The mindset of successful investors
By RUN Property CEO Rob Farmer
Have you ever read about a 24-year-old on an average salary who owns four investment properties? Or the single mum who bought her first property out of desperation for a better life and accumulated a $5 million portfolio within a few years?
How are some people able to achieve what so many others can’t? Why have they been successful beyond the wildest dreams of many in the same situation? Have they been gifted a large sum? Or earn a huge salary?
Chances are, their circumstances probably give them no unfair advantage, but there are several factors which create a successful investors’ mindset.
Data from the Australian Tax Office shows that more than 1.2 million people own an investment property, but the number of investors who own five properties drops dramatically to less than 14,000 and a few own more than 50 investments.
RUN Property is Australia’s largest metropolitan real estate agency managing properties valued at more than $10 billion. Surveys of our database show that investors own an average of 1.2 properties each.
Despite more than 90 per cent of investors saying they thought property was a good investment for them, most have been unable to focus on expanding their portfolio.
How do I avoid being average?
1. Create a burning desire
Whether you are an aspiring Olympic athlete, an artist or property investor, desire is an intriguing aspect of the ability to achieve greatness. Some people are born with extraordinary natural talents, but on the whole, I believe that if the desire is strong enough, anything is possible.
I love the saying, “necessity is the mother of all invention” and I think this can be applied to wealth creation. If your need is strong enough you will find a way to change your circumstances.
The reverse is also true. If you are comfortable in life with a fair paying job and food on the table, it can be difficult to create a strong desire to get out and take action.
Many people I speak with who have successfully built large property portfolios have either had, or been able to create, a burning desire for success. It might have come from a need to urgently generate enough money to retire comfortably, from hating their 9 to 5 job or because something rumbling within them wants them to be able to buy an expensive house or a fancy car.
The first and most important step in setting a path to create wealth is to determine what will fuel your desire. You must be able to clearly visualise and describe what success looks like for you and not let go of that picture. The stronger your emotional responses to this vision, the greater chance you have of being able to break through and achieve it.
2. Get a mentor and support network
Years ago there was shame associated with seeking support. It might have been seen as failing or being unable to achieve success on your own. Today, personal trainers, business coaches and counsellors help people achieve their goals every day.
A professional property mentor or simply someone who you know can support and encourage you and keep focus on your goals is invaluable. Make sure they understand what is driving your desire and how you will measure success. Your mentor will also need to be able to get tough with you if you veer off course.
3. Develop a plan
To fail to plan is to plan to fail.
More than 1.5 million Australians own investment properties. Many of them are what I call “accidental investors”. You could argue they are not investors at all – they just happen to own an investment property. It is remarkable how many Australians own an investment due to circumstances. For example, they may have got married and their partner also owns a property so they rent out one and live in the other. Or they might have inherited the property.
There is nothing wrong with being an accidental investor. In fact, it can be a great opportunity to turn one property into many more. But if you plan to use property as a vehicle to create wealth then you need to develop a plan to achieve your investment goals.
The plan needs to cover:
What is your current reality? (i.e. what is your current net wealth, passive cashflow, lifestyle and how much time is devoted to aspects of your life?)
What is your desired outcome? (i.e. what is your desired net wealth, passive cashflow, lifestyle and how much time is allocated to achieving your goal?)
What actions do you need to take to move from your current reality to your desired reality? These need to be specific, measurable, realistic and set against timeframes.
How are you going to measure and report on your overall success?
What support, education and resources do you need to meet your plan?
4. Enliven your strategy
Investors with large portfolios follow their investment strategy vigorously. Some go for capital growth properties and others prefer positive cashflow properties or a blend of both. Whatever your approach, stick to it.
Buy on mathematics, not emotion. Do the numbers on each potential investment and be prepared to walk away if the property does not match your criteria. There is a saying in real estate, “The deal of a lifetime comes up every week”.
Hold properties long term. Do not be pushed into a short-term decision that could damage your portfolio. Hasten slowly, but be flexible enough to move quickly if the right opportunity comes along.
Learn from your mistakes. Consider them not as a cost but as an investment in your future success. Be determined to make up for mistakes with future decisions that will more than compensate for the earlier failure.
View finance as a tool, not a burden. Property is a product and financial arrangements and the ability to leverage through equity help you to use it to maximise your advantage.
Work to your strengths. If you find a property sector that works for you, stick with it and don’t listen to the doomsayers if your experience says what you are doing works for you.
Exploit your risk profile. If you are an aggressive investor, maximise your borrowings with a clear conscience, but make sure the “sleep at night” factor is balanced with the reality of your cashflow.
Look and listen. Not all successful investors were a success when they started but they learned how to improve their chances of winning while reducing their risks.
5. Get off the couch and take action
Too often I hear phrases such as: “I would never invest in the current property market”, “interest rates are going up”, “I don’t have enough time”, “some people have all the luck” and “I should have bought that property five years ago”.
These phrases are commonly used by people who don’t really want to take action and like to blame everything other than themselves.
Some of my favourite sayings are: “There is no time like the present”, “Nothing ventured nothing gained”, “If you want something done, give it to a busy person”, “Create your own luck”, “You miss 100 per cent of the shots you never take” and “The best time to plant a tree is 20 years ago. The second best time is now”.
If there is one action I urge you to take, it is to set some time aside each week to focus on your property investing activities. Ensure you block out this time in your diary. If something totally unavoidable comes up, make sure you reschedule. View property investment as a business, not a spare time hobby.
The only person who can create the life you want is you. There is no magic or massive secret. The only thing between you and a property portfolio that can provide you with financial freedom is you.
RUN Property is Australia’s largest metropolitan real estate agency which manages property valued at more than $10 billion and has a dedicated team of sales specialists in Victoria, NSW and Queensland. RUN Property – sales, leasing and management. For more information visit www.run.com.au