Owning the Title of Property Investor
Investing in property should be a long-term commitment and treated just as seriously as your career in order to successfully create independent wealth.
It’s a well-known fact that most property investors (around 70 percent) don’t make it past buying just the one property. Unfortunately, a portfolio of one or two properties is not going to help you with the ultimate goal of being independently wealthy and retiring early.
It is quite confusing why most of us focus so much on our careers but spend very little time on our own financial plan and goals in life. Many of us only seriously start thinking about it when we are close to retirement and by then it’s a case of ‘too little too late’.
It does seem that this is starting to change. Recent media reports suggest that there is increasing interest in property investment for those aged in their 20s and 30s. They have cash flow but are struggling with raising a deposit and thus are relying heavily on the ‘Bank of Mum and Dad’ to assist them in buying a lower priced investment apartment. They may be still living at home, taking advantage of parent guarantors or ‘rentvesting’ – renting in the area they want to live but can’t afford while paying off a cheaper rented out property somewhere else.
Investor First Mentality
If you want to play by your own rules and take control of your future, it’s crucial to start seeing yourself first and foremost as a property investor and think like one as well. You can still be a fantastic teacher or small business owner but when you call yourself a serious investor, you will start treating it just as seriously as your chosen career. In order to become financially independent, you need to start thinking like a serious investor – writing down and committing to goals complete with estimated timing and regular reviews.
The goal of building a property portfolio makes you almost invincible and gives you daily purpose and the motivation to succeed.
Outline Your Goals
Most financial planners will advise you to list your goals as an initial step in your plan to generate wealth. Start with where you want to end up, and then develop a cohesive plan outlining how you will get there.
You will need to ask yourself some important questions like:
- What is the number of properties I need to have acquired before I turn 55?
- How does that translate to assets value?
- What sort of annual income do I want in my retirement years?
Let’s take the example of police officer Dave, aged 34. Dave’s plan is to have $100,000 in annual income by the time he’s 50. He has already purchased the apartment in which he lives and has a flatmate living in the second room to assist with the mortgage. Dave also has an investment property bought when he was 24 to rent out while he was still living with his parents. Now is the time to make sure both his properties become positively geared so he can purchase the next couple of properties over the following three years.
Dave is in a great position but until he makes that leap to the next property, he remains a part-time investor – a dabbler for all intensive purposes. To change his attitude, Dave needs to alter the way he sees himself, i.e. as a property investor as well as a police officer. This may seem a little strange but it makes more sense if you consider that Dave the police officer will be facing his retirement on a pension of around $22,000. In contrast, Dave the investor with his substantial property portfolio is the one who is well on the way to enjoying a $100,000 a year annual income and a pretty cushy lifestyle.
If he follows the goal of owning five properties by the time he is 50, Dave’s financial future will be secure. He can choose to live in just the one property and rent the others, and maybe swap which property he lives in around for variety. If he keeps buying well and using his equity, he should own around 10 properties by age 50 and then sell five of these to pay the others off.
Making it Happen
Don’t rely on lotto, your friends or family to achieve what you want to do with your life, especially during retirement. With a little research, time and energy, building a property portfolio is a tried and true method of making it happen. Here are a few pointers to get you started:
- Before you set goals, do some research: hit the books; attend some seminars; ask those you know who are already successfully investing. There is a wealth of information out there that will set you on the right pathway and warn you about the common mistakes investors make.
- You will need specialist skills and knowledge, which will only come from a team of qualified professionals including a mortgage broker, conveyancer, buyer’s agent and property manager.
- Buy property based on analytical research not on emotions. For example, what rent and capital gains do you require?; Are you in the best location to attract quality tenants?; Will it hold its long-term value for owner occupiers? What are the vacancy rates like in that location? A good buyer’s agent will be able to give you great advice based on their expert knowledge of the real estate market.
- Don’t be in a hurry – if you can hold a property for an extended period, e.g. a 10-year property cycle, it will double in value.
Cohen Handler’s team of expert buyers agents are specialists in helping you build a property portfolio and can assist you in finding the right investment property at the right price. Contact us now.