7 Principles for Investing into 2013
Although you’ll hear all about New Years Resolutions come January, for me that’s a little too late. Here are my 7 investment principles to help you frame your property strategy so that you can hit the ground running for 2013.
Principle 1: Make a Plan And Follow It
If you don’t know where you’re going, how will you know when you get there?
Many people will do what I call “investing by default” – they will get into an investment mainly because friends or family have told them it’s the right thing to do. They will give little regard to where it will get them and whether they’ll be satisfied with the result when they get there.
Having a plan helps you to focus on what you really want and helps you work out the steps to get there. It gives you a big picture focus and a reason why you’re doing what you’re doing. It also gives you smaller targets to aim for along the way, something that’s attainable so you don’t disheartened because you’re not hitting your big time goals.
Don’t be a default investor. Dream big, make the hard decisions now and understand the steps you will need to take to get there.
Principle 2: Think long-term
Ignoring short-term events, thinking big picture, focusing on a goal – these are all ideas that help you to play a long-term game and not get caught up in the wild fluctuations that can happen so easily in day to day activities.
Thinking long-term gives you more clarity and insight to make strategic investment decisions, helping you to see past the emotions of the day and buy when everyone else can only see doom and gloom.
When it’s time to throw your hat in the ring, long-term thinking allows you to sacrifice small concessions to achieve a better overall outcome. You can avoid getting caught up in trying to win a negotiation for a few thousand dollars, potentially missing out on a deal that produces outstanding results for years to come.
Principle 3: Take Calculated Risks
In order to generate a return you have to take risk. However trying to avoid all risk and make sure every conceivable outcome will work in your favour will result in little windfall worth speaking of and may actually prevent you from making a move at all.
On the other hand, diving headlong into a deal without considering the potential outcomes will probably not end well. As they say, only fools rush in.
As an investor you need to weigh up the benefits of the deal against the potential disadvantages or losses of what could happen should something go wrong. If the chances are high that you will come out on top and you feel comfortable moving forward, then you need to accept those risks and take action.
Principle 4: Fundamentals first. Price second
A property investment could be held for 20 or even 30 years at a time, so making a purchase based on the fact that you can get it for a “good price” can leave you holding a lemon in years to come.
I always ask myself, “Would I be happy to own this in 30 years time?”. If I can answer yes then I’m happy to start negotiating on price. Remember property is a long-term game so you need to think many years forward from now. Too many people get drawn into an investment because a skilled salesperson dangled a “bargain” in front of them.
First priority is to ensure your investment is ticking all the boxes (or as many as possible) before anything else. If the property meets your criteria, then you can talk about price. Not beforehand.
Principle 5: Be Front Foot, Not Back Foot
When you sit down to work out your investment plan, get excited. Feel confident. Focus on how you’re going to make it happen. If you’re out looking at property, be assertive, look for opportunities and have fun. Grab the bull by the horns and make it happen.
Don’t hang back hoping it will happen by itself, it won’t. Reluctance serves no one. If it’s not a good deal, move on and look forward to the next one. If it is a good deal, grab it with both hands before some other scoundrel sets their sights on it.
Principle 6: Keep It Simple
We all have to start somewhere. The problem with many would-be investors is that they want to start at the top. They learn the tricks and techniques of professionals who have developed a niche system using wraps, lease-backs, options or property developments. In many cases these investors aren’t even familiar with the most basic real estate transactions and quickly find themselves out of their depth, unaware of the commitment required and lacking the expertise to execute confidently. As a result, many of these investors find themselves in the same position years later, unable to proceed in even the most basic of investments because the task seems all too difficult.
The trick is to start small. Talk to any successful investor and you will find they had humble beginnings or grew up in the presence of greatness. Even the ones who appeared to be an overnight success had years of small steps leading them to where they are today.
Move forward confidently but take stock of where you are first and be mindful of the basics.
Principle 7: Stay Calm
Emotions will always be up and down and are usually tied to a perceived outcome you had in mind. If you feel yourself getting angry or excited about the outcome of an investment decision, be aware of your emotion and step back from the situation if you need to. Remain calm and try to avoid acting impulsively.
The investor who is slave to the whim of the emotional rollercoaster ride will end up making rash decisions in the spur of the moment that they will more than likely come to regret later.
This is an excerpt from Josh’s new book on property investment, set to be published in early 2013.
To all our readers, have a great Christmas and best wishes to you and your families. Look forward to seeing you in the New Year.