By Guest Blogger, Terry Ryder, founder,
hotspotting.com.au and propertyU
When it comes to property investment, patience is not only a virtue, it’s an outright necessity.
Real estate investment has never been a get-rich-quick strategy, notwithstanding the efforts of property spruikers and marketeers in the latter part of the 20th century to sell it that way.
Here’s the reality: a sensible well-planned strategy of buying good real estate assets and keeping them in your portfolio can, over the long-term, provide financial security and underlying wealth to fund your retirement and/or your children’s education and/or the overseas trip of a lifetime.
If that sounds a tad uninspiring and downright boring, it’s meant to be.
Many investment gurus over the years have commented that good investing is boring. And by that they mean that sensible investing is a slow-burn process where you generate wealth over time by making smart decisions.
In real estate, there are ways to accelerate the process of wealth creation by making the gains bigger and faster – like value-adding processes or property development – but as with other forms of investment, rapid or higher gains means higher risk. There’s always a flipside.
The best way to grow wealth without undue risk is the “boring” way. Buy good assets and keep them. Build a portfolio over time.
But some people get impatient. They own a few properties and they’ve seen them grow in value and they want to cash in those gains and enjoy the benefits. It’s the modern way, with the mindset that there’s no point having the most expensive coffin in the city.
But selling up early can be incredibly costly. I’m reminded that the first house I bought cost $25,000 and sold for $42,000 is today worth around $600,000. Another I bought for $50,000, and sold a few years later for $110,000, would be worth over $1 million just for the land.
At the time, back when I was 30, it was exciting to realise that rapid capital gain and congratulate myself on my cleverness. But I would be considerably wealthier today if I had exercised patience and foresight.
There’s more than one way to approach property investment, but I believe the best way to buy good real estate assets and keep them. You create wealth through accumulation of assets, not by trading them.
First you build your team (advisors in a range of disciplines so that your make good decisions based on the advice of experts), then you build your portfolio.
Slowly, steadily, with foresight and patience, based on sound advice and quality research.
It’s important to have a strategy, founded on your ultimate objectives. Having created a strategy, it’s important to stick to it. I’m amazed at how easily people are diverted from a clear and sensible plan when a bright and shiny object pops up.
You can waste a lot of time and destroy a sensible strategy by being distracted by something apparently exciting that sits outside your game plan. If you’ve decided to pursue houses on land in a certain price range in growth cities underpinned by strong and diverse economies, it’s dumb to suddenly want to buy a high-rise apartment in Surfers Paradise because you saw something on television showing the sun rising over the ocean.
You’d be amazed how many people do that.
The official statistics show that over two million Australians own investment properties but seven out of ten have only one. Less than 1% have six or more.
So many Australians set out to achieve success with property investment, but few succeed.
What distinguishes the 1% who succeed in creating a portfolio? I know people who have 30 or more properties and they’re all people who have been willing to invest in good information and expert advice before buying real estate. And they have bought good assets and kept them.
They’re people who know the value of a good accountant who understands real estate, a lawyer who can advise on the best buying entity, a mentor who has a track record of success with investment, a great source of good research information - and a reputable buyers’ agent who can provide good advice and save them lots of time in finding the right properties.
People with that mindset do well with real estate investment.
But it’s a slow and steady process. In real estate investment, the tortoise beats the hare every time.
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