Buyers beware
Many wannabe property investors procrastinate because they simply do not know where to start. In their quest to start, these people often end up as victims of real estate spruikers or marketers.
These marketers are predators who make about 200 to 500 cold calls every week. Because of our opportunistic behaviours, wannabe real estate investors easily fall prey to these predators.
The marketers’ initial phone call is hard to resist; “Are you interested in saving tax while paying your house off faster?” Of course, the answer is going to be “Yes”, which leads to the next question: “Are you free next week for one of our experts to show you how it works?”
The only purpose of the interview at the victim’s home is to make an appointment for them to attend the marketers’ office, where victims will be subjected to hours of hard sell.
I have been there and it was not a nice feeling. I had to make decisions on the spot and from hindsight, I should have just walked away. These guys were good and I do not want this to happen to anyone else.
Victims are given a long story about the pressure on government budgets caused by rising life expectancies and then shown vivid illustrations of the life of poverty that will be faced by those who don’t provide for themselves, playing on their vulnerable emotions.
Marketers have a great story, “Money in the bank earns nothing (especially with today’s low interest rates), shares are risky, and you can’t trust superannuation as the government is always changing the rules.”
These marketers also ask whether you want to “achieve your financial and lifestyle goals through real estate investing, reduce your dependence on paid employment, and create a more financially secure future.” Who wouldn’t want these? Their well-rehearsed questions seek to bring out an emotional response from us.
Then comes the sting – the way to wealth is to negative gear into (or make losses with) real estate. This is followed by complex illustrations showing how quickly you can pay off the mortgage on your home by using the rental income from the investment to speed up the repayments. The cream on the cake is the huge amount of tax that is going to be saved.
Interestingly, the word “mortgage” comes from the French “mort-gage”, literally death-pledge. The French peasants were working until they died for the privilege of owning a house. Same game! Different time!
These marketers may also urge you to call them for a FREE real estate investment strategy session. Well, free comes with a cost. They say things like, “we want what is best for you and your investment portfolio. In taking this opportunity, you will be under no obligation to participate in our programs, and the advice you receive may truly help you move forward.”
Some marketers will promote themselves as ‘independent’ because they do not sell real estate properties. However, they do sell real estate-related services like buyer’s agent, mentoring programs and mortgage broking. I’m not sure how independent these folks are if they sell services related to real estate. Not sure how independent they are after all.
In my quest to learn more about real estate investing and the tricks of the trade, I did attend a number of free strategy sessions and one thing common about all of them was that they are designed to sell their services and properties.
The sting was that marketers will offer you a ‘substantial discount’ if you bought their services and programs for thousands of dollars by the end of the ‘FREE’ session. The discount was only valid for that call or session. This means that you must sign up and pay money before the end of the session to take advantage of the discount. What a pressurised marketing tactic!
If there were no consumer protection laws in place especially cooling-off periods, then wannabe investors will be at a financial loss, especially when they do sign up and decide to change their mind and terminate the contract.
In one case, when I questioned the selling tactic, one real estate marketer proudly declared that the conditions his potential clients to take quick and decisive action by the end of the phone call. He claimed that this quick action trait would benefit them when they become a real estate investor. I am sure it will also benefit his wallet.
The bad news is that the real estate investment industry is largely regulation-free. In Australia, real estate investment is not recognised as a financial instrument and hence there is no legal requirement for licensing, professional qualifications or regulatory reporting.
There is also no legal requirement to inform the real estate investor of the potential commissions they will receive when they sell you a real estate property. Therefore, marketers can charge you a service fee and get secret commissions from the developer or seller.
Dangers of DIY real estate investing
You may think you have the strength and interest to take the DIY approach to real estate investing and property management.
Be aware that the DIY approach to buying and managing real estate can be both dangerous and lacking in rigour. My biggest concern is being ignorant to the risks associated with property selection, due diligence, and management.
If you don’t have experience with real estate investments, it’s better to consult experts or professionals about it. Get educated and ask the right questions, as many as you can think about to give you the complete information and facts.
There are experts and there are experts. Pick the right expert whose strengths are in the same real estate investment strategy as you have selected and who are local geographical or market experts in the location you have selected to buy.
