Do Smart Investors Finish Last?
Intelligence and knowledge are essential ingredients to being successful with real estate and investing.
However strategies, plans and research are usually not enough. Other factors can get in the way of “winning” at the investors game.
Here are 4 ways a smart investor can win.
DON’T buy with emotion
It’s essential that you treat investments for what they are – assets that are there to make you money. Completing your due diligence and calculating projected returns on every potential investment is the only way to minimise risk and maximise return.
If you can’t learn to tame your own emotional monsters (anger, greed, fear, etc.), you can’t be a successful investor. Even the most amazing strategies won’t save you.
DON’T get stuck in analysis paralysis
Investors can easily get inflicted by trying to find the property that “ticks all the boxes” especially if you are very analytical.
Although it’s imperative to do your research and due diligence, you might find yourself stuck analysing instead of making deals.
The point is that you’ll never make money on a deal you never do. A 95% good enough solution today is better than a 100% perfect solution tomorrow.
DON’T get complacent
All investors can be guilty of this. Once you get comfortable with investing, it’s easy to fall into the complacency trap. You forget about the impact of interest rates, forget about thorough due diligence, forget to review your portfolio regularly and fail to act swiftly in changing markets.
Retain the qualities of beginner investors of being passionate, keen, hungry and involved!
DON’T Underestimate the Power of Habits
Like diets or exercise, successful investing really comes down to self discipline, focus and consistent action. Most of us know what to do, but we just don’t follow through and do it.
Regular habits will lead to the results you want.
The key takeaway: Smart Investors can win.
Real estate is like running a business. If you cut out the emotional elements and remember that unless you profit, nobody else can either.
Prepare the way financially before starting a family
Becoming a parent can be an exciting journey. It can also be an expensive one so it’s important to prepare for the new addition in your life.
Here’s some tips to expect financially when you’re expecting:
The upfront costs
Before having a child, it pays to be organised and be prepared for the upfront costs. These may include:
- Baby clothes and equipment
- Upgrades at home—you may need to make baby friendly changes, paint and decorate the baby’s room.
- Doctor’s bills and hospital expenses.
Saving for these well in advance will assist greatly especially if one parent will be taking time off work or a reduction in income.
The ongoing costs
Many parenting blogs out there say new parents underestimate the ongoing costs of raising a child/children.
According to the AMP.NATSEM survey, a first child can cost on average $281 per week. Food, clothes, child care, education, hobbies and a range of other costs can continue growing and impacting your household budgets.
Just like upfront costs, planning ahead and even considering school fees now will only help set you up for success down the track
Taking the time now before baby comes to get your budget in order and creating a long term savings plan will help you in your new role as parents.
When planning to balance your household income and expenses, factor in your household income before and after the baby’s born (taking into account any loss of income) and consider:
- Essential living costs such as loan repayments, mortgage/rent and other regular ongoing expenses.
- The upfront and ongoing costs mentioned above
- Paid parental leave you or your partner may receive from your employer/s
- Any government contributions you may be entitled to.
- Day care and other care expenses.
Your Savings Plan
With a budget in place, you’ll begin to understand the costs you’ll need to be prepared for. Sticking to this budget will be easier if you set up a baby savings plan and automatically save money for these upcoming expenses.
The earlier you start saving the better, even if you’re not starting a family just yet, you can still put a savings plan in place today.
Starting a family is a major life event, so it’s important to seek help in managing your finances if you need to. Getting professional advice ensures you can make the most of any money you earn before the baby’s born and avoid financial stress at a time that can be one of life’s most special events.
Buying Property Interstate
Here’s an interesting statistic – Most property investors start and continue to purchase properties in areas familiar to them, more often than not close to home. It’s a common part of our makeup as humans to trend towards what we know which delivers a sense of comfort.
But in sticking close to the nest, you could be missing better opportunities in another state. As the property cycle clock runs at different times and speeds around the country there are always different areas in a state of rise and fall. Identifying these and investing around the country and following the cycles give the investor the best chance of achieving capital growth and growing their portfolio faster.
While buying property interstate can seem like a daunting task, the benefits can far outweigh the risks. Accomplished investors regularly sight diversification and early capital growth gains as the pivotal factors behind their success.
Here are my top tips when considering investing interstate:
Doing your homework is key. No matter where you’re buying, the key to success is to investigate the market you’re looking at and the potential rewards and risks. If you do your homework, you could buy at the bottom of the cycle in an up and coming area interstate and enjoy strong capital gains in the near future.
There are a few cost factors that differ state to state such as stamp duty, settlement costs and land tax as well as the tax implications. For example Stamp duty is deductible in the ACT but not deductible in other states. All this information can be found online at http://www.infochoice.com.au/calculators/stamp-duty-calculator/
If you don’t live close to your investment, it’s more important than ever to choose a good property manager as you won’t be nearby for regular inspections or for maintenance issues.
It’s important to make sure they do regular inspections, the rent is accurate and up to date and they have local rental market knowledge.
Refer to an expert
Now more than ever there are property mentoring groups and experts offering investors a suite of opportunities Australia-wide. Look to align yourself with a group that can provide you with property options and due diligence around the country. That way you can easily compare the states and different locations performance against each other before jumping into the next purchase.
How to Get Started
Information about the performance of each state is easily accessible through popular investment magazine YIP and Australia property investor. Purchase a copy and familiarise yourself with the state of the current markets, while preparing your finances and buying position with your broker. When you’re ready to buy, then connect with and investment expert to discuss options in your top 2 states.