Andy Fernandes talks about how great property investors have good education, the right structure, and the motivation to achieve financial freedom.
While investing may seem out of reach for many, borderless investor Andy Fernandes believes it’s achievable by anyone with the right systems, support network, and most importantly, the courage to take action.
On Property Hub’s Get Invested podcast, hosted by Bushy Martin, Andy provided advice on how to invest in your education, mitigate the risks, and avoid overthinking decisions.
Property investor tip 1: Investing in your own education
Above all, Andy believes your most useful asset is your own education and knowledge.
“Getting a good job and earning good income is important to buy properties you need, but you also need to educate yourself, whether it’s up-skilling yourself in your employment or just learning about property. It can be through forums, books, online, there’s so many ways you can educate yourself and make a start,” he said.
“Now you may go to a professional, a mortgage broker or whoever, but you need to be across what you’re getting into because it’s a 30 year loan. You’re buying a high value, high price asset. You need to know what you’re getting into more than others. Even if you get a buyer’s agent, the buyer’s agent will find you a property in a particular area, but you need to decide if you want to buy in that particular area first. So I think the saying that no one cares about you more than yourself, that’s an important thing. So I’ve spent my time educating myself so that I can eventually have more time to spend with family.”
Property investor tip 2: Having a strategy based on your ability to commit
A solid investment strategy, including what you invest in and how, will align with the amount of time one can dedicate to the initial exercise and ongoing process.
“If you don’t have much time, then taking on a property development would be high risk, because if you don’t have the time and you then having to find the time, that’s when you make mistakes,” Bushy said.
“If you’re going to invest, you shouldn’t be creating a second job when you do it. Part of investing is to actually give you time back down the track, so you can put that energy into things that are really important to you, like your family and your friends.”
Andy added: “For example, my strategy has been more of a buy and hold strategy. I haven’t been active in developing or doing too much of the property because I focus on other things, such as my family, clients, those kinds of things.”
Property investor tip 3: Mitigating the risks
A high percentage of first time investors will sell within the first five years due to the wrong expectations and structures in place, especially when there are short term changes in the market. However, investors can persevere through the hurdles by mitigating the risks, taking action and playing the long-term game.
“If you look back at the history, every city has had its time in the sun, dips, and then it gets back to that time in the sun. So it’s not that one market is always going up or down, but rather every place has its own cycle that eventually catches up. So eventually one market does pick up in relation to all the other markets,” Andy said.
“Then the other aspect is the risks. So you need to know the risks involved, such as if the property values might go down in this area. And you’re going to ask yourself, how would you mitigate this risk? Is it a mining town where it may never go back up, and therefore I’m not willing to take that big risk? Or is it a town that you know will eventually catch up again and it’s something you could look at?
“The other thing you could look at is the yield you require. Will this property cost you a lot to hold? That’s a risk. It may cost you a lot. The interest rates may go up. So you need to insulate yourself against that.
“Or the risk might be bad tenants. Well, you need to get your landlord insurance, you need to get a good property manager and buy in a pocket that has more owner occupiers. So those are some of the risks and how you mitigate them. There’s always a reason not to invest, but if you just do your risk analysis and mitigate them, then you can take action.”
Property investor tip 4: Taking action
After building your knowledge, establishing the right strategy and understanding the risks, there’s just one thing left to do – actually making a move. Andy and Bushy urged investors not to ‘talk themselves out of a purchase’, and to have the courage and motivation to go for it.
“The key to successful investment is to just take a step and actually invest, because often times we get bogged down with all the details and all the information available and we just don’t make a move,” Andy said.
“I think we can also have the mindset of loans are bad and you should not owe money to anyone. Now if you leverage and you buy a car, you’re buying something that’s going down in value, but if you’re buying a house, something that people need to live in, that’s good debt. So I don’t think it’s something to be afraid of. It’s something that we need to understand the risks and mitigate the risks. But it’s important to take action.
Bushy also warned investors of the ‘analysis paralysis’.
“Great investors have a system, and they’ve developed this system through their own experiences. And they take action. So it’s good to take the time to reflect if you’ve had the experience yourself and you’ve seen a lot of others going through the process. And if you have the ‘analysis paralysis’, that can be very dangerous because if you are risk averse and you’re conservative and you’re looking for an excuse not to do anything, you will put yourself out of everything,” he said.
“I think most of the successful investors in the world are contrarians. They’re swimming against the tide, and they’re saying things that the masses aren’t. For example, Warren Buffett is a classic contrarian.”
Listen to the full interview here.
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