Why do only 18 percent of investors own two properties and less than 1% own 5 or more?
Why do 50% sell up in the first five years and 92% of those who stay in the game, never get past their second property?
Let's look into some of the reasons why these statistics exists.
1. Buy and Hope
Too many investors adopt the buy and hope strategy, which means buying a property in a certain suburb that is tipped for growth and hoping it goes up in value.
There are many factors that influence capital growth which need to be considered when assessing whether a property should be introduced into your portfolio. Two key points to keep in mind are:
a) Undertaking thorough market and suburb analysis and due diligence.
b) Identifying the potential to increase the capital value of a property through development, renovation, buying under market value or other potential uplift strategies.
2. No Strategic Plan
Identifying your ‘why’ is paramount when working out your long term financial goal. Really getting deep into the reasons why and what you want to achieve is an essential part of this process.
The next step is creating a strategic plan. This will give you a clear pathway to follow and the confidence to safely implement your plan. Each property that you add to your portfolio should bring you one step closer to each your long term goal.
Building a team of experienced professionals around you is critical in the creation and implementation of your strategic plan which will allow you to ultimately achieve what you have set out to do.
3. Lack of Property Investment Education
Most investors haven’t done the hard yards in education prior to purchase. Listening to a couple of podcasts and reading a couple of books isn’t enough education to build upon to efficiently identify which property will outperform others in the long term.Having mentors is key. Experienced investors that have made mistakes in the past can help steer you in the right direction when navigating the selection process and can save you thousands in the long run keeping you in the investment game long term.
Enrolling in mastermind groups, continuous education and employing the help of a professional will help you in avoiding the expensive pitfalls that result in 99% of investors failing to achieve a multiple property portfolio.
4. Not Understanding Finance
Property investment is a game of finance.
If there were no boundaries with lending capacity anyone could go out and buy as many properties as they like. The bank doesn’t want to take on that risk, so it puts measures in place to assess your situation and cap your limits with borrowing. These limits aren’t always logical so it’s critical to have a basic understanding of these rules so that they don’t negatively impact your borrowing capacity too soon in your investment journey.
An experienced mortgage broker can advise you on these rules and navigate how best to work with them. Brokers are an essential member of your team but they are unable to help you with choosing the pieces of the puzzle that make up the picture of your long term goals and strategy. Not balancing the portfolio between growth and cashflow is an all too common story that trips up many investors on the way to building a solid portfolio.
Property is a long term game, a get rich slowly strategy.
Yes you can use short term gain strategies such as property development or buy and flip, but these are advanced strategies that should only be attempted after years of investment experience or with the help of seasoned professionals. Making the mistake of attempting these strategies too early is a sure fire way to see yourself in the 99% of failed investors category.
Many investors hold a property, see a small gain or even a loss and then bail out of the market only to see it take off a few years later. A property should be held for at least one full property cycle of around 7-10 years, but ideally the plan should be to hold it for the long term 10-20 years plus to experience the true magic of compound growth, which I will get into in another post!
If you made it this far, thanks for reading my thoughts.
If you need any help or advice on your investment journey feel free to book a chat on our website, reach out on email or give me a call.
I’m here to help you guys :)