The secret to creating wealth through property

Are you making investment decisions based on where the future will be, or based on the last 30 days of news?

When driving your car, focusing on the bugs stuck on your windscreen will result in missing where you want to go, or worse, you’ll crash! When it comes to creating wealth through property, the same concept applies – let me explain.

Right now, you can be forgiven for feeling anxious about investing in property. After all, the current environment can be perceived as bleak with negative news being thrown at you here, there and everywhere.

So of course you may have fallen out of love with property as an investment choice given that we’re experiencing some headwinds right now - which include;

a softer property market (generally speaking)
rising interest rates (although the peak is here, or very near!)
high inflation (resulting in the RBA taking harsh action to curb inflation)
a significant reduction in your borrowing power (when compared to a year ago)
higher home loan repayments
a fixed rate home loan cliff (which is just about to start)
new stringent rules which landlords must abide by
talks by State governments on how to tackle the issue of rising rents (landlords may be restricted on how often they can increase rents)
higher land tax for Victorian investment property owners (announced in the FY23/24 Victorian State Budget)

For some, the above issues have taken the shine off property as an investment choice. For others, they welcome the above issues as it presents a golden opportunity to set the foundation for the next property boom.

Markets go through cycles, and property is no different. Cycles are driven by many factors, however the two main drivers of any market are Fear and Greed. Right now, the market is fearful in light of the above issues.

Here’s the thing, each cloud has a silver lining. Savvy investors know very well that “this too shall pass”. In fact savvy investors love market cycles like we’re experiencing right now as this is where more property millionaires are made, during the down time.

Here are the stages of a property cycle:

If we consider Melbourne and surrounds for a moment, the property market appears to be at the “bottom” stage (green) – as shown above.

There are many factors to support this view, which include – but not limited to – lower property prices achieved when compared to 2021/2022, higher rental returns, more affordable property values, an increase in vendor discounting activity, and days on market starting to reduce.

Then of course there is a bridge that will take us from the “bottom” of the cycle to the “rising” stage of the property cycle – and this is where I believe we’re at right now. There are signs to support my views here, which include; stronger prices being achieved for A grade properties (with many selling above reserve), a consistent increase in auction clearance rates, and an ongoing low supply of quality properties available to buy.

If you’re currently making investment decision based on the last 30 days of news, then you’ll most likely miss an amazing opportunity to capitalise on the current market cycle and you will miss the upturn – potentially leaving large sums of capital gains on the table.

I have been invested in the property market for over three decades, and have been involved in the property and finance game for the same time. A common theme I have witnessed during this time is that many people sit on the sidelines feeling anxious about the noise around them. Then when the media starts blasting positive news, this group of people get FOMO (Fear of Missing Out) and they rush out to buy an average property with average prospects for capital gains, and they usually always pay above intrinsic value!

The moral of the story is this. Make your investment decisions on where the world is going, and not where it is right now. If you play the long game, you can't lose. And this is the secret to creating wealth through the power of property!

I hope that my blog today helps you in some way. If we can help you buy your next property led by strategy, please contact us and leverage our depth of experience and as we are ready and willing to assist.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

5 rules Monopoly can teach us to win as a Property Investor

Monopoly has been a classic board game for over a century. It's a real estate trading game played for fun... and for a chance to be a real estate tycoon. The game rules are interesting as there are some valuable lessons all investors can learn to win at the game of property investing.

I've played Monopoly at least a hundred times, since I was a kid. As much as the game annoys me with the fact that I can't borrow to buy property, I'm still hooked on the thrill of accumulating real estate and collecting rents. These days I get the same thrill from playing the property game in real life. It's fun..!!

In my daily work, I see some common mistakes people make when it comes to property investing. Given that most people have played Monopoly at least once in their life, I thought it made sense to use some of the key principles from the game to real life property investing.

Here are the 5 key rules from Monopoly that (I think) correlate to property investing today:

1. Positioning

Those who win at Monopoly usually own properties with the highest probability of other players landing on them, which entitles the property owner to collect rent. For example, the statistics say that 7 is the most common number rolled with two dice, and the 'just visiting jail' is a common space landed on. Therefore owning the Orange sites is a smart move seeing they are located 6 and 9 spaces from the 'just visiting jail' landing.

