The Accidental Property Gambler
Ever wondered how some people are able to build large property portfolios… while others lose in property, despite being highly risk averse?
Check out the video for more.
Are you a property investor or are you a gambler? Hi, it’s Niro here from Investment Rise. And in this video I want to talk about how I see so many people wanting to invest in property because it’s a safer investment. Yes, all investing does carry risk, but property is generally considered a safer investment. And yet what I actually see is so many of them playing Russian roulette and gambling with their future. Let me explain.
Over the last now 15 years, I’ve been conducting a secret study where I’ve been interviewing and studying and researching, what is it that makes the difference between someone who succeeds with property investing and someone who doesn’t? And here’s what I found. The person who does not succeed with property investing often falls into one of two camps. Number one, they know they should invest, but they’re too busy in their jobs or they’re just too busy working hard to do what it takes to get their money to work hard for them. And of course, unless you have your money working hard for you, it’s really difficult to create any sort of long term sustainable wealth.
So these are the guys who want to invest but just don’t have the time and so often look back just wishing that somebody could give them the advice and guidance so they could do what was needed in order to get their money to work hard for them. That’s number one. But number two is this group. These are the group of people who know they should invest because they need to do something to create wealth for their future, for retirement, to support their kids. Whatever their reasons are. But they’re scared of either making a mistake or they’re scared of debt or they always worry that the economy is going to crash or they’re scared of something.
And often they won’t verify their fears. They just kind of sit there almost ruminating in and marinating, rather, in their own fears. But then what happens? They start to see news and hear news in the media about property markets starting to rise. They start to hear reports about people who are making significant wealth through property and they start watching. They’re still too scared. They still are thinking, oh, maybe the market, this is short term, maybe the market’s going to crash. But they start to see more and more people creating wealth through property.
Then they see their friends telling them, “Oh look, you need to invest in property. Prices are going to the sky. They start to see their Uber driver or their cab driver telling, “Oh yeah property! You need to get into the market right now. And eventually, after waiting, waiting, waiting, after seeing so many success stories and almost hearing everyone they know, telling them they should invest in property, they go and buy a property either in a regional town or they buy an Off the Plan unit or they do something. But they buy at the top of the property market. So people who went and bought Off the Plan units in Sydney in 2017 who when properties then came to settle, the properties were valued at sometimes $100,000+ less than what they paid for it. And that resulted in them losing significant amounts of money. Right? And so these people who then invest or buy property at the very end of a property boom, they’re investing out of FOMO or what I call the Fear Of Missing Out. They’re not thinking it through strategically. They’re not getting independent guidance and advice.
They’re just going, “Well, everybody else is making money through property, so it must be safe. And my friends bought in this particular suburb or I know this area and it’s gone up over the last 3 or 4 years. So I’m going to buy there.” And what happens?
They buy. And it’s almost as if the market was waiting for them to buy property before it goes flat or it even goes backwards and in some cases. Right? And so then these guys go, “I knew we should never have invested. Okay. I knew we shouldn’t have. We shouldn’t have listened to so-and-so. We shouldn’t have done this. And now we’re in big trouble.” And what’s really fascinating to me and often in many cases really heartbreaking is that the very people who are the most risk averse, the very people who want to avoid risk, end up taking the biggest risks of all without calculating it, without looking at the downside. And as a result, they end up getting burned.
But on the flip side, my research over the last 15 years shows that the people who succeed with property investing, they’re not looking around asking what their friends are doing. Because they look and say, “Well, if my friends haven’t created wealth through property, why would I want to listen to them?” They don’t ask their uncle or their aunty or mom and dad? No. They do their own research. They get independent advice and they take baby steps. They don’t go and buy 3 properties in a year just because maybe they can, because they’ve got the equity do so. No. They take it slow. They buy a property in a good area. They do their research. They look at the factors like the vacancy rate, how easy it is to get the property rented, because they understand that your ability to get your property rented is almost more important than the capital growth potential.
Because if you can’t get your property rented, well then, it doesn’t matter how much the property grows in value because you’re going to struggle on a month to month basis. All right? So they check out the vacancy factor. They look at the key fundamentals for capital growth and they buy in a very strategic but also a non emotional manner. And here’s what I can tell you. If you take nothing away from this video. Here it is. If your emotions are driving your investing decisions, you are more likely going to be gambling than investing. You are more than likely, even without your knowledge, going to end up taking a bigger risk than you wanted to, and you could quite easily end up regretting your investment decision. Look at the people who bought Off the Plan units at the top of the market. Look at the people who bought in regional towns when there was lots of media reports about those towns going to be a boom market, only for them to fall back in in value. Right? Look at the people who bought properties in even good locations, but they didn’t do their cash flow analysis because nobody told them about that. Nobody told them that, you know, when you buy a property, you’ve also got to look at, well, will the rent cover the mortgage and what’s your cashflow shortfall? Can you afford that? No. People just said buy because prices are going to rise. And now they’ve bought this property and they’re struggling on a month to month basis. There are countless stories like that out there. You got to remember, according to the Australian Tax Office or ATO. Only 1%, maybe less. Let’s be generous, say 2 percent of property investors have 5 or more properties.
That means 98% of property investors never get to that goal. And it’s widely accepted that you need to have a few properties in order to have enough for retirement. So if you’re going to be doing what 98% of property investors are doing and copying what others are doing, how likely are you to get the results that the top 2 percent do? My research over the last 15 year shows that the top 2 percent are often buying properties without telling anybody else. And so, for example, I can tell you case studies of truck drivers, nurses, people in mid tier jobs, not your traditional high paying jobs. Often the guys in high paying jobs are just too busy to be able to go and buy property, go and do their research. And so they’re the ones often missing out and they’re just working harder and harder, but they don’t have the time. Right? But people often in your mid tier positions, the guys that you wouldn’t expect to be creating wealth, they don’t even show off their wealth. They’re not the people who are driving their flashy cars or anything else. No! What they’re doing is they’re being strategic. They’re not letting emotion drive their decision. They’re asking good questions. They’re doing their research. They’re getting the right advice and they’re buying property according to a plan that they have in place. And they’re doing so without taking unnecessary risks, or at least they’re taking those risks with their eyes wide open. They are aware of the downside, and yet they’re still moving forwards. They’re not gambling with their future. They’re not playing Russian roulette with their future. And so if you’re someone who is serious about creating wealth through property, please do not buy property as an investment through FOMO or the fear of missing out or you think that prices are going to rise and therefore, I need you to jump in. If you’re thinking that you need to buy property because prices are rising and you’re going to miss out, ask yourself this question. What is it that’s driving prices up? Get a clear answer to that question. And if you think it is because there is greater demand for property, there is good infrastructure, there’s great jobs growth, all those key factors. If it’s a strong economy in that area, then, yes, you may want to look at buying an investment property. But do your research. Don’t gamble with your future because you know, when you buy the wrong property and it falls in value or doesn’t perform the way you want to, not only do you lose money, which hurts because it’s your hard earned money, but you also lose time. And if you’re someone who’s 45 or older or certainly 50 or older, you’ve got to ask yourself, can you afford to lose that time? I would suggest that the time that you lose from a bad investment is almost more painful and has a far bigger cost to you than the money you lose from a bad investment. But either way, although property investing yes, carries a risk, don’t take an unnecessary gamble. Invest strategically. Get the right guidance. And as we start this new decade off, I really believe that the person who invests strategically, there are some golden years ahead for those kinds of property investors.
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June 3, 2020
May 20, 2020