Please do not let the experts dictate which location or market you need to buy. Your real estate investment strategy would already have pre-determined the location you need to search, based on a number of criteria.
One of the biggest mistakes wannabe investors make is to think they can do everything themselves. They do a little bit of research, cross some numbers and suddenly they’re industry experts.
There’s nothing wrong with doing things on your own. It’s when you think you know enough already when in reality you don’t know what you don’t know. They learn a little bit of this and a bit of that. Then they jump right into real estate investing. Often they end up stumbling along the way or not being able to maximise their returns.
While most real estate buyers acknowledge that they require lawyers for the legal aspects of the purchase and may even get a building inspection to ensure the structural integrity of the property, few buyers consult a qualified and experienced professional about the property and deal itself, the risks associated with it and how the deal stacks up as an investment to get you closer to your goals. These are all important factors for wealth creation and protection.
Like the lawyer and building inspector, an adviser protects the buyer’s interests if structured correctly. In this case, protecting buyers from making a poor million-dollar investment decision and steering them, based on demonstrable evidence, towards an investment that not only avoids pitfalls but with the potential to perform better than most.
There are very few investment grade or blue-chip properties around. Not all properties are created equal.
Two things prevent would-be buyers from engaging a professional from the outset.
First is their unwillingness to pay for professional advice in real estate investing.
Despite the fact that a property adviser (or coach, mentor) can save buyers both time and money, some view the additional outlay of a few thousand dollars as a deal-breaker – even to avoid a million-dollar mistake that can take a lifetime to recover from.
Second, it’s the DIY approach of many people buying real estate where they assume the role of the ‘property expert’.
Like IT technicians, sales consultants, mechanics, doctors, hairdressers, chefs, lawyers, nurses and any other profession requiring study or on-the-job learning, experienced property advisers have developed and refined their trade over the years, making them the full-time experts in their chosen field.
The fact that most people baulk at the idea of cutting their own hair and pay hundreds and even thousands of dollars a year for a professional to provide the service – yet spend hundreds of thousands of dollars on a property without the same hesitation – is particularly baffling to me.
When buying your next property, ask yourself; “Do I know property and real estate investing like I know my profession or trade?”
Most real estate ‘investors’ are speculators
Many wannabe real estate investors are really speculators because of our opportunistic behaviours.
Let me explain.
Personally, I define ‘speculation’ as the use of money to purchase real estate where the speculator is prepared to lose up to 100% of the asset value, even if such an outcome is not likely. Presumably, the speculator would only accept such a risk if the potential rewards are viewed as substantial and, in some sense, commensurate with the very real risk of a total loss.
An ‘investor’, in contrast, expects with a higher likelihood to preserve and enhance the overall value of the real estate over the relevant time horizon.
The difference between a speculator and an investor is, therefore, simple. For a speculator, investing is a game of chance. For an investor, investing is a game of skill and knowledge.
For people who turn their money over to someone else to invest, investing is often a game they don’t want to learn but want to be involved in. The important thing for these individuals is to choose a financial advisor carefully.
Here is an example. I have two ten-year-olds, Pat and Kim, each with $100.
Pat uses his $100 to buy lemons, sugar, an old table, and some poster board and sets up a lemonade stand on a busy road. Business is brisk, and he reinvests his profits by buying more supplies. By the end of three months, he has turned $100 into $500. Some days (rainy, cool days) business was slow, some days (the hot sunny ones) it was brisk. He is never discouraged. He did not throw up his hands on the first rainy day and say “no one is ever going to buy lemonade again – I’m going to sell my stand”. He is an investor (and an entrepreneur).
Kim, on the other hand, goes and spends her entire $100 buying lemons, which she hopes (or prays) to sell to Pat next week at a higher price. She read from the newspapers that the price of lemons would go up because the forecast is calling for record heat and lemonade is popular in the hot weather. Lo and behold, the forecast is wrong and the price of lemons drops. Kim, the speculator, is wiped out.
Speculating is akin to gambling, which is the wagering of money or something of value on an event with an uncertain outcome with the primary intent of winning.
