The Most Valuable Lessons I Have Learnt as a Property Investor

While buying your first investment property and building a property portfolio is exciting, it can also be a little scary. Nila Sweeney, managing editor with Property Market Insider spoke to successful investor Marissa Schulze of Rise High Financial Solutions on how to overcome these initial fears and reduce your risks if you have the right strategy at the outset.

Investing in property is scary and overwhelming for any beginner or even for some seasoned investors. Here are some of the biggest lessons successful property investors like Marissa Schulze learned to fail-proof their investments.

Lesson Number 1: You have to commit for the long term
Property investment can be a low risk and predictable way to build your wealth and retirement. However, you need to be in it for the long term.

Property investing is not a get rich quick scheme. It’s more like watching paint dry or watching grass grow.

Don’t expect results overnight and don’t get disheartened when going through the ups and downs of the market.

Top insider tips!

  • Understand and manage your cash flow
    This is the best way to ensure that you can ride the ups and downs of the market and still maintain and build a strong property portfolio over the long term. Cash flow is everything and the way you manage your cash flow will ultimately determine your success or failure as an investor.
  • Know where your money is going
    You need to clearly understand your own personal spending and exactly how much of your income you can contribute towards your investing.
  • Know the costs of holding on to your property
    You also need to understand exactly how much each property in your portfolio (and each property you wish to add to your portfolio) is costing you before and after tax and how this will change if interest rates go up to say 7-8%.
  • Have a sufficient buffer
    You need to have enough cash for you hold the investment property over the long term regardless of what happens to its value and regardless of whether interest rates increase or not. If you have calculated this correctly, then you will never be in a position to sell and lose money.
  • Buy the best property you can afford
    Stick to a firm rule of only buying property that you can afford to hold forever.
    A property cycle is generally about 10 years. The earlier you start investing and the more cycles you go through, the better off you will be.

With property investing your ‘time in’ the market is one of the most critical elements to your success. So don’t procrastinate.

Lesson Number 2: Use your money wisely
It’s not how much money you make that matters, but rather what you do with your money that will ultimately determine your financial success.

For every dollar you earn, you should always put aside a percentage of that income towards investing and a percentage of the income towards rainy day savings before you pay your bills or spend money on entertainment or living expenses.

To take control of your finances and manage them like the wealthy, here are three steps you may want to consider.

Top insider tips!
You may like to show some leniency to tenants who have fallen on hard times. Perhaps you’re a nice person. But your insurer is not. It may not be your choice to allow the tenant some more time, that decision may invalidate your insurance policy.

  • Identify areas where you can save money
    Look at your current spending and identify things that you can change that will make a difference to your savings while not greatly impacting your lifestyle (e.g.,. taking your lunch to work instead of buying it every day could save you $2,500-$3,000 per year).
  • Commit to paying yourself first
    Make a commitment to pay yourself a percentage of your income that you can use to invest. This amount is the proportion of your income that you can live without. Try to commit a minimum of 10% of your income towards your investment fund.
  • Make it automatic
    A great way to get started is to open two different bank accounts as follows:
  • The first bank account
    This is where your income is paid into and where your bills and living expenses come out of. This bank account is linked to an ATM card, and you have internet banking access to make internet payments from this account. You can call this account on your internet banking ‘everyday account’.
  • The second bank account
    This is your investment bank account. This account is not linked to an ATM card and the money in it is harder to access. Once money goes into this account, it’s important that you don’t take it out for any reason other than what the money is for (i.e.,. Investing and building your wealth). Call this account on your internet banking ‘investment account’.
    Once you have your separate accounts, you could ask your employer to split your pay into the separate accounts, so that 10% automatically goes into investment account before you even see your pay.

If your employer is not able to do this, you can set up automatic periodic transfers on your internet banking programmed to transfer 10% of your income to your investment account on the day that you will receive your pay.

If you are self-employed, every time you receive income into your business, just as you would put aside 10% for GST, at the same time you should be transferring 10% into your investment account.

The easier you can make the process and the more automated the process is, the better your chances of sticking with it and turning your life around.

Lesson Number 3: Surround yourself with the right people
One of the best things you can do is to build your own team of experts who you could trust, who understand your goals and had a proven track record for achieving their own property investment success for themselves and their clients.

Top insider tips!
When choosing your experts, look for the following attributes:

  • They’ve done what you wanted to achieve
    While the right credentials and qualifications are essential, first-hand property investment experience is so much more valuable to look for someone.

Genuine positive client reviews

This shows that they’re doing the right thing for their clients. Also look for other attributes such as their strategies and depth of market knowledge. This way, you can significantly fast-track your progress and avoid costly mistakes along the way.
The truth is anyone can be a successful Investor. Regardless of your income, if you can commit to sticking with it over the long term, spending less and saving more as well as seeking guidance from the right experts, you too, can succeed and create wealth through property investing.

Source: Nila Sweeney