KnowHow founder Bushy Martin sheds light on the common mistakes which see many first-time investors remove themselves from the property market early.
Investing, especially in property, is essential if you want to live life on your own terms. But unfortunately over 54% of first-time investors don’t reach their goals and sell their properties within the first five years.
On a recent episode of the Get Invested podcast, Bushy explained how the main difference between success and failure comes down to ‘just buying property’ versus establishing the right strategy, network and processes.
“They haven’t bought the right type of property in the right location and they haven’t set things up in the right way. And as a result, the properties end up costing a lot more than anticipated and burn an unaffordable hole in their pocket every week, and the property takes much more time and much more hassle than expected to manage, so they end up offloading the property, losing money and they never invest again,” Bushy said.
“The sad thing is that just buying a property versus adopting the right principles, people and process before investing in a property, is the difference between spending money on a property that underperforms, costs a bomb ongoing, and causes a lot of stress, versus spending the same money on a property that significantly grows your wealth, has little or no impact on your savings, salary or lifestyle, and creates an easy, affordable stress free journey.”
Mistake: Perceiving property investment as optional, not a necessity
Bushy explained the first mistake hard-working Australians make is seeing investing as an optional extra, rather than a must do.
“They’re in for a big shock because they mistakenly believe that paying off their home loan and just putting money into super is going to maintain their lifestyle when they try to stop work. But the cold hard reality for most is that relying on your super is going to leave you in penny-pinching poverty long term,” he said.
“It’s the major reason why over 73% of current retirees over the age of 65 are surviving on an average of just $295/wk or $15,300 a year, according to ABS data. Now I don’t know about you, but that doesn’t even cover our weekly grocery bill let alone anything else. So investing outside of super isn’t an optional nice thing to do if and when you get around to it, but a non-negotiable must do now if your going to enjoy a comfortable lifestyle when you want to stop work.”
Mistake: Not making the time to get started in property investment
Potential property investors will often delay starting their investment journey for a number of reasons, and ultimately minimise their ability to grow a significant amount of wealth.
“People don’t make the time to get started because they use the excuse that they’re too busy, and they mistakenly believe they still have plenty of time, so they’ll get around to it one day or sometime later. But one day and later never comes, so you need to use the investment time you’ve got now to do the heavy lifting for you, in order to get your time back, as time is one of the biggest investment success ingredients,” Bushy said.
“As I illustrate in The Freedom Formula, a 10 year delay in investing in a $1.2M property portfolio at a growth rate of 7%, will cost you over $2.4M in lost wealth, which equates to over $4,600 a week! So it’s never too late to start, but it’s always too late to wait. Don’t delay, start today!”
Mistake: Uncertainty about where to start and who to trust
Not knowing who to trust, especially when starting out, can see investors either do nothing or do it solo – neither of which is ideal.
“For those who are keen to start investing, one of their biggest problems is that they don’t know who to trust and they don’t know where to start. So, the mistake they make is to do nothing out of fear, and time and opportunity slips through their fingers and passes them by, and eventually in their mid 50’s they suffer an ‘Oh Shit Super Moment’ when they realise their superannuation isn’t going to be anywhere near enough to fund their lifestyle when they wanted to stop work. So, they’re left eeking out a paltry existence on next to nothing, or they’re forced to keep working until the day they drop,” Bushy revealed.
“Alternatively, others try to reinvent the property wheel because they don’t trust anyone, and they try and do it all themselves and end up making very costly mistakes because they just don’t know what they don’t know. I know this first hand because this was one of the biggest issues I suffered when I first started investing in property, and I paid the price until I learned the hard way that property is an elite team sport and a game of finance and I wasn’t a player, I just needed to own my property team and manage my managers.”
Mistake: Only focusing on the property itself
There is so much more to investing than just the property itself, and investors need to ensure they have the right mindset, strategy, finance capacity and structure, ownership entities, cash flow affordability and independent property team.
“The next mistake is that they just focus on the property without getting all of their other ducks in a row first … they simply focus all of their attention on buying a home like the one they live in that is close to their backyard, and then they try and figure out what to do with it after the event, but by then it’s too late,” Bushy warned.
“With nearly 11 million properties spread over 15,353 suburbs and locations across the country, the chances of a property in your neighbourhood being the best performing property available is very unlikely, so if you adopt this narrow sighted approach, you’re hamstringing yourself, and if you haven’t set it up properly to maximise your growth while minimising your costs as well as your risks by considering ownership entities, finance structuring and tax planning, then your setting yourself up to fail right from the get go.”