Good day, my name is Ben Everingham and I’m the Director here at Pumped on Property. In today’s video I’m going to talk about the 10 hardest things about investing in property.
Good day, my name is and I’m the Director here at Pumped on Property and were a Buyers Agency based in Queensland at the moment that buys high quality investment properties for our clients all over Australia. In today’s video I’m going to talk about the 10 hardest things about investing in properties. Some of these things are things that I’ve personally come up against the last seven or eight years as an investor myself. Some of these are things that are regularly here from that we take on as a client.
The number one thing is consistency, which I suppose is a problem that most of us have in life. A recent example of this in my own life was my health. I used to be super, super, super fit when I was at University because I lived in a house with some guys that were personal trainers, exercise scientists, physios. Just being around those people all the time had a full on effect where I started to eat better. I started to train more. I was much more active in my life. As I went into the corporate world and as I started my own businesses and had family and made up all of those excuses that come with all of those things unfortunately in my life, my health continued to fall away to a point where my brother-in-law got very, very sick in his stomach from probably abusing his body a little bit too much. He had to go through this programme of eating well, reducing his alcohol intake, eliminating his sugar intake, and training him.
It’s had a bit of a full on effect because at the family barbecues he started to look better and better every time I saw him, to the point where I had to ask him some questions about what he was doing, how he was doing it. Consistency and the reason I bring this example up is, as related to any decision in our life as absolutely any other, and I use it with relationships, I use it with health, and I use it in the same way with building businesses and building wealth through property investing. For property, the major challenge that most people have is they don’t show up enough, so they don’t prioritise property investing as part of their life. They don’t focus on their education, and they definitely don’t buy enough properties consistently enough over a 10 to 15 year period to achieve what all of our end goals should be, and that is financial independence through property investing.
Property is no different than anything else in the world. The more time, attention, and consistency you give it, the more results you’ll achieve over the short, medium, and long term. Property investing is a lot like a plane where it take a hell of a lot of energy to get off the ground because you don’t know what you don’t know. It takes time and there’s a rapid learning curve, but once the plane is off the ground it requires less energy to keep it in the sky than to take off. The consistency associated with property investing is that there’s going to be a huge amount of energy and effort put into it at the start, and you can obviously fast-track that through coaches and through buyers agents, or through videos like this, but the reality is once you’ve got it in the sky there’s minor tweaks over a period of time to keep it there that means you can get from where you are now, to where you want to be. Think about property like anything else. Put designated time in your calendar or your diary each week to focus on it.
Whether you’re in the information collecting phase, the learning phase, or the actioning phase, you’ve still got to be focusing on it and making sure that it is part of your monthly/daily/weekly rituals. For me, it is definitely a big part of that because it is still taking me to where I want to be short, medium, and long term in terms of the life that I want to live with my family. The second thing that I wanted to talk about in terms of the hardest things about investing in property is strategy. Probably 99% of the people that I talk to, and some of these people are already completely financially independent through their portfolios, and very, very successful people in their lives don’t actually have a clear plan for where they are right now, where they would like to be in 12 months, and further where they would like to be, let’s say, 10, 15, 20 years from today.
I find a big, big disconnect between I want, let’s say, $200,000 of passive income from property investing within the next 30 years and this is where I am right now, which might be in a solid position or might just be getting started but the road map to achieve that is often missing. It’s very important to sit down and create a plan. I’m not talking about some crazy plan that you 100% have to stick to for every step of the way for 20 years. Most of us can’t plan out our week, let alone 20 years into the future. While I’m very good at planning my week these days, and very good at planning out my year, the thought of thinking 20 years in the future and all the opportunities you miss by being so focused would just be absolutely death to me, but is till need to know where I end up. I’m very, very focused on my strategy for the next week and my strategy for the next twelve months. That means consistently doing certain actions, and if you don’t have a clear strategy in place, at the end of today’s video I’ll take a little bit about how you can maybe book a one on one complimentary strategy session with myself or my brother and talk about where you are and where you would like to be, and actually bridge some of those steps and actually making that happen.