Real speculators are forever trying to be ‘smarter’ than the real estate market. Their only criteria is; “Can I make money from this deal?” So today it’s cashflow properties in location A, tomorrow is capital growth properties in location B, and yesterday it was bought and renovate properties in location C. Such opportunistic behaviours can sidetrack someone from achieving their long-term goals.
The question they always ask themselves is, “What’s the easiest way for me to make money right now?”
A true investor, on the other hand, is a completely different animal altogether. An investor has a clear vision and long-term goal of what they want their real estate investments to become and how many assets and income the portfolio will generate over the long term. After meticulously reviewing the pros and cons of each real estate alternative, they pick the best deal that will bring them closer to their goal.
Real estate is just one class of investment asset or vehicle that will bring you closer to your end goals. Other investment vehicles include shares or equities, bonds, and cash deposits.
Investment vehicles take us from point A to point B. By knowing our point B (which people usually don’t), investing is a plan that is unique to us as individuals. This is why we should never copy someone else’s real estate investment strategy. Their circumstances will be different from yours.
Here’s some inside information that any seasoned marketer will confirm. It’s about 100 times easier to sell real estate to an opportunity seeker or speculator than it is to an investor.
Why?
The opportunity seeker has no criteria, no real estate buying rules, and no real estate investment strategy. If we can convince him or her that they can ‘make money with it’, you’ve made your sale.
Opportunity seekers do not differentiate between facts, assumptions, opinions, and assertions because they do not have the knowledge to discern the information in the first place.
An investor, on the other hand, compares what the marketer is offering. They verify all information provided against their own due diligence, against their own research, and against reliable third-party information.
Investors will often ask this question, “Will this investment make it easier for me to achieve my goals?“ or “Will this investment bring me closer to my goals?“
If the answer is “No”, then the proposed real estate deal is off. There is no emotion.
Unlike investors, the opportunity seekers’ lack of due diligence and long term goals are compensated by their emotions, ignorance, and self-justification. Marketers will play upon their emotions, ignorance, and insecurity to make the real estate sale.
If you think education is expensive, try ignorance
Before I move on, I would like to briefly touch on the subject of knowledge acquisition.
Education is an attitude. If you have that kind of positive attitude toward self-learning, you will do well. Allocate sufficient time for self-education.
Get the knowledge you need BEFORE you step into the arena.
Think about it: if you were going to play Andre Agassi, the great tennis champion, for money, wouldn’t you start learning the game and practising BEFORE you stepped on the court to play him?
It amazes me that so many people get into real estate investing without acquiring the specific knowledge necessary to win. Then they wonder why they’re struggling.
Like playing the piano, golf or tennis, real estate investing is a learnable skill. No one comes out of the womb an expert. Everyone has to unlearn and relearn how to do it if they want to succeed.
There’s one caveat. If you are going to learn things, you have to make sure you learn the right things … the things that will make the difference between becoming rich and staying middle class or poor. You must learn the difference between having a successful, thriving, fun-filled business versus a struggling one that can make you miserable.
I attribute the lack of in-depth knowledge in real estate to the fact that, for whatever reason, many people rely solely on the real estate, legal, financial and accounting advice that they are able to get for FREE including those from Internet forums and message boards, friends, co-workers, next-door neighbours, in-laws, soothsayers, and real estate marketers. There is a high chance you’ll suffer severe financial consequences for being ignorant or just following the crowd.
My success as a real estate investor will be tied directly to the people I choose to hire where I seek professional advice from them. Yes, I paid money for professional advice. Most often, the problem with obtaining free information from dubious or inexperienced sources or professionals is that it’s almost always wrong or half-truths.
I have experienced that the most expensive advice is often free advice. It is this advice about money, investments, and business that you can get from your friends and relatives who are not investors themselves (and who are not financially free).
Talk to people who have done the things you are planning to do.
The reality is that free information is most likely not complete information. It is biased with half-truths. Think about it. Which professional is going to give you good free advice without trying to get something in return from you? Unless you have great knowledgeable friends who are real estate investors themselves, this is going to be rare for most people.
