It’s easy to dream of becoming the next big property investor. A portfolio worth millions, an eye for the next big thing and enough passive income to take an early retirement. When it comes to making the successful property investor dream a reality, it’s the little things that go a long way.
1. Be quietly confident
You have to back yourself. Follow what you believe is right without buying into every property article in the news or speculation by industry peers. There’s no substitution for studying trends, following current events and hours of research so you know you’re up to date with what is happening in (and is forecasted for) the property market. Be confident enough to take chances and see them through properly, and be prepared to get up again if things don’t go as planned.
Make sure you have a diverse array of features in your property portfolio. By introducing this level of diversity, you are safeguarding your future, whatever the financial outlook.
2. Remember debt is not a bad thing
We are right to be wary of debt. Recent statistics have shown that New Zealanders aged between 45 and 64 owed $107,000 on average, while for 25 to 44 year-olds this figure is as high as $145,000. Around 87% of this debt is linked to property.
However, debt is not to be shied away from in property investment. Don’t be afraid of tapping into your portfolio equity to buy more properties. Figure out how much debt you’re comfortable with while still being able to service your mortgages.
3. Don't lose sight of cash flow
This requires a balancing act between negatively and positively geared properties. Negatively geared properties require work, and may be losing you money in the short term. However, it is these properties which are going to reap big rewards in the future when their value is enhanced.
Offset this with positively geared properties which will give you short term cash flow, and use cash flow forecasts to predict what you can and cannot afford.
Smart investors run cash flow forecasts to structure their finances before purchasing an investment property, allowing for maintenance needs, vacant periods etc. While the rent alone may cover the mortgage on a property, some will require a top-up to cover those additional costs. Cash flow forecasts help you determine what the shortfall might be, so you can decide whether you can afford it.
4. Stay hopeful
Property investment is risky long-term game. Sometimes during a recession it’s hard to see the light at the end of the tunnel, so the ability to stay hopeful, see the bigger picture and look outside the square is so important. We often get caught up over buying at the ‘right’ time. In actual fact, there isn’t really a right and a wrong time, it’s all about being informed and making decisions based on your research and experience.
A rule to live by is if it won’t affect you in five years, don’t spend more than five minutes worrying about it.
5. Take responsibility
While you need to stay positive about your future, it’s even more essential to have the ability to own and learn from your mistakes. If you can’t do this, it’s unlikely that you will go very far.
All of the world’s richest and most successful people say making mistakes is part of being an entrepreneur. It’s going to happen! If you don’t learn from the past you’re doomed to repeat it, so to grow and be successful make sure you turn your mistakes into learning opportunities.
Property investment is a competitive and demanding industry that is certainly not for everyone. There are many ups and downs that will chew-up and spit-out the unprepared and uninitiated. While you don’t have control over the property market, you do have control over how you choose to play your cards. Keep these five points in mind and you’re on your way to becoming a successful property investor.
Download our A-Z guide is a handy guide to help you navigate the property investment world, and make buying, leasing, and selling homes that much easier:
