4 High-Level Property Investing Mistakes People Make

There are some really big problems with the way most people invest and I’ve definitely made these problems myself. If you can avoid these big problems then you can lower your risk and achieve success faster.

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1:10 – 1. Having No Investment Strategy At All
6:09 – 2. Bad Timing In The Market
10:29 – 3. Bad Cash Flow
14:23 – 4. Not Doing Anything To Increase The Productivity Of Your Asset

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Transcription:

Ryan 0:00
There’s some really big problems with the way most people invest. And you may be making these problems yourself, because I know that I’ve definitely made these problems in the past. But if you can avoid these, then you can really help to set yourself up for success in the future, and achieve your goals faster. So in this video, we’re going to talk about these big four problems, and how you can avoid them in your life and how you can do better than I did in the past. So Hi, I’m Ryan from OnProperty, helping you achieve financial freedom. And with everything that’s happening in the world at the moment, people can get so focused on certain aspects of things that they just forget about everything else. One example, people get so focused, and I’ve definitely done this, she gets so focused on the economy, and what’s the global economy doing in the local economy going to be doing that you actually forget about your own personal economy? And what am I doing to actually improve my own personal economy? That’s a huge mistake that I made. But let’s get into it these four big mistakes. So the first one is having a bad strategy, or in most people’s cases, it’s just actually having no strategy at all. So no end point. So a lot of us think about investing and they just think about, I want to make heaps of money. Yeah, I want to make money. Let it rain, baby. And look, I have done this in the past, and often going into new business ventures that can sometimes be like this investing in cryptocurrency, I lost money thinking like this. And this one, I think, is probably the biggest mistake. Because if you don’t have a long term strategy, it’s very hard to actually get to where you want to go. And we get so swayed by people call it shiny object syndrome, where you’re like, Oh, this new fancy strategy. And then you do that for a little bit. And you’re like, Oh, this fancy strategy. And it’s about getting good at something and just rinsing and repeating it, that really allows you to lower your risk and increase your chances of return as you build up your skills in that area. But if you have no strategy and no destination, then you have no way to objectively look at these potential investments, and whether or not actually going to get you to where you want to go, and whether or not they’ll line up with your timeline and line up with your risk profile. So for me, I guess in my own strategy, I’ve got both the short term, which for me is business. And then I’ve got the long term, which for me is property. And so looking at the goals and looking at the short term, how much money I want to make through my business, I look at the investments that I make there in terms of content creation article writing the money that I invest, and think about what is the return going to be on that? What is the risk like, and then I track that on a short term basis. But I really have some short term goals there, as well as longer term goals for that as well. But then if I look at long term in my life, I want to invest in property to achieve long term success. And for me, that is 15 to 20 years down the track, I’m in my early 30s. Now, so you’re looking at late 40s, early 50s, where I want to be completely financially free through my property investments. And what I want to do is actually invest in a way that is mostly passive. So in the beginning, I’m happy to spend time building out my portfolio, but then I just want it to kind of takeaway and pay itself off over time. So I’m not actively working for those 15 or 20 years in order to achieve that financial freedom. So for me, I’ve got that timeline in place, I’ve got that goal in place, I’ve got that income goal, and then I can look at Okay, what strategy will help get me there, which for me, is those two properties to financial freedom strategy. And to purchase those properties, build granny flats to get the extra cash flow, and use that cash flow to pay off those properties, and eventually live off the rental income that those properties generate for me. So I’ve got my end goal in mind, I’ve got my financial goal. And then I’ve developed a strategy that I believe is going to get me there with minimal risk because I’ve got the cash flow coming in that I can then see through the different markets that will occur in that time. markets that boom markets that bust markets that stay steady. I’ve got my plan, acquire those properties, build the granny flats, get the rental income and maximize that and pay off those properties as quickly as I can. Pretty simple strategy. Because I’ve got a plan