When I asked for free advice, I only got part of the answer. It has been frustrating at times. This is dangerous if you are trying to rely on piecemeal half-truth information to make a lifetime decision on a $400K asset or investment.
Unfortunately, like any industry, there is a slew of incompetent real estate ‘experts’ working within the industry. Because most investors lack the knowledge and usually do not know that they’re dealing with an incompetent person until it’s too late, the damage has already been done.
Manage your risk through proper education
People who are too negative avoid risk and miss all the income-earning opportunities because of their fears.
I needed to overcome my own fear of failure, took calculated risks and made some mistakes.
I reduced my fear through education and financial literacy, through understanding my personal income statement and balance sheet.
The average investor does not know the difference between investing for cash flow and investing for capital gains.
One of the major reasons people look to others for investment advice is that they fear risk. While wanting to avoid risk is human nature, investors understand that there is a major difference between ‘risk’ and ‘risky’.
Everything in life contains a certain degree of risk. From crossing the street to skydiving out of an aeroplane, every activity has risk associated with it. While risk can never be completely eliminated, a person’s lack of education or disregard for processes can make an activity riskier than it would otherwise seem.
Most people know they should invest or start a business to earn a passive income stream. However, the problem is that most people believe investing or starting a business is risky. Investing is risky if you lack financial education, experience, and guidance.
If you want to unlock your wealth and become financially free, you must gain the required education AND experience in the game you intend to play well in. Remember, playing on your strengths will generate the required profits.
Knowledge gained in real estate has certainly helped me better understand the subject matter and know who can truly help me achieve my goals. There are no short cuts.
When it comes to investing, nothing will pay off more than educating yourself. Investing in myself is the most profitable investment I have ever made. It yields not only future returns but often a current pay-off as well.
One reason financial education is necessary is to appreciate and understand the subtle shades of grey hiding behind all the investment half-truths you will hear. Do the necessary research, study, and analysis before making any investment and business decisions.
I would highly recommend that you adopt this motto: “Assume nothing, verify everything, do your own due diligence and be prepared for anything.”
However, do not go into analysis paralysis or paralysis by analysis. At some point, we have all found ourselves in the crushing grip of this dreaded condition where we simply can’t make a decision no matter how much we want to get to in the end.
We convince ourselves that we don’t have all the facts, the timing isn’t quite right, something bad will happen if we take action, or we just haven’t conjured up the right solution yet.
These feelings of uneasiness and unsteadiness can cause us to squander precious time and lose our peace of mind and financial freedom.
The most important step is to bust through analysis paralysis by adopting a trusting attitude. There are no mistakes, wrong turns or missed opportunities. Any outcome is far preferable to the physical, mental, and emotional price you pay when perpetually brewing in fear, doubt, and uncertainty.
I am not telling you these to discourage you. On the contrary, I am warning you about the consequences of investing in real estate without having your own eyes wide open, without having done your own homework, and without having your own long term goal and strategy that will guide your decisions to achieve your financial freedom.
Financial freedom is about having the freedom to work or not to work. It is the freedom to choose with whom we work and what you work on. It is not about having more money. Money in itself does not make you happy.
The two most common regrets of dying[6], “I wish I had the courage to live a life true to myself, not the life others expect of me” and “I wish I hadn’t worked so hard” reminds me that I must take control over my future and not spend so much time on the treadmill of work as an employee.
We owe it to ourselves to put in place investments and business systems that will generate streams of different passive income for our families.
Money is an idea. If you think you are never going to be rich, most likely, that will happen to you. Alternatively, if you think that it is good to have too much money, then you will end up with too much money.
Your thoughts become your reality and your realities become your entire life.
Real estate is a numbers game. Being financially uneducated is risky. You need to have a grasp of basic math and scrutinise every investment dollar. What looks like a good real estate deal on paper may be a money pit once you factor in taxes, repairs, and maintenance.
You can’t blindly accept any financial advice from anyone. You must know the numbers. The numbers will tell you the facts.
My financial survival depends on facts, not some friend or advisor’s opinions.
As I said before, real estate investing is a business. For most people, it is not a hobby. There is a lot at stake. Treat it that way and with respect.
