Real life property millionaires share secrets


Whether you pay for it, get it unsolicited from a nosy old man on the train, or ring up your mother for it in the dead of night, there is certainly no shortage of advice.

You’ll find pages and pages of it within advertisements and marketing material for property experts who claim their advice can lead you to riches in property and life.

If only advice could come with a star rating like listings in a restaurant guide, we all might have a little more luck at picking through the bad advice to ferret out the nuggets of good stuff out there.

So we turned to you, our readers, for your take on the best – and worst – advice you’ve ever received. And you gave us some whoppers. Here are some of your favourite bits of wisdom, along with some you wish you had left behind. 

Prue Muirhead, YIP Investor of 2009

Best advice I was given: “Keep an eye out for the ‘ripple effect’”

My father told me to look out for when one suburb has had great capital growth over a short period of time, yet a neighbouring suburb has not.  He explained that this could mean that the neighbouring suburb will show a delayed capital growth shortly thereafter. When people can no longer afford to live in the more expensive suburb next door, they will buy in the cheaper neighbouring suburb, which will increase the property values in my (once) cheaper suburb – the ‘ripple effect’ in action.  I now spend many hours watching the Property Price Guide in the back of the Your Investment Property Magazine, to help with my research on areas for potential capital growth through the ‘ripple effect’.

Worst advice I was given: “Never invest in an area that you wouldn’t live in!” 

By memory, this was about 2008 and this person lived in a very expensive area which would have been affected by the GFC!  I guess his strategy is different to mine, as I like to purchase investment properties in areas where I can expect both returns and capital growth.  I buy properties that are neutral, or even positively geared within the first 12 months of purchase.  These areas are generally in the first home buyers’ market.  This person’s judgement is probably blinded by his emotional thoughts of where he personally would like to live, which has very little to do with investing in growth areas.

Renae McGlashan, YIP Investor of 2011

Best advice I was given: “Never let your schooling interfere with your education.”

You do not need to get the highest scores in school reports or certificates to make something of yourself. I myself am a school dropout and it shows that I have gotten to where I am not by finishing year twelve and going to university for years on end and I am not the only one! That’s not to say that school isn’t important, but you can learn in other ways too. Find a mentor and you will soon learn that property is not a gamble but an educated risk.

Worst advice I was given: “Live everyday like it’s your last, for all you know you could be hit by a bus tomorrow!”

Let’s face it, you are probably not going to be hit by a bus, which means the decisions you make today you may have to live with for the next 50 years. The only thing that sat itself to success was a hen. So, start thinking of the future and getting to where you want to be, make wise decisions and take action that will not only allow you freedom today but secure your future too.

Michael Yardney, CEO Metropole

Worst investment advice I was given: Property investment is easy.

This was clearly wrong because most property investors fail!

Look at the facts - 50% of those who get into property investment sell up in the first 5 years and of those who keep their properties, the vast majority never ends up owning more than one or two properties. This means they don’t ever achieve the financial independence they desired.

However over the years I found property investment is simple, but not easy.  And that’s not a play on words.

It’s simple if you follow a proven formula but it’s really hard to become wealthy in property if you do what everyone else is doing. While many investors chase cash flow or the next hot spot, I’ve found successful investors build their asset base.

Over the years I have developed a 4 stranded strategic approach to property investment that ensures the properties I buy a property will outperform the market averages.

  1. I buy a property below its intrinsic value.
  2. In an area that has a long history of strong capital growth
  3. I look for a property with a twist  – something unique or special or different or scarce about the it.
  4. And a property where I can “manufacture capital growth” through refurbishment renovations or redevelopment.

This means I minimise my risks and maximise my upside as each strand represents a way of making money from property and combining all four is a powerful way of putting the odds in my favour. If one strand lets me down, I have two or three others supporting my property’s performance. 

The best advice I received:  “Treat your property investments like a business.”

Over the years I’ve seen a small group of property investors, those who treat their investments like a business, become very, very rich by growing a multi-million dollar investment property portfolio. They do this understanding “the system” and getting the right type of finance, setting up the correct ownership and asset protection structures and knowing how to legally use the taxation system to their advantage.

Let's face it; the majority of Australians will be always be employees but we all have the ability to become financially free by becoming property investors who treats their investments like a business. And you can set up your own property investment business while you are still an employee or self-employed.

In fact that’s what I did and what almost every wealthy property investor I know has done.

They built their wealth by growing their real estate portfolio one property at a time. While this was going on they lived off the income they earned from their day job. They started off with one property, then leveraged off its capital growth to invest in another and another until one day they found themselves with a true property investment business. One that gave them financial freedom and choices in their lives.

Justin Wood, successful property investor

Best advice I was given: “Invest, don’t speculate.” 

A mantra my father passed down to me is investors should always invest where there are jobs, infrastructure, and population growth. This usually leads to our major cities. Within our cities you need to drill down even further and find quality property that is in demand (currently smaller houses and units) close to work nodes, public transport and lifestyle precincts. For example Brisbane has major work hubs in Ipswich, Chermside and the City. Using this advice even when most suburbs have gone backwards in value, my portfolio has had small to modest increases because the demand is still there for affordable and well-located property in our major cities. When the market starts to move again, my portfolio will be well placed to take advantage thanks to this great advice. 

Worst advice I was given: “Don’t be afraid of negative gearing”

In my early years as a property investor negative gearing was the buzz word. For some spruikers it still is. Beware. Negative gearing is just a nice way of saying 'you’re losing money'. Basically you are subsidising the lifestyle of your tenants until you can get that property to start putting money in your pocket.

The second property I bought after advice from various celebrity property investors was to use a negative gearing strategy. The big problem with negative gearing is you need capital growth to outpace what you are losing per year in mortgage and other costs.

I still buy negative geared properties with the goal of getting them to put money in my pocket as soon as possible. It is important you calculate just how long it will take you to get a negatively geared property into a positively geared one.

With capital gains most likely subdued this year and the next it is a very important question to ask.

"Meet real-life property millionaires face to face and have your property investing questions answered at the YIP Property Investors Forum Melbourne in 2013. CLICK HERE for more information and to register."

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