As a property investor have you asked yourself, what is it you really want?
I speak with hundreds of investors each year and their initial response is that they want a property.
Perhaps it is their first property or possibly the next property to add to their portfolio.
But that can be a very superficial response.
I gradually start to dig deeper and start working on their “why” and what they are really hoping that property will do for them.
Of course, everyone’s response is usually the same, in that they want to have financial freedom.
But, by digging down another layer, it becomes apparent that it is not about the next property, but in fact something far more important….. having choices.
Let me explain
At Metropole clients come to us with a desire for more choices and that tends to mean different things to different people.
For 99% of our clients, it is not about mansions and shiny new Ferrari’s.
Most desire a certain income in retirement, that will allow to live comfortably and will give them those choices they desire.
They want the ability to slow down, perhaps travel and life a comfortable lifestyle, without the burden of financial headaches.
Some have a passion project they aspire to undertake, others want to give back to charity, while many want to leave a legacy for the next generations.
In our first session together, barely a word is spoken about “the” property or “a” property.
But, believe it or not, this means our clients then move forward with even more clarity and focus than they had hoped for.
They know exactly what they want to achieve and in what timeframe.
Direction & certainty
I always suggest that if you sit with anyone related to property investing and they start by offering you a property, you are in the wrong place.
That is a very superficial, a very shallow type of discussion.
As I pointed out, it is not a property that investors want, that is just the vehicle, it is the choices.
With their end goal in mind, we can then reverse engineer and build a bridge or a pathway to their choices and desired outcomes.
From that point on, it is imperative that all decisions are made in conjunction with their long-term strategic plan.
For many investors that first step may not be forward and buying a property, but it may be sideways or even backwards.
For those holding multiple properties, their existing properties may not perform at wealth producing rates of return and may need to be replaced with investment grade properties.
This can be why many investors come to the crossroads and are unsure about what to do next – they do not know where they are heading.
There is a clear process and framework to follow before we get to the property.
Now you know your destination, you just need to find the right vehicle.
Preferably the one that will get you there the fastest, the most efficient and importantly the safest.
But how do you find the right property and how would you even know if it is the right property?
Importantly not off a “gut feel” - we do this by undertaking further scenario analysis, using facts and data and our decades of perspective.
We use computer projections and modelling on different properties in different locations to find the scenario that will best fit our clients long term goals.
Too many investors buy off a gut feel and then find out the costs and cash flow analysis the hard way.
By using this process, it allows us to factor in everything from inflation to living expenses to holding costs and capital growth and as a result there are no nasty surprises.
With the numbers pointing us in the right direction, we can now use our on the ground knowledge and perspective to execute and find an investment grade property.
You see many investors and advisors take a science-based approach, but they lack the artistic skill that is perspective.
For this we use our top-down approach, using longer term fundamentals to find the right state, the right suburb and the right street and the finally the right property.
Think of it like a holiday.
I was lucky enough to spend Christmas in New York back in 2019, it was something I had been planning for about 5 years.
I started out my planning with the destination (end goal) …. not the aeroplane (vehicle).
I knew where I was going, I knew where I wanted to stay and where I wanted to visit, and I knew the total cost.
Once I had the destination and I knew what I wanted it to look like, I was able to work backwards and to follow a process to get us there.
Imagine if I had just started with the vehicle and has hopped on a plane going anywhere, hoping it would take us to New York.
It would have been a disastrous holiday.
Instead, we arrived safely, I had ample funds for accommodation and sightseeing, so we could have choices and could relax and enjoy our holiday.
It should be no different when investing in property.
The bottom line
So, what is it you really want as a property investor?
The first thing that comes to mind may be a property, but dig below the surface and ask yourself why?
What is it you want the property to do, what is the desired outcomes and what choices are you hoping for in the future?
With that in mind, work backwards, maybe understand your existing properties and make your next property decision a more strategic one.
Do not just go off a gut feel or the last 30 seconds of news.
You will then have confidence and clarity in the direction that you are heading and it will enhance your chances of arriving at your desired destination.
Brett Warren is a director of Metropole Properties in Brisbane and uses his 18 plus years property investment experience and economics education to advise clients how to build their portfolios.
He is a regular commentator for Michael Yardney's Property Update.
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.