The similarity:

When investing in property it's not just about buying in the right suburb, but also about buying the right position where the property sits. If you buy a property in the right street, on the right side of the road, with the right floor plan, and next to other high performing properties, the property will be in constant demand by buyers and by tenants, no matter what the market is doing.

2. Cash is King

In the game of Monopoly cash is king. To win the game, you have to be the last player standing. In other words, the last player to have money wins. If you are moving around the board buying up everything, when it comes to paying out other players for landing on their sites, and you run out of cash, you lose.

The similarity:

Property investing is just like any other business, where cash flow is king. Maintaining a cash (financial) buffer is fundamental to ensure you can ride the ups and downs that comes with property investing. For example, interest rates can move up all of a sudden (like now) resulting in higher home loan repayments, or a property will require repairs and maintenance from time to time. Having the cash readily available is important in order to remain in the game.

3. Be patient

To win at Monopoly you have to be patient and have a game plan. Buying every piece of real estate you land on is not strategic and will likely cost you the game as you will run out of money.

The similarity:

The world's most successful investor of our time, Warren Buffet, once said "wealth is the transfer from the impatient to the patient". This is so relevant when it comes to wealth through property. Buying the right properties and being patient (holding) is the secret to creating wealth through property investing. I see too many people trying to time the market. To make serious money from property investing, it's about 'time' in the market and not 'timing the market'.

4. Diversify

To increase your chance of winning at Monopoly, you need to spread yourself throughout the board as opposed to owning just the one property and loading it up with hotels.

The similarity:

If you bet everything on one property type in the one location (e.g. apartments in the same suburb), you become single point sensitive when the market changes appetite. This is happening right now with apartments in Melbourne, Sydney and Brisbane, where an over supply of apartments has impacted the capital growth of such properties (at least for the short to medium term until demand meets supply once again!).

5. Cash flow

Monopoly is a simple game. You start off with some money, and your goal is to be the last player standing with money. The way you win in Monopoly is by collecting rents on property, or cash flow. On the Monopoly board, the best cash flow are the four railroads, because if you own all four of them, you collect $200 in rent (...a 25% return).

The similarity:

Capital growth is a key fundamental in order to create wealth through property investing - no arguments about that. However, if you don't manage your cash flow to ensure you remain in the game, then you'll be forced to sell up your property asset/s and deny yourself the chance to create real wealth from holding your properties for the long term.

In summary...

Monopoly shouldn't be taken as gospel, as the rules certainly have their flaws. The fact that you can't gear and borrow money is a real flaw in my opinion. In real life, if you don't take on good debt, you'll never achieve true financial freedom.

Having said that, Monopoly does have some valuable lessons to teach us. Buy well positioned properties, maintain a financial buffer, be patient, diversify property types, and manage your cash flow. These are all very important fundamentals to ensure you win as a property investor.

5 key tips for creating wealth through Property Investing

I wanted to share with you my 5 tips for creating wealth safely and predictably through Property investing.

These are my golden rules for property investing and I am confident that adhering to these will give you the best chance to achieve true financial success through your property investing.

Tip No 1:

As the saying goes, if you aim at nothing you'll hit it every time! Have a strategy and know what you're aiming for. You should know and be clear on the following:

- How much passive income do you want from your property portfolio?

- How many properties do you need in order to achieve your desired passive income?

- How much time do you have to achieve the desired level of properties?

Tip No 2:

Once you know how much passive income you want and how many properties you will need, you need to know how much money the bank is willing to lend you. This is known as your borrowing capacity.

Know your borrowing capacity at all times as opportunities tend to come up when you least expect it and being prepared will help you jump onto such opportunities. Taking action is the key to financial success!

Tip No 3:

The best coach is the guy that has walked in your shoes before. Surround yourself around advisors that walk the talk and that are actively playing the same game as you. No point taking advice from a theorist! Build your "dream team" and never compromise. Surround yourself with the best Accountant, Solicitor, and Finance Strategist as part of your dream team to ensure you achieve your set goals and aspirations in the most efficient and effective way possible.