I’ve got a goal in place. So if you don’t already have a plan and if you don’t already have a goal, that’s probably where you need to start. And if you need help actually working out okay, I’m here. This is where I want to be financially or this is my property goals. How do I get there? Or what should my property goals even be? Then we do offer free strategy session so if you go to onproperty com au forward slash strategy you can learn more about those sessions over there you can book in a time that suits you to get on the phone with some on one of the team over at pumped on property and to talk about your situation where you’re at and where you want to be and get clear on a strategy to get you there as well as your next step so again go to onproperty com au forward slash strategy if you need help with that but that’s the biggest mistake i think is a bad strategy or no strategy or a strategy that doesn’t line up with who you are and where you want to be so it’s great to say i want to be a billionaire but if you’re actually living consciously and think about your values and my values actually time with my family going to sports games taking my kids surfing spending time away with them does that line up with being the amount of work you need to put in to be a billionaire and the time you need to spend away from your family probably not and so getting conscious and getting really clear on what your values are and a goal and a strategy that will line up with those values which is what me and ben called conscious investing is really important in that part as well the second big problem that people make is bad timing in the market now property swings happen we have booms we have vast economic zones happen we have booms we have bass is basically impossible to pick the exact timing of things no one out there could have really picked the exact timing of a virus that would hit the entire world and cause this bull run that’s been happening for the last 11 or 12 years to come to an end and to see the stock market crash by i think over 40% now so no one could have predicted exactly when that was going to happen but we could predict that there was a recession that was jus and we just were waiting for the trigger that would actually cause that so i’ve been talking about the coming recession for over a year now so have a lot of economists as well you can start to see those sorts of things you can never pick it exactly but you can start to see when it’s going to happen look at the property market in sydney and melbourne back in 2016 i was thinking this property market is too hot right now it’s crazy this can’t continue to go on that was february 2016 i started saying that and then it wasn’t until mid 2017 for sydney or late 2017 for melbourne where those markets actually hit that peak and started to decline and went through the next 12 to 18 months of decline you could see you could see that it was coming but you can never actually pick your time exactly but even just having an idea that these cycles and these timing exists is something that i didn’t know a couple of years ago and i got into cryptocurrency one of the worst times it was after the boom and it had gone down and so i started investing on the way down so some of my purchases in the beginning were a really high price and then it kind of bottomed out and i started learning real quickly about market cycles and then the next purchases i made work towards the bottom of that cycle obviously that moves a lot faster and is higher risk but it was also a great lesson for me in a very short period of time don’t pick the wrong cycle don’t jump in and get fomo because you’re scared you’re going to miss out market goes in cycles and there’s runs that can last years and then crashes that can happen in just weeks or in just months and you can see 40% wiped out of the stock market in just a couple of weeks instead of buying at the end of a 10 1112 year run oh i don’t want to miss out in start to see okay this has been running for a long period of time can this continue into the future maybe i’ll wait for crash here and then when the crash comes thinking okay it’s not a risk free time to invest the crash could still go further but it’s less risky because you’re starting to see the bottom of that cycle

and whether or not we’re going to continue to see markets go down through this crisis or if we’re kind of starting to see the end of it as infection rates start to slow and are we going to see another bull run from all the stimulus that the government has put into things will that inflate asset prices but getting the best timing that you can get with the limited knowledge that you have and not jumping in just because of fomo getting educated about market cycles is super important so check out stuff from phil anderson check out stuff from harry dent check out this who else is another person i can’t remember off the top of my head but yeah phil anderson is a really great resource to check out he’s got a book which i’ll link up down below if you want to learn some more about market cycles and get deep into that. There’s also a really great video by Ray Dalio, on why market cycles happen, and how debt causes market cycles. And I found that just the most straightforward and best explanation of it that I’ve ever seen. It’s all linked up to that down below. So that’s the problem number two is just really bad timing, you can never get perfect timing. But if you choosing the absolute worst timing, then you’re obviously increasing your risk there. This third thing is bad cash flow. So that’s something that I see a lot of people making investing in negatively geared properties with only one potential way of making money. And that’s that property and that market going up in value, and not thinking anything about cash flow, or how that’s going to affect the day to day. The reason that I think this is such a big mistake for so many people is that it just puts you in a higher risk category, because you’re not just looking at the risk of the asset you’re investing in. But you also need to look at the risk of your own life and the income in your own life. And if this crisis has taught us something is that even people with safe and secure jobs are people working for great long term companies think virgin think cuantas could easily have their income wiped out overnight. Look at all the people who work for gyms who work in bars who work in clubs, I’ve got friends who are DJs, in in the entertainment industry, all of that sort of stuff because of one virus and the government changes lost their income overnight. Now imagine you’ve invested in property, and you’re super negatively geared. So that property is actually costing you money every single month to hold it, you’ve got your expenses, and you’ve got your rental income, and the rental incomes less than the expenses. So there’s this big gap here that you need to make up yourself with your own income. Now, let’s imagine your income goes to zero, that gap there still exist, how are you going to make up that gap? You can’t, okay, because you’ve got no income coming in. So you now have to sell that asset, potentially at a bad time in the market where you going to lose money on it. And that’s just a bad situation to be in. Now, let’s flip it and look at some of the investors that we’ve helped purchase property in Brisbane in the last year or last two years, that have then going ahead and build granny flats on those properties. They’re in a position where they’ve got their expenses from their property. But they’ve built a granny flat, they’ve got not just one income coming in, but they’ve got two incomes coming in. And now interest rates have dropped a bit as well. And so they’re in a situation where their income is greater than their expenses on that property. And so they’ve actually got a gap here of positive cash flow. And so let’s say they’re in the same situation, they worked as a DJ, or they worked in the entertainment industry or in travel or whatever it may be that they lost their income at the moment, that property and the rental income from that property is paying for all of the expenses done. And then it leaves this bit this little bit here of extra cash flow, which you can then use to pay off the property if you want,