A word of caution about experts who are just employees themselves.
People may blindly turn their money over to people they believe are financial experts (e.g., bankers, financial planners and stockbrokers). Unfortunately, most of these ‘experts’ are not real estate investors themselves. They are mostly employees working for a regular salary or are self-employed.
This is why I took control over my real estate investing destiny through investing in my education first, understanding the real estate investing fundamentals and knowing the pitfalls to avoid.
If people do not have sound financial education, they cannot tell if a financial advisor is a salesperson or a con man, a fool or a genius. When it comes to money, there are many people desperate enough to tell and sell you anything, just to get your money.
Here’s your wakeup call
I hate to say this, but Henry David Thoreau was right when he said, “Most men (and women) lead lives of quiet desperation and go to the grave with the song still in them.”
To put it more bluntly, most people’s lives suck. I think to a large degree there are two reasons for this.
First, people trudge through life half-asleep, instead of expending the mental energy to really think things through. They simply operate on autopilot, choosing to live in this semi-conscious state and focusing their actions on immediate gratification instead of realising the importance of their current decisions and the impact it has on their future.
Look at the marriage and business failure statistics. If both of these numbers aren’t depressing to you, I don’t think you realise the pain and suffering that is attached to both of these statistics.
Don’t get me wrong. I am not saying that all marriages should work or that no businesses should fail. These numbers are staggering and account for a lot more than the small percentage of inevitable mistakes.
The second reason is that people really do behave like sheep at times. They follow the herd or some authority figure without really questioning if their life experience and knowledge supports what they are being told or what everyone else is doing.
Financially literate people know that a mortgage doesn’t show up as an asset on their personal balance sheet but as a liability on the owner’s balance sheet. My mortgage actually shows up as an asset on my bank’s balance sheet.
The common investment story centres around the notion that real estate investors are encouraged to take on more debt, to take all the risks associated with the investment and to lose up to $200 a week with the expectation that the price of real estate may go up because the government will give a tax break for losing money (assuming that the policy remains).
Then a real estate agent tells you to sign the rental papers because he can find a tenant who will pay you less than you’re paying but, in his opinion, the value of the real estate will go up.
Granted that each situation and real estate market is different, you simply can’t play this game with that mindset especially in the long term.
The story gets better. To reduce your taxes further, buy a bigger house or get more loss-making real estate properties and get deeper into debt so that you can get more tax write-off.
When the government gives you a tax break for being in debt, it is not because they’re concerned about your financial future. The government is concerned about its financial future as they are able to get perpetual tax revenues from you, the real estate owner.
What a brilliant strategy by the government if you think about it!
The fundamental problem exposed
Let’s take a look at one fundamental problem wannabe real estate investor can experience.
(1) Symptoms: Buying anything that looks like it’ll make money.
(2) Cause: Opportunistic seeking and experiencing tactical hell by trying something new that comes along every so often promising potential returns in the shortest possible time without consideration of the risk profile.
(3) Problem: Lack of long-term real estate investment strategy (preferably written down), and disciplined and persistent focus that will capitalise on the investor’s strength, knowledge, and mindset.
The very first obstacle you need to look at is yourself, and your thinking and mindset.
Speaking about mindsets, we all have our personal financial thermostat or invisible scripts that dictate how we relate to money and wealth, ingrained in our subconscious minds. It is these blueprints, more than anything, which will determine our financial lives and dictate our future success in real estate investing.
Here are some possible considerations:
(1) If our financial thermostat is not set for a high level of success, we will never have a lot of money. If somehow we do, we will most likely lose it!
(2) If we are not doing as well financially as we would like, then we will have to change our financial thermostat.
(3) If we currently have outstanding credit card debts over many months, then most likely, this is an indication that we have to reframe or improve on our financial thermostat before thinking about real estate investing.
(4) If we want to change the fruits of a tree, we need to first change the tree. Likewise, if we want to change the visible, we need to change or renew the invisible scripts.
We must be aware of all those positive and negative statements we heard or experienced about money and wealth when we were young. Understand and write down how these statements have affected or impacted our view about money and our financial life.