The third thing, which is an excuse that I used to make when I was working in the corporate world and working 70, 80 hours per week, something that a lot of our clients, particularly in stressful executive style roles, or our clients that own businesses all over the world, is finding the time to actually invest in property so again, like anything else in life, and I talked about this in part one, consistency. Finding the time is easy if you prioritise property investing in your life. If you haven’t prioritised it in your life, and you’ve got a family or if you’ve got an extremely stressful job, or you’re just not making the time for it, it can be very, very challenging. One way to overcome that is obviously forcing yourself to make some time in prioritising it. Another way is to, like some other services in your life, outsource it to somebody else like a buyers agent for example that can help you do that.
The fourth thing I wanted to talk about in today’s video is very close to my heart, and for any investor that’s actually gone out there and invested properties over a short or medium period of time, you’ll be able to relate to this one and that is serviceability or just borrowing money from the bloody blank. This is the bane of my existence and I think it’s every investors largest challenge. At different times in property investment cycle finance is very easy to get. At other times during the property cycle, it’s very difficult to get. Regardless of the timing of the cycle of where you’re at, borrowing money from banks is always going to be a challenge, because there’s always hoops that you’re going to jump through and there’s always changes in the market place in terms of lending.
Serviceability is definitely one of the hardest things, especially if you’re looking to rapidly grow a property portfolio over a period of five times so that you can really set yourself up for the future. There’s huge amounts of content online and some of it’s mine. Other people have done some great jobs with this stuff, but really understand borrowing capacity and serviceability and understand the changes in markets at different times. Keep up to date with it and no definitely doesn’t mean no from every bank in Australia. Sometimes it’s because your broker doesn’t have the knowledge or skills to get you over the line. Other times it’s because you flat out can’t do anything for a period of time, which means reviewing your portfolio, maybe offloading properties that aren’t performing or adding values to properties or increasing your cash flow. Other times it’s as simple as you’ve just got to get out there and find some more income, or you’ve got to work in your business for longer or your wife has got to go back on maternity leave. There’s so many different things that effect borrowing capacity. For me, it’s definitely one of the challenges as an investor, but also one of the fun things because when you do get that yes, you definitely make the most of it. That sounded dirty for some reason.
The fifth thing I wanted to talk about is the fear of failure, which has been a big thing that’s followed me around my entire journey, and still follows me around. Sorry, I’m just moving a little bit there. My legs are becoming a bit stale. The fifth thing for me is this fear of failure, which as humans we want uncertainty in our lives, we want certainty in our lives. It doesn’t feel nice looking in a bank account with a huge amount of debt going, in the future this will be worth it, because the day that you take on that debt can be scary. It’s about, for me, this things that I’ve put into place about overcoming that is educating yourself as much as I possible can about the larger cycles and timing related things in the property market, educating myself on which markets are performing best at the current time, and identifying the best suburbs and types of properties, then layering my strategy with capital growth, and cash flow, and adding value to properties, and buying below market value, and timing the market, and getting tax depreciation benefits.
Where in the old days I’d just buy and hope it was all going to work out, these days to overcome that fear it means I have to put myself through a more rigorous process, but that also means the outcomes I’m getting from property these days for myself and my clients is far better. There’s heaps of different reasons why have few, and we can’t go into all of them today, but you’ve just got to acknowledge that it’s a part of the journey and a to of it’s got to do with not understanding what you don’t know, and you’re never going to be able to control the future of the property market, but if you learn enough and you buy at the right times, you’ve put yourself in a much better position to obviously make the most of marketplaces as opposed to buying at the wrong times, which can really put you in a detrimental position that could set yourself and your family back five, ten, fifteen years.
