I’ve helped hundreds of property investors over the years, and in that time I’ve discovered that successful investors do things in a certain way that helps them become rich. On the other hand the opposite can be said for the investors that haven’t completed the research required to get it right and they tend to struggle.
So let’s look at 6 simple reasons most investors will never get rich and how to make sure you do.
Reason 1 – Most people wait too long to start
Many investors are waiting for everything to be “perfect” before they get started. The right time in the cycle, the right property, the right environment etc, which means they never get going. The longer you wait, the longer it will be before you obtain the money, success and financial freedom you deserve.
It takes time to grow real wealth, especially if you are looking to use the power of duplication to it’s most effect. The timing may never seem to you like it is perfect, that’s why you just need to jump in and get started, because if you’re ready there will be a property out there ready as well.
Reason 2 – Fear stops many would be investors
Fear keeps many of us from getting what we want.
Be honest with yourself and count the number of times fear has prevented you from taking action and in the process, cost you possibly thousands of dollars through missed opportunities.
With property investment fear holds many investors back. Some fear taking on more debt, others fear failure and believe it or not, some even fear the success of becoming wealthier than friends and family.
Successful investors have often met someone who has explained to them that these fears are a natural part of investing and what they should do to handle it. Sometimes it’s understanding what you stand to lose if you don’t invest. For example, do you fear being stuck in your current job for the rest of your life, or retiring on a pension without enough money put aside to keep the lifestyle you’re used to?
Take the fear on, research your options and talk to someone who has been through it before.
There are many companies that claim to be able to make you rich overnight and try to convince you of this by cramming you into a big room with 200 other would-be investors, but this will probably just confuse you further. One on one advice that is specific to you is always the best option and that combined with a planned meeting with your accountant to get their opinion, will put you on the right road.
Once you’ve overcome the fear and experienced success on the other side, you usually look back and wonder why you were ever afraid in the first place.
Reason 3 – Some investors wait until they feel they know enough
The fear of not knowing enough prevents many investors from starting.
I have met hundreds of people where the more they learnt, the more they realised they didn’t know.
Once you start learning some basic investment concepts you suddenly realise there are a whole lot more things about investing that you don’t yet understand. The trap is that many investor’s think they now need to learn even more, so they read more books, go to more seminars, listen to CD’s and watch DVD’s. It just never stops!!
To be honest there aren’t too many people that do know it all so stick to your limit or knowledge and ask lots of questions along the way. Use a service like ours, watch, learn and lean on someone who has gone through this process many times before and when you feel comfortable, then you can do it on your own.
Reason 4 – Understanding short term pain for long term gain
It’s important to realise that at the start, you will probably need to give something up to be an investor. It could be that extra dinner out on the town or that nice bottle of red wine you drink during the week or a holiday every couple of years. What are you prepared to do now so that you don’t have to work tomorrow?
The way to become wealthy is creating a passive income whether you go to work or not. It’s also about building wealth while you sleep.
OK so let’s do a couple of quick basic sums to show what I mean;
If you borrowed $400,000 to buy your first investment property and put in 10% deposit plus the fees, you would need to borrow $360,000. Now let’s take an average interest rate of 7% on that money and you will pay around $484 per week. Then you’ll have rent coming in and that equates to say $400 per week. This means you will have to find around $84 per week. Now obviously there will be some tax deductions however, there will also be some extra costs, so let’s say they work out to be equal. Over the coming years the rent will slowly rise until the day that the property will look after itself and you can enjoy that bottle of wine again.
The other part of investing is that on average property prices in Adelaide have increased by around 8% over the last 80 years and there is no reason why this shouldn’t continue.
OK, so you bought that property for $400,000 and 8% of that will take the property to $432,000 after year one. Year two the value increases to $466,000, year three $503,000 and if the property kept increasing by 8% it would be worth $863,000 after 10 years of you purchasing the property. In the last year alone it increased by $65,000! That’s $178 in value your earning each night that year while you sleep! This is called passive income and this is what makes a property investor grow wealth.
That’s what happens to property investors. Initially they work long hours, save up a deposit and then invest it into a property. Then, their money starts working for them and keeps giving them sound investment returns “passively” in the form of capital growth and rental returns. Rather than getting another job, the wealthy people know they need to send their money out to work for them.
To put it simply: If you’re not making money while you sleep, the chances are you’ll never become rich.
Reason 5 – They don’t use systems for making money
A system for making money is something that takes the emotion out of your investment decisions.
My preferred system is investing in new areas that have high employment opportunities. Now I might get in trouble for this BUT I would prefer to invest in the North of Adelaide rather than the South as I believe that employment growth is far superior than the South.
I also rarely sell properties and instead I use the growing equity to buy more properties.
Once you create a proven system for making money, there is no limit to the money you can make. When I sit down with my clients, I lay out my system and explain it step by step.
Reason 6 – Not going all the way
To become a successful property investor requires a long term plan and importantly you must continue to monitor your property values and use that value to buy even more.
Remember back in point 4 were you were making $178 overnight while you slept, well imagine if you had bought 5 homes and made almost $900 every time you went to sleep. Now let’s move another 10 years forward’s and you would be making an amazing $378 per night with one property or if you bought 5 properties $1890 per night.
So, it’s not a get rich quick scheme, but you will get rich.
The problem for many investors is that they become impatient and they want to sell and look for the next best thing, but in most cases that just makes them a bad investor.
When you are tempted to do this, remind yourself that real estate has been the number one long-term multi-millionaire maker throughout Australia’s history.
And the last thing I will leave you with is this;
Many investors fail because they try and do it all themselves. They need to realise that even the experts talk to other experts. Most importantly, they don’t cram into a big function room, they talk one on one.
Successful investors build a great team around them and have mentors and like-minded people around them – they learn from people that have already achieved what they want to achieve.
So, you have a choice to make now. Will you sit around and do what you’ve done in the past, or will you take action today?