when you’re in that really bad situation, that extra bit of cash flow, you can actually use to buy bread to buy toilet paper to buy the things that you need to help you pay for your rent and to pay for your mortgage in that time of need. So you might not be moving forward financially, because you’re taking that extra cash flow and using it for your life. But again, by your lifeline, or maybe you’ve owned that property for five years. And each year, that extra bit of cash, you’re putting in your offset account. And so it’s grown and grown and grown and you’ve got this buffer of money in there that is offsetting your debt. And then you get in a bad position, you could live off that money for a period of time, if you wanted to. And most importantly is that you don’t need to sell that asset, you’re not forced to sell it in a bad time, because you’ve got the cash flow coming in. So bad cash flow can put you in a bad position. Sometimes it’s fine, bad cash flow can help you acquire an asset that goes up in value and makes you more money than you lose, you don’t lose your job, you’re fine, can still be a great investment strategy for some people. But I think it’s a big mistake for some other people, because it just puts them in a higher risk category than they actually want to be. And the fourth thing, and a massive mistake that a lot of people make is not doing anything to increase the productivity, increase the output, increase the income or the value of their investment. So they’re just buying something and relying on market dynamics and for the market to go up in value for them to make money. Now this is a fine strategy for your average investor. But do you want to be average? You know, probably not. If you’re watching videos like this, investing in the stock market is inherently like that. You have no control over that company that you invest in. But a lot of people do the same thing in the property market. They invest in a property. And they do absolutely nothing to that property to increase its productivity or the increase its value. Now that property could still go up over time because of the way that markets work. But it could also go down over time if you’re in a bad market. However, if you become an active investor and invest in things where you can create value and generate value, so maybe you invest in a property that is a bit rundown, you could potentially renovate that property, which increases your rental income on that property, extra cash flow for the wind there, you could also increase the value of that property to maybe you’ll also go ahead and take the step of building a granny flat on that property, which increases your cash flow again, and allows you to pay down your debt faster. Granny Flats tend to increase the value of a property up to the cost of the builder, the granny flat, so you’re not getting a huge capital gain there, but you are getting extra income. And you’ve added income producing value to that property. And you’ve made that property more productive, because you’ve taken capital invested in doing something, building that granny flat, and you’ve generated productivity out of it. And if you’re looking at the numbers of that granny flat, which me and Ben have gone through, I’ll link up to that, you can see massive cash flow gains from that 1000s of dollars per year into your pocket, because of that build, investing about $120,000 into the build of a granny flat, getting something like $300 a week in rental return from that granny flat with interest rates as low as they are today. You can see some great returns from that. So that’s the fourth problem is just, you know, not looking to add any value not looking at any productivity during your investments. And just hoping that you’ve got everything, right. However, if you actually look at this and look at Okay, let me have a strategy in place. Let me pick my market timings. Let me do my suburb research and pick the right suburb and the right timing for a suburb as well. And line all that sort of stuff up. Let me get good cash flow in place to minimize my risk. And let me also actually increase the value of that property, let me increase its productivity. Now you’ve got multiple ways of making money. Let’s say you think you did the timing well, but the way when you enter the market, the market dipped by 5%. If you’re able to actually manufacture value to that property, you might increase it by 5%. And you stay level But hey, at least you lose money or get into a dangerous loan to value ratio situation. Or maybe you’ve added cash flow. So now your positive cash flow. So even though it’s did you go the cash flow coming in that you can weather this storm come out the other side as your property increases in value over the long term, as you pay down the debt over the long term. So you have multiple ways of making money there are let’s say you pick the timing, you try and manufacture growth, but it doesn’t work out. So you actually lose money on a renovation, but you pick the timing and the market goes up in value. Okay, now you got one to offset the other. Or maybe the stars align, and you get the timing right, the suburb timing right, you buy the right asset, you get good cash flow, you manufacture value, then look at the growth of your investment

compared to someone who made all the wrong mistakes and pick the bad timing didn’t add value, didn’t get cash flow, then lost their job had to sell out at a loss. As you can see, if you can avoid these problems, if you can avoid these mistakes, you can both minimize your risk and increase your chances of return. So get a clear strategy have a clear goal in mind that is in line with who you are and how you consciously want to live and the value that you want to bring to this world and the way that you want to experience this world and live your life. Get clear on that strategy. Get clear on that goal. And go to onproperty com.au forward slash strategy. If you haven’t already to book in a time, get on the phone to someone to get clear on that strategy. If you’re struggling to do it by yourself, get that strategy worked out the market timing so look at things like hey, cw is month in review report, get onto core logic, subscribe to them on YouTube and look at their monthly reports. Watch me my videos. Look at Ben’s videos from Pumped on Property. He talks about market cycles. Phil Anderson start listening to some of these economists as well. Don’t let market cycles consume you because then you’ll do nothing at all, you’ll just be too scared. But take them into account to lower your risk there. Improve your cash flow, try and get as best cash flow as you can. Ideally, I want to be in a positive cash flow situation. I don’t know about you, but for me, cash flow is king. And I’ve been running about a positive cash flow since 2006 I think is when I started or 2008 or something like that. And then look at ways that you can manufacture growth, increased productivity, increase the cash flow and the revenue generation of your investments as well. So try to avoid these problems try and counteract these problems go to onproperty. com. au follows our strategy if you need help with that strategy. Otherwise, until next time, stay positive