The sixth thing I wanted to talk about, I’m going to start looking weird and my wife is going to give me a hard time if I’ve got all these fingers in the video, hey Lisa, is a lack of market knowledge. There is no excuse for using a lack of market knowledge for not buying or not moving forward. You know, I was a perfect example of this. I grew up in Sydney in a suburb called Engadine and then my parents moved closer to Cronulla Beach as I got a bit older. This lack of market knowledge, for me, came into play when I think the first six properties I bought were either in Sydney, the Central Coast, or where I moved for University in Queensland. For me, I used lack of market knowledge as a crutch for a long time to not buy the markets. I probably didn’t buy Melbourne in the last five years because I thought, well that’s too far away and I don’t understand that marketplace and I’ve probably lost 60 to 70 or even 80% gains in some of those areas because I’ve used lack of market knowledge to not invest.
Lack of market knowledge can be overcome through reading, through watching, and through learning. A great resource is the Heron Todd White Month In Review report, which you can Google, and it’s completely free online each month and give you a full wrap of the Australian property market and what the major capital cities and regional markets are doing at any point of time in the year. Great resource, his other amazing resources like the Residex Reports once you identify, I’m moving again, which market you want to invest in, and then there’s locally specific information, where once you’ve identified, which state, which market, which suburbs, you can really rip apart that data, but again it’s just the process and it takes a little bit of time. If you know what the key drivers are and indicators are, it becomes very easy to interpret that information.
As an investor these days, because of the rigour and process that I have, I feel like I could get my head around most marketplaces in a very short period of time before wasting my time on things like realestate.com looking at suburbs and types of properties that may or may not be relevant for my strategy and my situation.
The seventh thing that I find a lot of investors that I talk to don’t have in their world is a mentor or a coach and this kind of feeds into point eight, which is a lack of social support. You don’t need a mentor and a coach to become a successful property investor. There’s amazing videos online that people like myself have been doing with so much more information than you’ll ever need to make a good decision. I find that a lot of people don’t have a social support network around them of people that are like minded that they can ask questions to that are heading in the same direction.
This shows up in all sorts of different ways, but that limited social support was a big one for me. That’s why I originally started Pumped on Property, which was a blog and a community of like minded people where we shared thoughts and we shared questions, and it eventually became a buyers agency, and now we’ve helped countless people buy hundreds of millions of dollars worth of property around Australia, mainly in Sydney and Brisbane. Limited social support is just such a big one. It really is important to find a few people that you can connect with, that you can share that you want to actually do something with your life from a financial perspective and the first thing that they say isn’t, you can’t do that or you should do that or how are you going to do that, or what about the risk, or all the other bullshit. Just because they don’t understand how to do it, doesn’t mean that it’s wrong for you.
There’s so much that you can get out of property investing. It’s not good enough to put your hands and go, well mom and never board, or grandma and grandpa didn’t board, or none of my friends own property, or I own one investment property but no one else in my world does, so I’m king of my pond type mentality. It’s really about going, this is where I want to be. This is the knowledge, skills, tools, that I need to accumulate, this is my strategy that I need to put in place, this is the work that I’m going to commit to each week to actually make this happen or commit to it to actually make this happen or each month and I’m going to draw into my life people that are like minded that I can share my ideas that have similar knowledge, skills, values, and that aren’t afraid to share what they want to do with the world and not get shut down. Work on that social support. There’s some great forums online if you don’t like face to face. There’s some great videos and people to follow.
Often I talk to people, they’re like, I’ve been watching your videos of the podcast for a little while that id do with Ryan from On Property and they start to feel like we’re their friends. When I talk to them on the phone I’m like, “Man I’d love to have a beer with you and catch up for lunch and do that sort of stuff.”, because we’re only taking on seven new clients per month at the moment, it’s really nice to have that real one on one relationship with people and become an ongoing part of their part of their family or their circle and be that support for them.
The ninth thing I wanted to talk about, and this is one of the hardest things that most investors will face with the biggest repercussions. That’s mistiming the market. Because we haven’t had a major recession or depression in Australia for quite a while, there’s a whole generation of people that don’t know that property prices can drop by 10, 30, at one point in the 1980s in Australia, property prices dropped by 90%, but people around the rest of the world know that this is a reality, and it happens with a relatively consistent pattern, at least for the last 250 years according to Fred Harrison and Phil Anderson, a couple of the leading economists and people that have written about this space around the world. If you’re more interested in this stuff, I highly recommend reading a book called The Power In The Land by Fred Harrison, and the Secret of Real Estate and Banking by Phil Anderson, but timing is crucial, and if you buy at the wrong time you can sit flat for a long time or the property can potentially drop in value, but if you buy at the right time you can ride the wave right out, think about buying Sydney in 2013 and holding it to 2017, which we are today.
