Real Estate Investment:Today

Two big things 90% of investors fail to do

In my experience, the two big things most property investors fail to do are:

  1. Formulate property investment strategy that can stand the test of time, and
  2. Regularly review their property portfolio’s performance.

Looking at it this way it should come as no surprise that most investors never get past owning one or two properties.

If you don’t really know why you want to build a property portfolio or how it will one day get you out of the rat race and if you don’t really know where you are heading, how will you know which properties to buy?

And how will you know if you’re on track and on target?

The trouble is if you don’t know where you are going, any road can get you there, but any road can get you lost.

And nowhere is this truer than property investing.

So what are your goals?

How much money do you want your property portfolio to produce?

How many properties will you need to achieve this?

And what type of strategy are you going to follow – capital growth or cash flow or are you just going to leave it up to luck?

Currently, there are over 300,000 properties on the market in Australia, yet not all of them will make good investments.

In fact, most won’t.

To ensure I only buy properties that outperform the market averages I use a 6 stranded strategic approach

I only buy a property:

  1. That would appeal to owner-occupiers. Not that I plan to sell the property, but because owner-occupiers will buy similar properties pushing up local real estate values. This will be particularly important in the future as the percentage of investors in the market is likely to diminish
  2. Below intrinsic value – that’s why I’d avoid new and off-the-plan properties which come at a premium price.
  3. With a high land to asset ratio – that doesn’t necessarily mean a large block of land, but a property where the land component makes up a significant part of the asset value.
  4. In an area that has a long history of strong capital growth and that will continue to outperform the averages because of the demographics in the area as mentioned above.
  5. With a twist – something unique, or special, different or scarce about the property, and finally;
  6. Where they can manufacture capital growth through refurbishment, renovations or redevelopment rather than waiting for the market to do the heavy lifting as we’re heading into a period of lower capital growth.

By following my 6 Stranded Strategic Approach, you will minimise your risks and maximise your upside.

Each strand represents a way of making money from property and combining all six is a powerful way of putting the odds in your favour.

If one strand lets you down, they have two or three others supporting their property’s performance.

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When you look at it this way, buying a property strategically takes a lot of time, effort, research, and something most investors never attain – perspective.

What I mean by this is you can gain a lot of knowledge over the Internet or by reading books or magazines but what you can’t gain is experience.

It takes many years to develop the perspective to understand what makes an investment-grade property.

While most investors read a book or two, do a little research and then buy one of the first properties they come across, strategic investors are smarter than that.

They follow a system that is rooted in the real world and has stood the test of time in changing markets.

But it doesn’t end there.

I also suggest you…

Regularly review your property strategy

While most investors just buy a property and hold it for the long term, strategic investors regularly review their investment portfolio’s performance.

When I ask investors how their properties are performing they usually have no idea.

They’ve just closed their eyes, crossed their fingers, and hoped for the best.

It makes no sense to invest in a property and then not review its performance every year or so.

Some investors avoid the tough decisions and excuse their property’s poor performance by saying things like “it will turn around eventually” or “I don’t want to make a loss, so I’ll sell it when I can cover my costs.”

Some questions you should ask:

When I assess the performance of my property portfolio, I like to ask myself a couple of questions about each of my investment properties:

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