Aaron Christie-David says investors can overcome their fears in property investing by breaking down the steps and forming the right habits.
Aaron is a mortgage broker and author of the recently published Happy Home Loan Handbook.
On the Get Invested podcast with KnowHow’s Bushy Martin, he discussed how potential investors can gain confidence in the property market and prepare for any potential obstacle which may arise.
Overcoming a lack of confidence
Aaron revealed a number of factors which will see investors lack the confidence to purchase a property.
“It’s a confidence game and it’s like a lot of parts in life. Why doesn’t everyone start a business? There’s a confidence element to it. Maybe it’s not right for you or maybe the timing isn’t right. Why are some people able to go travelling overseas or land that perfect job? It’s that confidence. It’s also probably a reflection on your greatest insecurities, a reflection on the peer group that you may have or the company you keep, a reflection on your mindset, a reflection of how you grew up, as well as your family for generations before you were even born,” he said.
Overcoming the fear of securing a home loan
Fear over the ability to secure a home loan will often deter potential investors from entering the market and finding the right property.
“So the biggest mistake is waiting, and then the biggest mistake around borrowing is fear and putting the energy into the loan and not the property. So worrying more about am I going to get my loan approved, rather than putting that energy into finding the right home. I feel like they compromise the asset because they put a lot of energy into the loan out of fear. Questions like, am I going to get the loan? Will the bank approve my loan? And I’m like don’t worry about the loan, the loan’s the easy part. Finding the right home – that’s the hard part,” Aaron said.
Overcoming perceived hurdles
Aaron recommended that investors undergo a ‘fear setting’ exercise to break down any concerns or hurdles and explore potential solutions.
“So let’s write down what is going to get in the way. So let’s do an example and say that you’re renting. Okay, we still need to rent somewhere. So write down, well, I can’t save a deposit because I’m renting, and I can’t afford where I’m going to buy or where I want to live. Okay, well can we think about reinvesting? Next, interest rates are going to go up. Okay, can we think about a fixed rate? Next, the property’s going to need a lot of cash for maintenance if I buy it. Okay great, can we have a buffer for cash that goes into a maintenance fund? I won’t be able to travel because I’m stuck with this mortgage. Okay awesome, can we have a little travel buffer? Or do we need to buy just a little bit less so that it gives you more cash to travel with,” he explained.
“So you start to unpack these fears for people, and you go I hear it, but firstly these aren’t exclusive to you because every home owner that I’ve spoken to has some degree of these fears simmer. But then they were addressed and they’ve gone on to buy their own home. So what are these fears? If we can just find a way to tease it out, because everyone is saying just go and buy, just go and buy. And when we use the word ‘just’, I feel like it diminishes the journey by saying oh it’s just so easy. But if it was that easy, everyone would be doing it. But they’re not doing it. So we have to find a way to play in these grey areas that there are some people that are on the journey that aren’t there yet. How do we just help them nudge forward one step at a time?
“So I feel like if we can just take the fears out of their head so they can get out of their own way a little bit more and start to realise that there are ways to address each fear that they have, and that they’re not being silly, in fact they’re been quite rational about it and this is a very logical step to take if that enables homeownership.”
Overcoming the difficulty of budgets
Budgeting and improved spending behaviours are achievable through making small sacrifices and persistently taking small steps which turn into habits and a resilient mindset.
“There’s no shortcut. You’re going to have to sacrifice something. Cash flow is the lifeblood of any business, and if you see your household as a business, you do the same. So your income comes in, the government gets paid, you need to save a bit and then you’ll live off the rest, and that’s your expenses. So then it’s time to unpack what’s going on in expenses – what is absolutely critical, what is lifestyle and what is discretionary? And how do we siphon out what we absolutely need versus what are we going to eliminate for a little while and make some sacrifices on for the greater good,” Aaron said.
“For example with me, while there wasn’t an overseas holiday, there were shorter, smaller, more casual breaks. So we still got to go away, and we didn’t feel like we were giving up every luxury. We stopped coffees for a bit, and I think while the five bucks a day wasn’t going to change our lives, it was the discipline to go, hey look, we can give up something. Yeah, the smashed avo isn’t going to change your life. But all it is is that there’s a mindset around, I’m going to give up things for the greater good. And if I can give up this, then I can give up that. If I can give up that, then I can give up this. And that means we don’t take out a loan for the car and it means we don’t have a credit card, which means we’re not spending money that we don’t have.
“It then means that I’m going to talk about things like, is the HECS debt good for my borrowing capacity or can I find a way to pay that out? Just by being curious about it or asking questions, we’re going to get better answers, and that’s really what is kind of leading into this. Can we move in with parents just for a short period? Can we find a way to get cheaper rent or ask for discount? But these are just more short term pain that we have to go through, but once you’re in that house, that property, that unit, whatever it looks like, you will thank yourself for making those small sacrifices.”
Listen to the full interview here.
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