The 5 worst property investment mistakes we’ve seen.
Mistakes, mistakes, mistakes – Nathan Birch has seen so many of them made by others that he can group them into five different categories.
But the good thing about mistakes is that you can learn from them. So, that’s why he decided to share them with you below.
1) Mistakes driven by emotions.
As a successful investor with more than 200 properties in his portfolio, Nathan attributes much of his success to treating his investing as a business.
But, unfortunately, not everyone who buys an investment property has the same sense of logic.
Nathan says he has seen investors sell properties prematurely because they were going up in price only to miss out on much larger gains down the track.
He has also seen others pull out of deals and lose their deposits because they thought the market was crashing – even though the numbers stacked up in their favour.
The driving force behind these decisions was emotion. They weren’t based on logic, on an educated understanding, or even on some basic mathematical equations. Instead, they based on excitement, in the first example, and fear in the second.
“People sometimes let their emotions make decisions when they should be logical,” Nathan says.
“Investing is a logical game.”
He says the best way to make sure that your emotions don’t take over is to look at the whole picture. Where are you today and what do you need to do to get to your destination?
Ask yourself if the next move will take you closer to achieving your goals, or hold you back. This will help you figure out if it is a move worth making.
2) Mistakes driven by opinions.
Nathan has come across a lot of doom and gloomers during his time. He says, every time he puts out a blog post or a YouTube video, there is always some hater who makes an opinionated comment about the market crashing.
But, opinions will cost you, he says. By simply believing something without having an educated understanding about it, you will miss out on what is really happening. You won’t get to where you want to be, you will just be stuck in the same position, judging others for what they have or haven’t achieved.
Nathan didn’t build wealth by having opinions – he built it by educating himself on the monetary system and the market.
The predictions he makes are not based on opinions either. They are based on analysis and economic modelling that is underpinned by more than 16 years of experience in the market.
When it comes to being a successful investor, numbers and experience count for a lot.
3) Mistakes made from getting sucked in by scammers.
There are a lot of scammers out there – and a lot of people who get sucked in by them.
He recently came across a man who had purchased three new properties. One of these was in a mining town and another was in a dodgy block. The mining town property was only worth about $150,000 but the man had spent $600,000 on it.
“I’ve seen schemes in all different shapes and sizes,” says Nathan.
Some schemes use all sorts of reckless marketing claims to suck people in, others are full of obvious risks – some are even marketed as tax perks for high income earners, he says.
The one thing they all have in common? The investors who buy into them lose money.
“If you constantly revert back to your plan and strategy and ask, is this in line with that? You’ll be able to spot what you need and what you don’t need,” says Nathan.
4) Mistakes driven by a lack of education.
When it comes to investing, a lot of people who have made mistakes just thought it was a good idea at the time, says Nathan.
Many never thought about ways to manage risk – but this is an essential part of investing. Learning about the market and the monetary system as well as the different strategies you can use to manage risk and build wealth is very important.
You wouldn’t get behind the wheel of a car if you had never learned to drive. And, you certainly wouldn’t put your family in the car with you. Yet, so many people make financial decisions about things they don’t know much about and put their family’s livelihood at risk.
Nathan developed his strategy of buying below market value, with a good upside for growth and a strong cashflow to reduce risk and maximise gains.
He has always made sure to stay ahead of the game by informing himself of how the monetary system operates.
“I need to know how debt works more than anyone in the country, because I have more debt than anyone in the country,” he says.
“I need to ensure that I’m constantly educating myself on the knowledge that’s out there in order to get ahead of that market.”
5) Mistakes made from having the wrong mindset.
In order to be truly successful, says Nathan, you need to be committed and focused on achieving your goals.
“I think mindset is key,” says Nathan.
One of the biggest mistakes people all over the country make is not actually doing anything. Whether from fear, laziness or a lack of belief in themselves, countless Australians are missing out on building wealth.
“A lot of people don’t have the right mindset to be successful.”
Many have a victim based mentality where they blame the world and everyone in it for their lack of success. Others have an entitlement mindset, where they expect success and wealth to just drop into their laps.
The successful people out there have a success mindset – one they have developed in conjunction with plenty of hard work, self-learning and the willingness to do whatever it takes.
After all, you only get out what you put in.