The key to property investment is having a plan ready to go for any change or challenge, says legendary Australian investor Steve McKnight.
Steve retired from his accounting career at 32 years old and famously purchased 130 properties in three and a half years. He has become one of Australia’s best selling business authors and speakers.
Steve joined KnowHow founder Bushy Martin on the Get Invested to talk about how investors can find opportunity in every twist and turn.
Planning for the worst case scenario in property investing
Every hurdle you face when investing can be successfully overcome, as long as you ‘plan for the worst-case scenario and hope for the best-case scenario’.
“I play out a whole lot of worst-case scenarios in my head so that I’ve got plans ready to go. And as the situation unfolds, I just roll with the strategy that’s most applicable for that time,” Steve said.
“Sometimes you can be caught in a pinch point through no fault of your own. Of course, there’s been property deals where things have gone wrong. I’ve had properties burned down, people driving a car through the front of a property, tenants letting me down, the United States drug enforcement agencies breaking in, termites eating properties … you name it, it’s probably happened to me.
“That said, it’s all locks and keys when something goes wrong. It’s your job to work through it. And this is the act of investing – to solve the problem. You can sit there and put on sackcloth and say woe is me, or you can get on and say, well that’s happened, now what am I going to do about it? And that’s the best you can do.”
Working through your fears and insecurities
As with many things in life, Steve said investors can be their own worst enemies by letting doubts and emotions interfere with decision-making.
“The biggest challenge I think any investor will face is not external, but rather their own ability to be able to keep going when the doubts and the fears and the insecurities and wobbles in life happen,” he said.
“You will be your biggest asset and your biggest liability. So you always need to be working on yourself. No one can have an investing outcome on the outside until they’ve had an investing breakthrough on the inside.
“If you’re trying to invest your way out of the money problem, well even if you’re successful, you’ll end up with a money problem because you haven’t actually fixed the problem. If you’ve wallpapered over it, that’s not going to lead to lasting success – it’s only temporary success.
“A lot of people will look outside because they’re too afraid to look inside, whereas I’ve found that you’ve got to start by looking inside to work out what your strengths are, and then apply these strengths.”
Buying problems and selling solutions
Steve’s key to maximising success is by ‘buying problems and selling solutions’, which can be achieved once investors build their knowledge and understand their skill sets and strengths.
“When you buy problems and turn them into solutions, you make money. That’s my calling card. Buy problems, sell solutions, make money,” he said.
“If you’re buying solutions, then the only way that you’ll generally make money is if the market goes up, and the market doesn’t always go up. But if you’re buying problems, you can make a manufactured profit by using your skill and expertise to outperform.
“To me, that is the act of investing. The act of buying is buying something. The act of investing is taking a problem and turning it into solution and using your God given skills to make money. If you can do that, then you’re not relying on the market. You’re relying on yourself.”
Turning every challenge into an opportunity
Based on his ‘buy problems, sell solutions’ theory, Steve believes any change in the property market will provide an opportunity, as long as you’re prepared and wiling to go for it.
“People are always fearful that the market might shift and turn into a headwind rather than a tailwind. Well, that’s just an opportunity, and your ability to be able to see the opportunity, participate in the opportunity and monetise the opportunity is the very essence of your opportunity to make money,” he said.
“Whereas if you’re just someone that parks your money somewhere and you do well when the market’s going up, well you’ll only make money when the market’s going up. And what you’ll do when the market’s down or sideways is be fearful or panic, and that’s not where you want to be, is it?”