B Invested

The Hurdles You Face When First Investing

Australia is obsessed with real estate and just about everyone says they “want to invest in property”. That’s if they haven’t already. So, surely that means we are a country full of multi-property portfolio moguls?

Not quite. Have you ever heard of property investors referred to as ‘1 Percenters’?

That term refers to the fact that only 1 per cent of investors have 6 or more properties. So, investing is not as common as you think. Somewhere along the line, people are failing to follow through on their goals. That’s largely because everyone they know tries to stop them.

When your goal is to build a big portfolio, you are in the extreme minority. It will take smarts, dedication, a calm head and hard work, though your end reward will be all worth it. You just need to jump these hurdles.

Friends and family

When you swim against the tide, you will come across plenty of naysayers. They can’t imagine doing what you’re doing, so they project their doubts onto you.

Your friends and family can be your greatest supporters, but can also hold you back. They may be happy for you when you purchase your first one or two properties, but they will often change their tune when you go further. You may hear comments like “You’re taking on too much debt”, “What happens when there’s a market crash?”

They may care about you, but they are not qualified to give you sound investment advice. So don’t let them be the reason for your own doubt.

Times have a-changed

Their concerns are often based on things they remember from the past. “You’re better off with a high interest savings account or a term deposit”, for example.

That might have been true when interest rates were in double digits, but nowadays you’d be hard up finding a term deposit that returned 1%, so why would you put your money there?

Remember, most people only buy or sell property a few times in their life and apart from that have no up to date interest or knowledge about real estate markets, so if you are currently active in researching and doing due diligence, you know more than all of them!

Single bad experiences

Some people latch onto one negative experience. “I know someone whose tenants trashed their investment property”, or “stopped paying rent and refused to leave”. These things do happen sometimes but that’s why landlord insurance exists… it’s not like you would never drive a car because someone you know once had an accident.

Bursting bubbles

The media is full of stories about market crashes and bubbles bursting, because those stories get the most clicks. But a 2% value fall over a quarter…is that a crash? No, especially not when the market has gone up by 20% over a couple of years. Then there are the commentators that sell their books based on bold claims like values will fall by 30% or more. They say it year after year, but it hasn’t happened yet.

Markets do rise and fall, but in a repetitive pattern: A growth period, a plateau, a correction or slight fall, a recovery, and another growth period.

When it hits home

Purchasing a property is daunting. You sign on for a big debt, run the risk of tenant vacancy periods and there’s a chance interest rates will rise. It’s natural to feel nervous and have self-doubt, but if you don’t put faith in your strategy and take the plunge, you probably never will.

Stay true to your strategy

Don’t get arrogant or cut corners. If you let your guard down, you can get burned. It could be as simple as skipping a building and pest inspection because the property seems fine, only to find out it’s full of termites. Or buying in a town that has had major recent growth, just before the single major employer relocates elsewhere, or a mine closes down. You should stay disciplined. To be the best, and stay the best, you must keep training, keep learning and keep improving.