely that simple. Most people ‘learn by doing’, and this seems particularly relevant to investing in property. If you are the type of person who needs to know absolutely everything before you take action, you will probably never end up buying anything. The basics need to be mastered, but it comes to a point where you simply have to take a leap of faith, hopefully guided by someone with more experience than you, and there is a very good chance that everything will work out fine.
Yet many potential investors who possess sufficient knowledge to get started never end up doing anything. So what is the problem? What is the cause of all this procrastination?
Focusing on the negative
One of the first questions that I ask of potential investors is ‘How long have you been thinking about investing?’ The answer can vary from several months to several years, or even decades. So in order to help them get started, I simply need to find out what concerns have prevented them from taking action. The surprising thing is that most of their concerns are, to my mind, quite minor in nature and even if these concerns were realised no major long-term financial harm would ensue. People worry about interest rate rises. So take a fixed rate loan. They worry about potential damage caused by tenants. Take out landlord’s insurance cover. It is cheap and a fully deductible expense. Don’t let little things that probably won’t even happen prevent you from securing your financial future.
Taking investment advice from non-investors.
Everyone, it seems, is an expert on real estate. Your cousin, your next door neighbour, and the guy who drives you to the airport at five in the morning. And if for some strange reason you are devoid of all human contact you can always get some great advice from the front page of the tabloid newspapers – always a great source of unbiased and balanced advice! Most of this advice seems to come in the form of sweeping generalisations and is invariably negative (“Don’t buy in Queensland, the property market is about to crash, etc, etc”). It is hardly ever backed up with any relevant information to support such a position. The quality of your investing, particularly in the early days, will depend on the quality of the advice that you heed, so be careful who you listen to and what you read.
Many people hold beliefs that do not serve them. One such belief is that it takes money to make money. But I know that it is more about your resourcefulness than your resources. Just take inspiration from some of the reader profiles featured in this magazine. Many have started from humble beginnings but have achieved great things because they had a vision and took the opportunity when they saw it.
In order to build wealth through property you have to actually go out and buy something. Too many people are chronic procrastinators. They spend lots of time reading magazines, attending property seminars, and spending thousands of dollars on ‘mentoring’ programs. But it is all a waste of time and energy if they are not prepared to actually buy something. If you have been ‘educating’ yourself for a while now and have still not made an investment, you need to start asking yourself why. For me the fear of working hard for 40 years and ending up with nothing outweighed by far my fear of all the unknown horrors that we imagine await the first-time property investor. And as is usually the case, once the unknown is known you can look back with hindsight and wonder what all the fuss was about.
Ian Hosking Richards is a successful property investor with a portfolio of over 30 properties. He is the CEO and founder of Rocket Property Group, a leading independent real estate agency that helps hundreds of people each year enter the property market or grow their existing portfolios.
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