PROPERTY INVESTING IS A BUSINESS - PART TWO
Published on July 10, 2015
Last week in part one of ‘Property investing is a business’ I touched on purpose, goals, strategy, support and having your finances in order. Today I’ll look at:
- Challenges are coming your way
- Houses, townhouses or apartments
- The nurse at my laser surgery
- Business partnership
If you’re a property investor then you’re a business owner and those who fail to realise it will probably make a number of mistakes.
It was John Maxwell who said “The pessimist complains about the wind, the optimist expects it to change, but the leader adjusts the sails” and anybody wanting to be more than ordinary or average in life must take on the mantle of leadership.
Much of our focus at MRD is on supporting you as an individual to be better and make smarter decisions. We understand that your success as a property investor is tied directly to the person you grow into.
In my book ‘Property Investing in the Post GFC World’ I reference the annual Sydney to Hobart Yacht race. Each Boxing Day an array of yachts leave from Sydney Harbour and three or four days later arrive in Hobart.
The interesting thing is that conditions, such as wind direction and currents constantly change. They change from one year to the next and even from one day to the next during a race. Yet all the yachts end up in Hobart regardless.
If those vessels were not manned properly the yachts would be tossed about at the mercy of the elements, but as the aforementioned quote points out, leadership is about making adjustments as required and staying the course regardless of what changes are thrust at you.
Challenges are coming your way
We live in an imperfect world and as such there are challenges daily. We hope that the ones we have to deal with are insignificant and manageable but unfortunately that is not always the case.
There's things we can’t control but we can control our attitude and how we respond to any unwelcome interruptions.
As a property investor sooner or later you’ll be forced to deal with things you’d rather not. Perhaps your tenant vacated in the dead of the night owing you money; something that is very rare but could happen. Maybe your managing agent calls to say the hot water system is playing up and you’d need to pay for a tradesperson to service it. What if it’s something much more inconvenient, time consuming and costly?
Leadership is staying focused on the end game, the destination or goal. It’s about making adjustments when required and maintaining a winning attitude.
Great parenting takes leadership; as does the cultivation of all valuable relationships. Sporting coaches and players, business owners and property investors will all have their success measured in time by how they deal with this thing called leadership.
If you were on a yacht sailing from Sydney to Hobart and the swell picked up, the wind changed and with it came the mother of all storms - what would you do? It may take out of you more than you had set out intending to give, but your success (even survival) depends on how you respond. Do you become a victim of circumstances or do you take charge and arrive in Hobart, even if it takes a day longer than originally planned?
It is said that:
- Small minds talk about other people (we call that gossip)
- Average minds talk about events
- Big minds talk about ideas
Small minded people don’t change the course of history or create inventions that save lives. No, they sweat over the small problems in life and wonder why they have it so bad.
You and I will rise or fall to our level of personal development. Successful leaders who fail in business tend to get back to where they were financially with five or so years. By way of contrast, an idiot with nothing but the winning ticket in a million dollar lottery is about five years away from being an idiot with nothing again.
Take time to develop yourself on a personal level. Read great autobiographies and learn from those who have overcome in the face of great obstacles and achieved the sort of lifestyle that you dream of.
Houses, townhouses or apartments - what’s better?
It’s not what you buy but where you buy.
As a general rule of thumb, apartments are located closer to the nerve centres, housing estates on the fringes of cities and townhouses in between.
People buy houses because they believe it’s the land that appreciates. While there is some truth in that those same people would not buy a small farm in the country for the same money.
People will often ask me what they should buy. It’s a question that cannot be responsibly answered on the spot in most instances.
An important business decision ought to be the result of good financial planning and strategy, which in turn are the byproducts of having a clear understanding of one's goals and objectives.
There are literally thousands of real estate companies you can find and transact with. In establishing and growing MRD our goal has never been to ‘compete in that crowded space’. We are more interested in really getting to know you and partnering with you to develop a strategy that will propel you closer towards your goals.
Getting the balance right between capital growth and cash flow is important and the right balance may be very different from what you think it should be.
Your preferred level of involvement with your investment properties may also influence the type of property you buy, as will what you currently have in your portfolio.
While a freestanding house has no body corporate you still have a number of costs that are included in body corporate fees. Building and public liability insurances, a provision for future repairs and maintenance, a provision for replacing plant and equipment and an amount to look after the gardens, common areas, barbeque area and pool (where applicable). You see, you may not have to pay a fixed quarterly amount but when the time comes for these things to be paid for, owners of freestanding homes still have to find the money.
My belief is that you should invest in property for the capital gain your property will deliver over time. Cash flow, while not your focus, is vital so you can hold the property until the capital gain kicks in. Obviously, those with large amounts of cash may have an alternate strategy with little to no debt on the property and thus strong cash flow from day one - but this is not the norm for most property investors.
The nurse at my laser surgery
September 11th 2001 is a famous day for all the wrong reasons. It was also the day I had laser surgery.
I remember when I went in for my procedure there was an older (motherly figure) nurse present. She seemed to do nothing but stand there to comfort me. I remember thinking that it was an unnecessary added expense as the doctor had it all in control. That was until…
When the washer-like 'thingie' was pushed onto my eyeball (one then the other) and my eyes were clamped open and a bright light shone on my face and the doctor started to explain what was about to happen; that nurse who stood by the bed holding my hand and comforting me became the most important person in the universe. She was so necessary and worth her weight in gold.
In life we all need people we can turn to and receive wise counsel from in times of need. Maybe you are overwhelmed as a new mum or in your marriage, job or business or as a property investor. None of us should be an island and ‘go it alone’, although the significance of that statement may not be apparent until the challenges come.
At MRD we do not merely want to transact with you, we want to partner with you on this journey. We know that we have to first earn your trust and prove ourselves and demonstrate that we will never shy away or hide.
I encourage you to contact us and using the comments box briefly say what assistance you are seeking at this time.
- Perhaps you want to know if there are better bank loan products available than what you currently have.
- Maybe you want to get started on your journey as a property investor business owner.
- You may have a number of investment properties and be curious about whether your next purchase is better inside or outside of superannuation.
Whatever your need / question simply let us know by using the comments section of the contact us section of our website.
Sydney and Canberra client consultations
In the mean time have a great weekend with family and friends and I look forward to meeting with many of you face to face over the next two weeks as I come to Sydney and Canberra to host one on one consultations with clients keen to meet and pick my brains about their financial situation.
There are a small number of spots available so if you want to meet me in Sydney, Parramatta or Canberra go hereand let us know your preferred time. We’ll do our best to accommodate you where possible but will be in touch with you on Monday either way - Sydney and Canberra bookings.
Partnering with your for your investment success,