Disassociate ourselves from these negative statements by declaring aloud that what we heard about money and wealth is not true and that we must constantly renew our minds to adopt new positive ways of thinking that support our happiness and financial freedom.
As my mindset dictates my personal success, I had to reset my financial thermostat to live in the present and in financial freedom.
If I do what everyone else does, I’ll wind up having what everyone else has. For most people, what they have is years of hard work, unfair taxes and a lifetime of debt.
A person who has a negative financial thermostat will always lose no matter what stock, bond, real estate or mutual fund they buy. If they still had the thoughts, beliefs, and ideas of a poor or middle-class person and did what the rich did, they would still wind up having what the poor and middle class have.
People think that working hard for money and then buying real estate will make them look rich. In most cases, it doesn’t. It only makes them more tired, more in debt and more unhappy. We call it ‘Keeping up with the Joneses.’ The Joneses are exhausted.
The way I see things is that there are two different diametrically opposing ways of thinking when it comes to building a real estate investment portfolio and creating financial freedom in the long term.
There’s the opportunistic thinking and there’s the strategic thinking.
Opportunity seekers think opportunistically focusing on the short term (or get rich quick schemes) whilst investors think strategically focusing on the long term.
An opportunity seeker is always looking for the next big opportunity to make ‘lots of money’, possibly in the shortest time, from the hot opportunity of the moment.
Opportunity seekers chase the next hotspot real estate location in which to invest. They chase the next strategy that has made others money. They rely on the media and their friends to recommend the hottest location or property to buy instead of conducting their own independent analysis or due diligence of the financials and market to see whether the investment actually stacks up or not and that this purchase will bring them closer to their long term goal.
I am amazed at how many questions and attitudes are based on misinformation. When it comes to real estate investing, we have an unerring ability to listen to the wrong people. We are greatly influenced by sensational newspaper headlines and spend a lot of time speaking to neighbours, relatives, and others who knew as little as we did in real estate investing.
Here is a typical conversation: “My next-door neighbour was talking to his brother last week and he reckons …”. And this: “I was at the doctor’s this week and he has a patient who works for a real estate agent and he was saying …”
By tapping into a range of unreliable sources, most of them second-hand or third-hand, wannabe real estate investors had cobbled together a thoroughly distorted view of the real estate investment world.
Financial freedom through strategic thinking and planning
Being strategic is a state of mind. It’s a way of increasing the likelihood of winning the game of real estate investing.
Most people make the incorrect opportunistic choice right from the very get-go when they ask, “First investment property – City or Country? House or Unit?”
In one online real estate forum, I noticed that a participant wrote, “We have been finding it very difficult lately to find ‘quick-turn deals’ – a property that can be purchased, changed to add value and on-sold for a quick cash profit e.g. subdivisions, renovations, etc. After many months of frustration, I am turning to this forum for some assistance. Just wondering if anyone is generous enough to share info on locations or strategies that they are finding good for this type of investment at the moment.”
Seriously, if I can find ‘quick-turn deals’ and keep all the profits for myself, why should I tell you, a complete stranger, especially in an open online forum?
Let’s face it. Making money does take effort and hard work and it does take time. There are no short cuts.
I see beneath the iceberg. There is a whole lot of effort, commitment and sacrifices that investors have to go through to generate the riches others only see on the surface. Rather than criticising the rich and the wealthy, admire them, and learn from them.
Know your WHY and be clear on what you want to accomplish
Once you have determined whether you have personal strengths in operating a real estate investing business part-time and implementing the chosen real estate investment strategy, determine your WHY in real estate investing.
People usually know what they ‘don’t want’ rather than what they ‘do want’.
They know that they don’t want to work for someone else. They know that they don’t want to live paycheck-to-paycheck. Moreover, they don’t want to spend another day in the Rat Race of life.
Successful real estate investors, on the other hand, know exactly what they want to accomplish and how they are going to do it. They know how much money they need per month to cover their current expenses. They have developed a detailed plan to generate that amount over a definite timeframe.
