{"id":1363,"date":"2022-01-02T08:29:53","date_gmt":"2022-01-02T08:29:53","guid":{"rendered":"https:\/\/royabhishek.in\/urbanbuyer\/property-updateavoid-these-12-reasons-property-investors-fail-to-build-a-multi-million-dollar-property-portfolio\/"},"modified":"2022-01-02T08:29:53","modified_gmt":"2022-01-02T08:29:53","slug":"property-updateavoid-these-12-reasons-property-investors-fail-to-build-a-multi-million-dollar-property-portfolio","status":"publish","type":"post","link":"https:\/\/royabhishek.in\/urbanbuyer\/property-updateavoid-these-12-reasons-property-investors-fail-to-build-a-multi-million-dollar-property-portfolio\/","title":{"rendered":"Property UpdateAvoid these 12 reasons Property Investors Fail to build a Multi Million Dollar Property Portfolio"},"content":{"rendered":"

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Please use the menu below to navigate to any article section:<\/p>\n<\/div>\n

There seems to be a disconnect between what is myth and reality when it comes to the number of investment properties that people own.<\/strong><\/p>\n

We sometimes hear about \u201cgreedy\u201d investors who own dozens of properties when this is not really borne out by the facts.<\/p>\n

\"HouseDid you know that about 70 per cent of investors own one solitary property?<\/p>\n

And of the 2.1 million property investors in Australia, only a tiny percentage \u2013 around 20,000 people as it turns out \u2013 own six or more investment properties.<\/p>\n

Of course, only owning one investment property isn\u2019t going to help you achieve financial freedom.<\/p>\n

This means most Australians who try and secure their financial future through property investment fail.<\/p>\n

So why don\u2019t investors own more properties?<\/p>\n

Well, generally it\u2019s because they make one of the following mistakes, which stymie their chances of growing a portfolio.<\/p>\n

1. They treat property investing as a hobby \u2013 not a business<\/span><\/h2>\n

Australians tend to love property, they love going to open homes and auctions. <\/p>\n

They love for the excitement of buying a property and renovating it.<\/p>\n

They love the thought of becoming a property mogul.<\/p>\n

In short\u2026they\u2019re having fun.<\/p>\n

That\u2019s not the way to become rich through property \u2013 you need a business mindset.<\/p>\n

If you\u2019re looking for fun go bungee jumping, go trail bike riding.<\/p>\n

Property investment should be boring, but the results can make the rest of your life exciting.<\/p>\n

If you treat property investment as a business you won\u2019t think as much about each individual transaction, but the big picture \u2013 your long-term goal because property investment is a long-term process, not an event.<\/p>\n

You\u2019ll have a business plan which includes cash flow management, a finance strategy, asset protection, insurance, and correct asset selection.<\/p>\n

2. No strategy<\/span><\/h2>\n

Following on from the point above, owning an investment property is not a strategy.<\/p>\n

The problem is, most people become property investors without putting much thought into it.<\/p>\n

\"ChooseSome upgrade their home and turn their old house into an investment.<\/p>\n

However, that doesn\u2019t mean it will make a good investment because they probably bought it for emotional, rather than objective, reasons.<\/p>\n

Others buy an off-the-plan property based on promises made by marketers, while others buy a property in the comfort zone \u2013 close to where they live.<\/p>\n

Now don\u2019t make the mistake many investors make and buy in your own backyard because you\u2019re familiar with the location.<\/p>\n

That\u2019s really not a good reason to buy there.<\/p>\n

In fact, a recent university study showed those investors who bought a property close to where they lived tended to buy underperforming properties and didn\u2019t even get price advantage on purchase.<\/p>\n

You\u2019ve heard it before \u2013 failing to plan is really planning to fail.<\/p>\n

On the other hand, strategic investors devise a strategy \u2013 they bring their future into the present and devise a plan to achieve the results they want.<\/p>\n

<\/p>\n

Why not get the team at Metropole to help you build your customised, personalised Strategic Property Plan<\/a>? You can learn more about this <\/span>here<\/span><\/p>\n
<\/a><\/span><\/p>\n

3. The wrong strategy<\/span><\/h2>\n

Almost as bad as having no strategy is following the wrong one.<\/p>\n

Residential real estate is a long-term, high growth low yield investment.<\/p>\n

\"Strategy\"<\/p>\n

Your strategy should be to use the capital growth of your property portfolio to grow a large asset base that will give you more choices in the future.<\/p>\n

Yet many beginners chase cash flow or the next hot spot or try and make a quick profit by flipping.<\/p>\n

All recipes for investment disaster!<\/p>\n

Others chase tax benefits because they think negatively gearing new properties will \u201ckeep their tax down.\u201d<\/p>\n

So they buy a new house in an outer suburb or put a deposit on an off-the-plan unit due for completion in two years\u2019 time, because of the higher depreciation deductions on offer.<\/p>\n

The problem is that these properties just don\u2019t offer the capital growth you require to grow your wealth.<\/p>\n

4. Changing strategy<\/span><\/h2>\n

Unfortunately, some investors get spooked when markets soften, and rather than sticking to a proven strategy to secure their wealth creation through capital growth, they opt for something cheap and supposedly cheerful instead.<\/p>\n

Rather than looking at what has \u201calways worked\u201d over the long term they look for \u201cwhat will work now.\u201d<\/p>\n

