The very basic conditions to become a property investor is to have some borrowing capacity and some savings or equity. I assume that this is satisfied, so let us look at what kind of mindset is required to make a successful property investor.
Be inquisitive. The more questions you ask the more you are going to learn. Sometimes I hear people saying: “I am sorry to ask so many questions, but…” Don’t be sorry to ask, this is what it is all about. Education is the first step to become a successful investor.
Be comfortable with numbers. Investing in property is about numbers, not about properties. Wisely chosen properties will deliver the numbers you have worked out, but they are only tools that you use to create wealth.
Be rational. Letting emotions enter your decision making is a recipe for disaster. Investing in property should be treated as a business, not some kind of exotic adventure.
Have a clarity of purpose. This includes having a strategy and a business plan as well as sound risk management practices in place. In other words, what are your goals in terms of dollars over time? How many properties do you need to get there and how often do you need to invest, how much buffer should you keep, etc… Once you know where you are going, the path and actions you need to take to achieve your objectives become obvious.
Have the mindset to invest. Too many people spend a lot of time researching, trying to understand how it all works, but then fail to act. How many times have I heard: “I wish I had invested 5 years ago…I would be so much better off…”. What stops people making a decision to proceed is a combination of fear to take risks, information overload and a natural conservative mindset. If this combination beats you into procrastination, then property (or any other leveraged investment) is not for you!
Understand that you don't need to be earning a huge salary to create wealth. It is more about what you do with your income that is important and how willing you are to use it. In other words, have the courage to move forward to improve your wealth.
Be open to advice. Once I wanted to upgrade my plastic toilet cistern to a smaller ceramic one so that our guest toilet would look better. I decided to do it myself because it was easy enough. For various reasons it took me a whole day to do it, including drilling holes in the wrong place and not having the right tools. Once finished it did not flush properly so I finally called in a plumber who told me that I had bought a 6 litre cistern but I had a 9 litre bowl, hence flushing did not work properly. I simply had no idea that you needed to match cistern size and bowl shape! It ended up being a frustrating and expensive experience! Similarly, when investing in property, seek advice from specialists, it is simply not worth risking it by trial and error. There is a lot more at stake when you invest in property compared to fixing your toilet!
In conclusion, there is a bigger element of risk when investing in property compared to simply depositing your money into a savings account, but the rewards should be much greater, so the risk/reward ratio needs to be understood, and if you are willing to educate yourself, understand the numbers and practice some sound risk management, then property investment will be an attractive way to create that wealth we all crave for!
Join Philippe for his next Free Property Evening in Sydney on 5th May, with special guest Craig James from CommSec.
Philippe Brach is CEO of Multifocus Properties and Finance
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.