There’s people that have made 100% in literally four years, and that’s the power that I’m talking about with timing. Again, like everything else I’ve discussed in this video, it’s just not good enough to go or I don’t understand it or that’s the too hard basket, by reading those two books you’ll be ahead of 99.9% of property investors in the world, and you will understand the bigger picture and the consistencies of these things, and how to feed that into your actual investment journey.
The tenth thing, I’m using my hands again, the tenth thing that I wanted to talk about is having an average team of advisors that cost you time, cost you money, and cost you returns. I sent out an email to my database recently, and I’ll just share that example in terms of an average team of advisors. Let’s say that you go off and buy a property on your own, or you go off with an average buyer’s agent that doesn’t care about you or doesn’t have thee knowledge and skills to deliver for you, or your accountant or financial planner or whoever else, property marketer, sells you a dud property. Let’s say you spend $500,000 on this property and you hold this property for the next 20 years from today. That property worth $500,000 goes up by 3% over that 20 year period, you end up here and if you were to use someone who is more sophisticated, then all that person does for you is get you a 6% return per item for that same 20 year period. The difference in the total value of one property versus the other, I’m going to put my hand in my face, but he’s literally going to be $500,000 over 20 years in one property just by buying the right property in the right location with the potential to get you that extra capital growth.
There’s so many people that say capital growth is crystal ball thinking and it doesn’t always happen. You can’t always expect it, and what happens when processes are corrected. Fair point, I read a book and I felt the same way. I read a book by John Linderman called Mastering The Australian Housing Market. John did research on the last 100, 110 years in Australia, and what he found out is that 80 out of the last 110 years have been property price in Australia literally doubled every 10 years and then the 90s came a long way where prices in Australia only grew by 7.5% per annum compounded, so almost doubled every ten years. Then in the 2000s property prices slowed down in Australia and only grew by 5% per annum. If you look at Sydney, Melbourne, and Brisbane in the last ten years the growth rates have been sort of between 5 and 7 percent per annum compounded.
Again, I’m not saying that capital growth is going to be something that you can rely on together, but if I want a better life for my children, and my children are going to want a better life for their children, and population is growing and incomes do grow at different times of the cycle, and so you can’t bank on capital growth but I think having conservative approach in between 4 and 6% per annum for the next 10 to 15 years on a property is something that you can do, versus buying in some average marketplace where there’s not strong drivers like population and wages and jobs and infrastructure for growth in the future. Coming back to what I’m talking about there, that team of advisors is so important and an absolute must. You can’t have an average accountant, an average solicitor, and an average broker, and an average buyers agent, and expect to do anything other than average. You’ve really got to have the right people around you to point you in that direction.
I’ve just looked at the time on this video and realised I’ve been speaking for 21 minutes. I really appreciate if you’re still on this video, your attention, because I know we’ve talked about a lot. For me, these are things that I’ve personally gone through, still going through every single day as a very, very active investor myself, and as a person that buys a lot of property per year for my clients. I hope you’ve realised that just because there’s difficult things associated with buying property or challenges that you’re currently facing doesn’t mean that you can’t overcome them with the right team in place or the right mindset or the right education.
I’ll finish today’s video by just saying time to me is absolutely everything in property these days, and if you are interested in learning more, please jump over to my website, www.pumpedonproperty.com. You can click the Free Strategy Session button and book a time with myself or my brother. We will talk to you about where you are in this complimentary session and where you would like to be and help you begin to bridge some of those gaps and identify what your next action steps are. We can also help you get educated on the Australian property market, answer questions, and do all of those important things that someone who is coming from a place where they care about where you are and what you want to do/should do for you. There will be no pressure in that call. It’s purely about adding value.
Until next time, thank you so much for your time and attention today. See you again.