WHY DO 60% OF PROPERTY INVESTORS LOSE MONEY?!
THE STATS DON’T LIE
A CoreLogic found that over 60 per cent of Australian property investors are losing money every week by holding onto properties that reduce their net cash flow.
Findings show that 61.8 per cent of Australian investment property owners claimed a net rental loss during the 2013/2014 financial year. While figures varied across age and income brackets, the average net loss claimed by investors was $8,722, while the average profit claimed was $9,332.
INVESTORS AREN’T FATTENING THEIR POCKETS
While prices may have risen since 2012, rents haven’t yet caught up. This means, on average, more than 60 per cent of Australian investors fork out almost $170 every week to hold their investment properties.
The minority of investors who do make a profit, only receive $180 a week for all their effort.
Now, we reckon it’s pretty hard to be financially free based on those figures! What do you think?.
MOST ARE PART OF A LOSING TEAM
Property investment is almost Australia’s national pastime. Everyone seems to have a toe in the game or opinion from the sidelines. Despite all this keen interest, the national team’s scoreboard is pretty disappointing.
ATO statistics show there are 2.03 million individual property investors in Australia, owning own an average 1.28 investment properties. Many are negatively geared to the hilt and can’t push past 1 or 2 properties.
Is this really where a results and goal driven property investor should be – with the amateurs and wannabe’s stuck in the negative gearing trap? No.
WHY IS EVERYONE GETTING IS SO WRONG?
THE ‘HERD MENTALITY’
One of the biggest mistakes that property investors make is to follow the crowd, says Nathan Birch, co-founder of Binvested.com.au and self made millionaire property investor.
Many property investors will decide to buy, sell or negatively gear on a whim – without pushing aside media hype or properly investigating the markets or numbers.
They will probably think their property is doing well – when in reality it may take many, many years to generate a positive net worth or cash flow.
By following the herd, investors become stuck, not able to sell because their property hasn’t risen enough to recoup the money they’ve poured into it for years, and unable to buy better prospects because their cash flow is too tight.
However, they will compare themselves to ‘the herd’, which we know has an appalling performance record, and they will see their humble progress as something to be proud of.
But, being cajoled into a state of false confidence is a recipe for bitter disappointment in the long run.
TAKING THE WRONG ADVICE
The only thing worse than following the herd, is accepting bad advice. In an industry full or spruikers and hidden agendas it’s hard to separate the good advice from the bad.
Investors should do their research before accepting any advice and consider the following;
– How is the person qualified to give advice?
– Have they personally achieved what you want to achieve through property? What about their clients?
– How resilient are their strategies to market change, and are there exit strategies built in?
If it looks like someone has made their fortune on sales commissions selling overpriced properties or courses rather than personal investment in property themselves then run the other way!
WINGING IT WITHOUT A STRATEGY
Too many investors just decide to buy and hope, thinking it’s “as safe as houses”. This is wrong, “That’s called gambling – it’s not called investing,” says Nathan.
These people will make buying decisions based on emotion rather than financial logic and strategy.
The consequences include losing money, being exposed to too much risk or getting financially stuck.
Instead, every decision needs to fit within the strategy like a carefully cut puzzle piece – with exit strategies and contingencies.
Some investors lose their drive and determination, letting their portfolios languish.
Too many investors get a small win and slide into the comfort zone. Others will reach an obstacle and give up.
Property is a way to create financial freedom, but it’s not a get rich quick scheme. Nathan says “When people ask me, what do you do to make a living, I say, I do whatever it takes”.
It’s important to stay focused and keep pushing towards living life on your terms.
NOT MAXIMIZING THEIR POTENTIAL
One of the biggest mistakes investors make is restricting their potential by poorly structuring their portfolio.
Less than 1% of investors have got this right, and are able to scale their portfolio to 6 or more properties.
Like a racer with an efficient pit team, these investors rely on experts to create the right financial and ownership structure to maximise how fast and far they can go.
They know exactly what properties they need to buy at every stage of their journey, and are able to get these in the right place, at the right time and at the right price.
WHAT CAN INVESTORS DO TO SUCCEED?
To create a passive income and live life on their terms through property, investors need to bring their “A” game.
They need to build a sound foundation property portfolio that balances cash flow, capital growth and risk, in line with their goals.
They need to accept that one or two properties won’t cut it. The more properties they can buy and hold through a doubling cycle, the more wealth they will generate.
HOW TO GET THE RIGHT HELP
Truly life changing results can’t be achieved by buying one or two negatively geared properties and waiting 10 or 20 years for them to grow in value.
In order to succeed, investors need the right education and guidance from the right team of professionals in property, accounting, finance and financial planning.
Binvested.com.au is founded by two self-made property millionaires. Many of our staff are and clients are also property net-worth millionaires. Our results speak for themselves…and starkly contrasts to that of most property investors.
Don’t get caught in the same traps as the herd. Download our latest free eBook now and learn what else you need to avoid.
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