The difference between
General advice does not take into account your singular circumstances, goals and preferences. It is not intended to be tailored advice and should never be assumed to be. It is about broad concepts that apply to most, but not necessarily all.
You may accept the view that to invest is a positive step in providing a more secure and financially free future because that is generally very true.
However, general advice doesn’t take into account how it may affect you, and that’s why there usually is a disclaimer offered – a caveat if you like, letting you know that if you take the advice as ‘gospel’, you do so at your own risk.
You wouldn’t go into a medical centre and accept the doctor coming out and telling all the people with stomach pain to stand, and then him or her handing them all a laxative and telling them to go home! Very obviously, there is so much more to know before diagnosis, and a plan of action can be prescribed. It may be good advice for some, but for others, it may be disastrous.
Free or general advice can be found in many places, it is all-pervasive online, in the media and around the BBQ or dinner party table for starters!
Keep in mind the ‘investor mindset’. Just because someone has bought a house, it doesn’t necessarily qualify them to give investment advice.
Buying your own home is considered a decision of the heart in no small degree- an investment property is a wealth creation vehicle and should be an unemotional choice. It is a decision made on the balance of evidence and the numbers.
Before taking the plunge, you need expert, qualified and professional, personal advice. Advice that takes into account all your particular circumstances including your life cycle stage, age, income, tax position, risk profile, family circumstances and much more before it can be determined if it’s the right thing for you to do.
If you seek personal, made-to-measure advice, then take it from someone qualified to give it, someone trained and experienced. Find people who have gone above and beyond the current benchmarks in their area of expertise.
It’s also wise to surround yourself with those who have the investor mindset themselves, who have made the commitment and are implementing a plan for the future themselves. These are the people who will empathise with the importance of the decisions you are about to make and will work honestly and openly to make sure you are comfortable with your choices and that you go into with your eyes open.
In the property advice space, education is a natural barrier to entry to that fosters an increase in professional standards and therefore more consumer protection. Choose property professionals who are educated and qualified to advise you.
Ours is an unregulated industry at this point. So it’s even more critical to engage property experts who have undertaken specialist training and whose compliant and professional standards, and processes make them stand out from the crowd.
“Life rewards action, not inaction.”
Be careful what you wish for! The media is full of stories about people who have won money in the lottery and have not only lost it all but ended up in a more unfortunate situation than they were in before the windfall. Without the right mindset, it can be a house of cards!
What these people were missing was education and obviously any ability to postpone gratification!
Told you it was necessary!
A sensible decision would be to eliminate any debt and satisfy some basic needs – perhaps the car needs replacing or a home? But none of these so-called ‘winners’ seems to have any inkling that they could invest the winnings and live off the interest or rent earned and retain their capital.
What they lack is the investor mindset – immediate gratification is driving them, not financial discipline or long term goals. They could make the winnings work for them for a long, long time with just a little restraint and planning.
Opportunity doesn’t necessarily equal success, but it can.
According to Steven Covey, author of The 7 Habits of Effective People, the number one habit is Be Proactive – make decisions to improve your life through the things you can change.
Abundance isn’t finite, there are opportunities for ordinary Australians to create wealth, but you need to know about them and be prepared to act on them!
It comes down to knowledge and attitude.
That attitude is an INVESTOR MINDSET
1. The decisions you make need to be of the head and not the heart! They need to be made after due diligence and based on the balance of evidence.
2. When it comes to property investing, too many focus on their ‘own backyard’.
Australia is a big place, and as we will see later, there is no one property market as such. There are a collection of markets, some growing, some stalling, and even within those, and there is varying demand for different types of property.
These variations are a result of the fact that supply and demand for housing is a function of a wide variety of economic and demographic drivers that can vary from one state to another, one town to another and one house type to another. The best location and type of property is the one that stacks up dispassionately, based on the figures that suit your circumstances and goals.
3. You don’t need to be looking over the back fence either. Expert property management is crucial, particularly as your portfolio grows. Managing the property is the property manager’s job, you do your job, and they do theirs. Property management fees are tax-deductible – just another cost of ownership.
4. Similarly, the investor should not be overly concerned with the design and decor of an investment property. Too many people imagine themselves living in the property. While it’s essential to have plans that meet demographic changes, investment product is built with the tenant in mind. What appeals to the tenant market is what counts and also what maximises the market on resale.
The same goes for the inclusions in a property. Is it worth spending thousands on upgrading a property’s interior for rental? Some things are commonplace and expected, such as air conditioning, window coverings and hard floors in high traffic areas, etc.. But any quality offering will include those things – complete turnkey means that the tenant just needs to move in with their furniture and start living – the investment is basically ‘remote control’.
Going beyond that is something that can be done as part of an exit strategy, many years down the track if necessary. Don’t pay extra interest on an upgraded inclusions list for twenty years, instead, spend the dollars when it’s needed.
5. The property is an investment vehicle – an opportunity to generate income, build wealth for the future and reduce your tax burden now.
6. Time in the market is more important than timing. Some people wait so long for the right time that they never make a decision – suffering ‘paralysis by analysis’. No activity in life is risk-free or opportunity cost-free, but it is a matter of prioritising your goals and then making a plan to achieve them and sticking to it.
7. Understand that psychology plays a significant part in most people’s decision making. The ‘herd mentality’ (FOMO) can lead investors to come in and out of the market because that’s what others are doing. Instinct is what makes us run at the sight of a lion; it’s logic that should override impulse and make investment decisions.
“Be fearful when others are greedy.
Be greedy when others are fearful.” Warren Buffett
8. The media too is responsible for a great deal of fear and confusion. Bad news sells, drama sells. Investors need to ignore the doomsayers; they come and go. Lack of consumer confidence, fueled by the media, the crowd and sometimes their own family and friends (often those who have ever invested in anything) can often bring to fruition what the fear peddlers predict.
9. Successful investors gather a talent bank of support around them – Investment Property Advisor, Accountant, Broker, Financial Planner, Insurance Broker, Property Manager – all experts, trained and qualified in their specialty.
10. Understand that market corrections are inevitable – panic is not an option, nor is it a strategy! Business cycles are to be expected. Sometimes they are a result of macroeconomic policy by the policymakers via Fiscal Policy (the Budget) or Monetary Policy (interest rate manipulation by RBA), or even exogenous factors, outside of our control, such as a decline in commodity prices paid by our Asian trading partners or the current pandemic.
Property markets go through cycles and periods of correction too. Rapid appreciation in prices is often followed by a tightening of credit conditions and a softening in demand. It is essential to be prepared for these and to stay the course. Remember, it is the trend that is important.
11. Patience is a virtue! Property is not a get rich quick scheme.
12. Most importantly, Investors have the mindset that life rewards action, not inaction.