It\u2019s no surprise then that their smiles turn into frowns when that inferior property underperforms down the line.<\/p>\n

The only time to change your strategy is when you had a significant change in your financial or life circumstances<\/p>\n

5. Unrealistic expectations<\/span><\/h2>\n

Another reason investors fail is that they\u2019re not patient enough.<\/p>\n

\"Expectations\"They\u2019ve read too many stories about \u201covernight successes\u201d and go into property investment hoping to make quick profits or thinking they can buy seven properties in seven years, or possibly ten properties in ten minutes.<\/p>\n

In reality, successful property investment is a get-rich slow process.<\/p>\n

It takes most investors up to 30 years to grow a big enough asset base to provide a cash machine for their retirement.<\/p>\n

By then, though, many people have thrown up their hands and sold up because they had unrealistic expectations to start off with.<\/p>\n

Too many investors look for that one big deal that will make them rich \u2013 property just doesn\u2019t work that way.<\/p>\n

As Warren Buffet wisely said: \u201cWealth is the transfer of money from the impatient to the patient.\u201d<\/p>\n

Successful property investors go through the following 5 stages of their journey:<\/p>\n

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  1. The education stage<\/em> \u2013 learning what property investment is all about.<\/li>\n
  2. The savings stage<\/em> \u2013 they spend less than they earn and trap this extra cash flow in a saving account, to up a deposit to invest.<\/li>\n
  3. The asset accumulation stage<\/em> \u2013 it will take 2 or 3 property cycles to build a sufficiently large asset base of income-producing properties to move to the next stage\u2026<\/li>\n
  4. Lowering their Loan to Value Ratios <\/em>\u2013 asset accumulation requires borrowing and gearing but eventually, your LVR must slowly come down so you can\u2026<\/li>\n
  5. Live off the Cash Flow from your property portfolio<\/em><\/li>\n<\/ol>\n

    6. Cash flow concerns<\/span><\/h2>\n

    Clearly, you need cash flow to hold your portfolio for long enough so that the power of compounding kicks into gear, meaning you must have a financial buffer to see you through the lean times.<\/p>\n

    Too many investors don\u2019t recognise that property investment is a game of finance with some houses thrown in the middle and leave themselves open to financial woes by not having rainy day money that they can draw on when needed, which often results in them selling at a bad time.<\/p>\n

    7. Over-confidence<\/span><\/h2>\n

    The worst thing a property investor can do is to get it \u201cright\u201d the first time.<\/p>\n

    \"Confident\"Show me a booming market and I will show you an investor with their chest puffed out like a proud property peacock!<\/p>\n

    They falsely believe that the rapid capital growth of their very first investment is because of their own brilliance rather than simply the result of a rising market.<\/p>\n

    They then buy their next property, the wrong type of property at the peak of the market \u2013 because they have the Midas touch remember \u2013 and become confused when the value of their property falls for the next few years.<\/p>\n

    8. Getting sidetracked by the media<\/span><\/h2>\n

    The 24\/7 news cycle is hard to ignore and beginning property investors tend to be driven by fear and greed which is what the media thrives on.<\/p>\n

    During booms when they should be the most cautious, FOMO (the fear of missing out) encourages them to pay too much and during the property slumps when real estate is available at a discount FOBE (fear of buying early) stops them taking advantage of the opportunities available.<\/p>\n

    9. Not recognising that there are multiple property markets in Australia<\/span><\/h2>\n

    \"Australia\"While the media keeps talking about \u201cThe Australian Property Market\u201d, there are hundreds and hundreds of property markets within Australia and there are markets within markets.<\/p>\n

    Each state is at its own stage of its own property cycle and within each state, there are multiple property markets separated by geographic location, price points, and type of dwelling.<\/p>\n

    And each of these markets is performing differently based on local factors including demographics, economics\u2019 and supply and demand.<\/p>\n

    So listening to market commentary about the Australian property market or even the Sydney or Melbourne property market is far from helpful.<\/p>\n

    10. Not recognising that location does 80% of the heavy lifting of your property\u2019s capital growth<\/span><\/h2>\n

    There\u2019s a reason estate agents keep going on about \u201clocation, location, location\u201d but the problem is not all locations are created equal, and many investors don\u2019t recognise the locational factors leading to capital growth.<\/p>\n

    Many chases the growth corridors touted by property spruikers when these are really regions of strong population growth such as new outer suburbs or locations where large high-rise towers are being built.<\/p>\n

    \"LocationThe problem is that the significant new supply of dwellings that are required to accommodate this strong population growth is the reason that these areas exhibit poor capital growth.<\/p>\n

    Supply is the enemy of capital growth.<\/p>\n

    Instead, a significant driver of capital growth is the strong demand and scarcity of accommodation in aspirational or gentrifying suburbs close to the CBD with good amenities, good public transport, and multiple lifestyle drivers.<\/p>\n

    In general, these will be locations where the locals have higher disposable income and are able to and prepared to pay more to live there.<\/p>\n

    Remember\u2026the rich do not like to commute, while the poor will be flung further and further out to the extremities of our growing cities.<\/p>\n

    11. Not owning investment-grade properties<\/span><\/h2>\n

    Even in the right location, not all properties are \u201cinvestment grade.\u201d<\/p>\n

    It\u2019s important to own a property that has many of these attributes. It\u2026<\/p>\n