The Most Expensive Mistake in Property - March 2022
You may have heard that property is a foolproof way to secure your financial future. You might even have been told it’s a simple process of securing a house, popping it in your proverbial back pocket and just waiting for the capital gains to take you from struggle street to business class.
While I do believe real estate is a great vehicle for building wealth, I also think there’s a simply mistake most people make when investing, and it’s costing them thousands of wasted dollars before they even secure their first asset.
Asset selection is key
Before I reveal this costly mistake, let’s talk about some fundamentals. One of the first rules for building property wealth is choosing the right assets.
Now whether that’s your home (which can help you kick off your portfolio) or a direct investment property purchase, making sure the asset has the right ingredients for maximising returns is essential.
You need to be able to answer questions such as – how does this asset fit into my long-term strategy? If it’s a home, will it cater for my current needs? Can it be used as an investment when I move out? Will it be in constant need of repair and maintenance, which impacts my ability to generated consistent and reliable cash flow?
As you can see, selecting the right asset for your needs is no simple task. It takes time and experience to do this efficiently.
The cost of lost opportunity
This brings me to my second investment fundamental, and that’s opportunity cost.
This simply reflects the potential cost from a lost opportunity. Say it’s 2015 in Brisbane and you chose to buy an investor-style, high-rise unit in the CBD as opposed to a house in the suburbs at the same price. In 2021, your opportunity cost would be hundreds of thousands because the unit value would have been stagnant while the house value shot up significantly.
So, choosing the wrong asset can cost you a small fortune, and recouping those losses can be near impossible.
The true value of time
Here’s the third and most important element in this discussion… time is valuable.
Firstly, there’s time in the market. Getting in early gives you the ability to enjoy gains sooner. Ask any investor and they’ll tell you. Their greatest regrets are not buying as soon as possible and then selling too early.
But there’s another ‘time’ component you need to consider, and that’s the value of your time.
We live in a world where specialisation is valued. You will spend years getting great at what you do. Whether it be as a painter, doctor, teacher or whatever, the time you spend doing that job are your most powerful earning opportunities.
So, why waste that lucrative ‘earning’ time looking for property, when you can employ someone else with far more experience to do it for you?
The most expensive mistake
Given the fundamentals described above, I believe the greatest error property investors make is not outsourcing their search to a buyers’ agent (buyers’ advocate).
It makes no real economic sense to go it alone.
Firstly, it’ll take you at least twice as long as a buyers’ agent to fully research and understand your markets of interest. Also, in most instances the information you unearth will likely be inferior to the experts. In addition, your ability to interpret that information won’t be as good as the local expert buyers’ agent. They will help you avoid the fundamental mistake of buying the wrong type of property in inferior locations.
Next, your emotions will have you making compromises you shouldn’t. Buyers’ agents can assess prospects without fear or favour to ensure you make smart asset selections and price decisions.
Then there’s the negotiation process. Dealing with selling agents can be stressful and longwinded. Buyers’ agents do this constantly and often have a track record of closing deals with the very agent listing your prospective property. That’s a real ace in the hole when trying to reach agreement with a seller.
Then there’s the completion process. The buyers’ agent can help manage all the post-contract processes, keeping things running smoothly until you have the keys in hand.
So, it makes sense using your valuable hours to earn an income at what your good at and leaving the property stuff to an experienced specialist like a buyers’ advocate.
You’ll get the result you want in less time, with less stress and with a better outcome.
Not using a buyers’ agent is an error that will see you out of pocket and running at an expensive time deficit – and that just doesn’t sound like smart investing to me.
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