Tip No 4:

Treat your property investing like a business, and not a hobby. If you are serious about creating wealth through property, then make sure that you know at all times your cash flow position, prepare a cash flow analysis so that you know which rents are due and when and what expenses are due and when. Cash flow is the life blood of any business and your property business should be no exception. Stay on top of your bookkeeping, pay your bills on time, hire and fire property managers to ensure you achieve the best return on your investment, and so on.

Tip No 5:

Buy with your head and not with your heart. Most people I come across will buy an investment property in the suburb they live in, just because they like where they live. Depending on where you live, this may or may not be the best strategy for you. Your home is your castle and your lifestyle preferences should not be confused with what makes a sound investment. For example, if your borrowing capacity enables you to buy 3 investment properties, then your priority should be to buy and hold the very best 3 investment properties that you can get your hands on to achieve true wealth through your property investments.

I hope you find these tips value adding for your property investing and if we can assist you in any way, please feel free to contact us for a confidential chat.

Do you make money in your sleep?

Most people earn an income either from working a job or from providing a product or service to their customers in running their own business. So the question begs, what happens if something happens to you and cannot exchange your time for money? Or what about when you decide to work less and enjoy more of what life has to offer? At that point will the aged pension be sufficient for you to travel, dine out, be involved with social activities, help out the kids, donate to charities, and live a desired lifestyle?

Passive income is the secret to financial freedom as it allows you to receive an ongoing cash flow (income) without 'you' being the servant.

Not all income is created equal and to achieve financial freedom, it is important to understand the differences and what you have to do to achieve an ongoing passive income for life.

Working income is what you get from doing a job. You exchange a unit of time for a unit of dollar. If you don't turn up to work, you don't get paid. This is similar if you run your own business, unless of course you have staff to perform certain roles where the business can run without you. However the majority of Australian small to medium businesses would not run successfully without the owner being involved or hands-on, in some shape or form.

The difference with passive income is that you do the work once but continue to get paid over and over again without you having to be at work, or to do the work. Is this something that sounds appealing to you?

This is what property investors do. Initially they save up a deposit from earning an income (work). They then invest (leverage) their deposit to buy into an investment property and they provide accommodation to a tenant. The tenant is now obligated to pay a regular amount of money (rent) for the benefit of living in the investment property. The ongoing rental income is known as passive income. And the more properties you own, the more passive income you receive.

Sounds simple? It is!

As the saving goes, if you fail to plan, you plan to fail.

The more property you accumulate throughout your working life, the more assets you will have in your later years and the more passive income that you would have accumulated to do what you like.

The key ingredients to buying property and create more and more assets (and passive income) for your later years are as follows:

1) Build more deposits. Buying the right investment properties will accelerate this for you as capital growth in your existing properties can then be used to buy more property.

2) Take on good debt. There are two types of debt but only one type will help you become financially free. The good news is that banks and lenders have a strong appetite to lend money for you to purchase property. Maybe it's to do with it's long proven history of performance and the fact that property is a human need which will always be in demand.

3) Leverage your working income. To achieve higher borrowing capacity you need to demonstrate to the bank that you have the capacity to repay the debt. Money borrowed to buy property is usually serviced by you, the tenant, and the tax man. As time goes on, there will be less reliance on you having to service the debt as your loan balance will reduce and your rental income will increase.

In summary, if you aren't' investing in assets (like property) that will pay you money in your sleep, you will never become rich or enjoy your later years the way you want to.

7 ways to improve your financial position

Do you ever wonder why some people seem to have more money, more freedom, and more choices in life? Is it because they were born in a wealthy family or is it because of luck?

Whilst luck can be a contributing factor, the truth is that anyone can be financially free and have more choices in their life so long as you have the right mindset and your belief system is programmed right.

Think of your mind like a TV antenna. The more tuned your human antenna is (your mind), the sharper your focus will be, the more action you will take, and the better results you will get.

Here are 7 ways to improve your finances today. You'll notice the common denominator is all about 'mindset'.

1. Forget the past and start to feel good about money again

Many people walk around with "money shame". Perhaps in the past you haven't managed your money as well as you would have liked, or perhaps you're still dwelling on that bad investment you made which you're having trouble getting over.

Here's a newsflash. You cannot change the past, but you can certainly create the future you want by taking action today. Drop the guilt, forget the mistakes, it is what it is and just move on.