In fact, they have determined the exact number of properties they will need to purchase. They also know when and how they will roll their real estate portfolio over into larger cash flowing property that, according to their calculations, would produce enough passive cash flow in the future to cover all their expenses.
So, what is it EXACTLY that you want to accomplish by investing in real estate? Do you know how much money you need and how you will get it? How long will it take to get there?
Answers to these questions and a whole host of others are what you need to know beforehand if you are going to think like a successful real estate investor.
Staying focused on goals and strategies
Understanding your WHY will keep you strategically focused on and committed to your long-term goals by implementing a pre-defined real estate investment strategy.
My WHY was clear. Being a risk management professional who is in his 40s, I wanted to decrease my risk of being totally reliant on my employment for a job and income security through the creation of diverse passive income streams generated from real estate investing and owning an online business system.
Where possible, I also wanted to leave behind a positive financial legacy for my five children.
Make sure you stay strategically focused throughout your investment timeframe and avoid the tactical hell by wasting time on short-term opportunistic behaviours that will only distract you from ultimately achieving your long-term goals.
Investing in real estate is a business decision, not an emotional reaction. You do this by:
(1) Getting clear about what you want to achieve, starting with the end in mind: What are you looking to achieve? What does success look like to you?
(2) Setting a date as to when you want to achieve your goals.
(3) Identifying milestones you need to do to get you to your goals.
(4) Determining the real estate investment strategy that will bring you closer to your goals.
In order for you to achieve your goals, you must first articulate what your goals are. More importantly, you need to set a deadline as to when you want to achieve these goals. Then you can work backwards.
A passage in Alice in Wonderland nicely captures the need to have goals clearly articulated.
“Would you tell me, please, which way I ought to go from here?”
“That depends a good deal on where you want to get to,” said the Cat.
“I don’t much care where –” said Alice.
“Then it doesn’t matter which way you go,” said the Cat.
“– so long as I get SOMEWHERE,” Alice added as an explanation.
“Oh, you’re sure to do that,” said the Cat, “if you only walk long enough.”
(Alice’s Adventures in Wonderland, Chapter 6)
In my professional work, I have helped organisations articulate their strategies and developed their goals and key performance indicators. I also helped them develop frameworks and implementation plans to execute their strategies in order to reach their goals, including the identification of potential barriers or risks that may stop them from achieving their goals.
Individuals are no different. Each one of us has personal goals that we want to achieve even if they are unwritten. There will be barriers or risk associated with achieving those goals that we need to mitigate against.
For example, if you’re looking to replace your income and retire on your investments within 15 years, you can start by creating a 15-year plan, broken down further into 5-yearly, yearly, bi-annual plans all the way down to a weekly timeline. This way you don’t get overwhelmed by the enormity of the task, staying strategically focused to the end goal at all times and not becoming distracted.
To reach my own financial goals, I have purchased several real estate properties with the help of a professional team I assembled – a mentor, property consultant, a real estate agent, an accountant, a mortgage broker, and a lawyer.
It is important to select the right professional team members who will help you get closer to your goals by implementing your personal real estate investment strategy. If your team member is not experienced and skilled in your chosen strategy or does not operate in the geographical area you are targeting, find one that does. Don’t just hire any professional. Hire the right experienced professional to get the job done and move you closer to your goals.
There are multitudes of real estate investment strategies that you can choose from. You don’t have to know all of them. Focus on what works for you best that is based on your own strengths, commitment and risk profile, and develop your skills and knowledge in those areas by investing in yourself first.
It is better to be an expert in your selected real estate investment strategy than know a little about a plethora of tactics and strategy. Worse still, you can get stuck and distracted in a tactical hell by trying to be opportunistic just to earn a quick profit, if at all.
Again, do your homework and due diligence. Study the real estate market and strategies used, and learn everything you can before you buy a property.
Many books and seminars can guide you as you begin your real estate investing journey. This will help build your knowledge base and teach you the lingo of the industry. Knowing the terminology used in the business is vital for communicating with others and understanding what’s being communicated to you.
Understand also that strategy is only as important insofar as it informs execution.
Eventually, your strategy will need to be adapted and then executed. It’s only when you set proper systems in motion that you will get your desired results.