Before you rush out there and start buying properties, you need to set your property portfolio direction. Be smart, prepared, realistic and ready to buy well.
Having goals for your life overall is crucial to set your property compass. Goals are your target; property is the means to your target. These goals need to be authentic to you and realistic as to what you can handle. You need to understand what you value, set up goals and habits, and you’re off.
1. It all starts with goals
What does success look like to you?
Your answer to this will be unique. Consider your career; your family and friends; the lifestyle you want to live; any travelling you’d like to do; other investments, such as shares; your health, hobbies or activities you enjoy.
What are the priorities in your life? What practical and financial things do you need to establish? Where does property fit on that landscape?
It’s important to get these goals down on paper, because you’re 42 per cent more likely to achieve them when you do.
2. Habits get results
To give yourself the best chance of achieving your goals, you must create daily or weekly habits that relate to achieving your goal.
The top habits of property buyers are:
- Protecting and supporting their own health
- Continually educating themselves
- Connecting regularly with professionals supporting their purchases
- Keeping their expenses lean
- Forecasting in line with their strategy regularly
- Building on cash buffers each week
- Maintaining a healthy mindset
Saving that little bit extra towards your deposit each week; sourcing that next great property professional for your team; researching that next property, one piece of data at a time – these compound to help you build wealth for your future.
3. Your wealth magnets: active and passive income
Wealth typically begins with some form of income, but it’s important to understand the difference between active income and passive income.
Active income requires action on your part; for example, an income from employment requires you to be at work to earn.
Passive income is generated with little to no action required on your part, and this is some of the best wealth-creation income you can aim for.
If you’re serious about building wealth, you’ll be looking to replace your active income streams with passive income streams.
4. Understanding your risk tolerance
All investing involves some level of risk, and you need to know how much risk you’re willing to weather. Know the potential highs and lows, so you’re prepared to see it through and are able to make decisions, as required.
Approach risk with a logical mindset. Understand that certain aspects of the process may initially feel risky, but remain committed to continually educating yourself, staying informed and empowering yourself to navigate the decisions in from of you.
Your goal should be to know the risks involved and to develop a plan of action to help you adjust and manage risks associated with property:
- Market behaviour and fluctuations
- Financing
- Vacancy
- Property repairs and maintenance
- Legislative risk
- Lack of liquidity
- Environmental factors
- You!
5. Mindset gives you momentum
One of the healthiest mindset approaches you can develop is the understanding that you will always have something new to learn.
Allocate a set time each day or week to keep growing your knowledge and skills so you’re up-to-date and informed. Ensure that the ‘experts’ you are taking advice from really do have the skills and experience they claim to have.
Too many property investors are focused on building wealth simply because they’re greedy. However, investors just looking for a quick return don’t make good investors.
Focus on developing a growth mindset – built on your goals first and foremost, and the principles of a balanced and rational approach.
6. Sort your money out
If you’re not managing your money well, home buying and investing will basically be impossible. Property buying is built off the back of strong financials, so before you set off, check in on your personal finances.
These are the overarching principles I look for:
- Spending less than you earn
- Strong savings habit
- Reviewing expenses regularly
- Watching out for lifestyle creep
- Emergency fund for personal life and investments
- Have a great mortgage broker
- Have personal insurances
7. Identify as an investor
Savers look to save money as much as possible. Spenders are out on the town happily spending their money. The investor looks for opportunities to grow wealth, looking for assets, not liabilities, on a long-term trajectory and with an eye on return on investment.
Invest in things that bring return and avoid those that don’t. The investor isn’t distracted by shiny things in the here and now, and they aren’t just placing money in a bank account. The investor wants to put their dollars to work and benefit from the increase in value it creates.
Are you a saver, a spender or an investor?
This is an edited extract from Sort your property out & build your future by John Pidgeon (Wiley $32.95), available at all leading retailers.
Get Kochie’s weekly newsletter delivered straight to your inbox! Follow Your Money & Your Life on Facebook, Twitter and Instagram.
Read this next:
Trending
Sorry. No data so far.