2. Set financial goals

If you aim at nothing, you'll hit it every time! My advice is to create a Roadmap for your financial future. Be very specific with what you want and take massive action.

Your financial goals are nothing without purpose. I often come across people wanting to build a portfolio of properties but seldom do they really understand why. Is it to impress their family and friends? Or is it to create wealth?

If it's to create wealth, then why does one want to be wealthy? Reason I put this forward is because I know some wealthy people living miserable lives. They're working ridiculous hours, making little time to enjoy the important things in their life.

Money is an empty victory. If you have purpose as to why you want to be wealthy, then creating wealth will be more fun and stimulating.

Perhaps a goal for you is to retire from you daily work at a certain age. Or to travel for one whole month every 6 months with your loved ones?

3. Spend less and Invest the rest

I often hear this... Life is too short. Money doesn't bring you happiness. You can't take it with you... and so on. Whilst this is all true, money does bring you freedom and choice. Rightly or wrongly, it's a fact.

So whilst you're alive, why not give yourself and your family more choices and financial freedom to live the life you want?

The only way you'll achieve this is if you spend less than you earn, and invest the rest into high growth assets that will ultimately pay you a passive income for life. Property assets are a perfect example.

The benefit of investing in property is that the bank is willing to partner up with you and lend you the money to buy real estate, so you don't have to wait to save up the entire purchase price. Then as your property assets grow in value, you can tap back into the equity to buy more and more; obviously within your means and within your borrowing capacity.

For me property investing is a no brainer (excuse the pun). It's constantly in demand, it's a human need, banks prefer to lend against it (when compared to other assets), you can re-use the equity to buy more of it, it has a long proven history of growth, and the loan amount doesn't increase with inflation (e.g. a $100,000 home loan 20 years ago was a lot of money back then, today it's play money!).

4. Analyse your financial blueprint

A friend of mine (who is a very successful business person) once said to me, "companies make nice things for people to buy, so why not let it be you?".

If you were born in a hardworking family where money was a luxury, then perhaps your financial blueprint may have beliefs that is holding you back from enjoying the good/nice things in life.

Today opportunities are endless and if you want something bad enough, then your belief will make all the difference to what you can have.

So for example if you want a house by the beach or a nice flashy sports car, then visualise exactly what that looks like (with colour). If it's a red Ferrari that you want, then set your financial blueprint accordingly and take massive action to make it a reality.

Think about it, you can't buy the Ferrari when you're six foot under so you may as well do it whilst you're here, alive.

5. FEAR is just an illusion

Do you know what FEAR stands for? False Emotions Appearing Real. The world is full of doubtful people and excuses. The only thing holding you back from what you really want is, you guessed it, FEAR.

Program your mind (daily) by making positive affirmations to yourself, and believe that nothing is out of reach, except what you tell yourself.

If you are lacking a skill in something that you would love to do which you know will make you loads of cash, then get trained up. Just do it and always doubt your doubts. That's right, who said your doubts were right anyway, so doubt your doubts!

6. Build up your savings

"You must learn to save first and spend afterwards" - John Poole.

Once you've made your first million, the next million is easier. Moral of the story, you need to save as hard as you can to build enough cash so that you can invest, then once you start investing and make money, it's the old adage of money makes money. Leverage and compounding returns are the two secret ingredients used by the wealthy and it's the main reason why the rich get richer.

If you've been a poor saver in the past, then it's never too late to start now. Today is the best day to take action and work towards your financial goals... and dreams.

7. Avoid unnecessary spending

If you think it's hard to save, then here's an easy and very effective exercise. Write down all your expenses and break them into 'fixed' (like council rates) and 'variable' (like entertainment). Then annualise your expenses and look closely at your top 10 expenses.

Question everything and make some changes. Stop making excuses and trim unnecessary spend, at least until you have the required capital to start investing in high growth assets (like property).

If you can trim even just $50 a week, you should be able to hold at least one investment grade investment property which in turn will make you money (over time). I'm sure if you look hard enough, trimming just $50 per week from your expenses will be a walk in the park!

Does all this sound simple. It is, however the magic ingredient is ACTION. Take action today and stop the excuses 🙂