Entering the property market? Here’s how to overcome the inevitable first-time investor jitters
Friday, November 9, 2018/
Times are changing. Property news isn’t all good new and the mixed messages in the media are causing some would-be investors to doubt their decisions.
Fear and uncertainty lead to procrastination and a lack of action. You might tell yourself ‘I’ll get around to it’, but you never actually do.
To overcome the fears you may have about property investment, you must ask yourself two questions.
- What do I fear about investing?
- How realistic are those fears?
Sure, your feeling of fear is real, but it doesn’t have to be paralysing?
There are a number of strategies to help you overcome the fear of investing.
1. Only listen to people who know what they’re talking about
When it comes to real estate, everybody has an opinion.
But you know what they say about opinions? They are like belly buttons: everybody has one, but generally speaking, they are useless.
While your family and friends may have the best intentions, how many properties do they own? Are they financially free?
If they’ve only ever bought their own home and never really invested, they won’t understand why you might want to invest in property.
It’s wise to only listen to people who have property investment runs on the board and who have already achieved what you want to achieve, rather than to those who’ve never had the same dreams as you.
2. Understand the media’s love of sensational headlines
Bad news and sensational headlines sell newspapers and create clicks on websites, but in general, property journalists are not economic, financial or real estate experts.
Just look at the many mistaken predictions about an impending property market crash featured in the media over the past decade.
Of course, some specialist publications have experienced property journalists on staff, but the general news you might see online is likely written by a young cadet who is miffed about not being able to afford to buy that waterfront unit in Bondi he is writing about.
Just like listening to experts, only read media stories that have been written by journalists who understand the economy, real estate and property investment.
3. You don’t need to know everything before you get started
If you want to know everything, you’ll never get started.
Be comfortable knowing you have enough knowledge to get started and understand you will learn more along the way.
Accept you are likely to make some mistakes but minimise them by getting a good team around you, including an independent property strategist, a proficient tax accountant, a smart mortgage broker and a buyers’ agent.
These people have the type of experience that money can’t buy, but you can hire their expertise and profit from it.
4. Protect yourself with risk management
Too many novice investors buy with their eyes shut to the impact it will have on their finances in the years ahead.
Sophisticated investors, on the other hand, have risk mitigation strategies which allow them to hold and grow their property portfolio over the long term.
They understand while capital growth is the key to wealth creation, it is cashflow that will see them through the ups and downs of the property cycle.
Sophisticated investors not only buy real estate, but they buy themselves time to see them through the rainy days, allowing them to last the distance.
They have cashflow buffers, perhaps through a line of credit or an offset account, to cover any shortfalls when their property is vacant, or an unforeseen expense arises.
Other risk management strategies they might use include:
- Fixing the interest on a portion of their loans to minimise the risk of rising interest rates;
- Protecting themselves with life and income protection insurance; and
- Taking out landlord insurance to cover for damage to their property or unpaid rent.
5. Understand the biggest risk is inaction
No matter what you did yesterday, today begins anew. You will never achieve financial freedom through property investment if you don’t take action.
You can choose to overcome your first-time jitters and take your financial future in your hands.
Of course, while property investing may be simple, it’s not easy. And that’s not a play on words.
Fact is, about 20% of those who get involved in property investment sell up in the first year and close to half sell their property in the first five years. And of those investors who stay in property, about 90% never get past their second property.
So, if you want financial freedom from property investment to fund your dreams, you’re going to have to do something different to what most property investors are doing.
You’re going to have to listen and learn from different people.
You’re going to need to set yourself some goals and follow a strategy that’s known, proven and trusted.
Then you grow your property investment businesses one property at a time.
It really is as simple as that.
So, there is really nothing to fear, is there?