5 reasons people fail at investing

While most of Australia’s wealthy families hold their assets in property and fortunes have been made from property many average people do actually fail at property investing. Why is it that some fail and others succeed in property investing?

I have outlined below the top 5 reasons why people fail at property investing:

1. Selecting the wrong strategy

Property investing is not just a case of buying anything and hoping that it goes up in value or buying what your friend has. It has to be a well thought out and planned strategy. There are many different “methods” or strategies to make money out of property but rarely do all methods suit all people. Initially you need to determine what “method” is going to suit you. Just because your friend has made money out of renovating doesn’t mean that will also work for you. His circumstances may be different, his appetite for risk may be different, his time frames and property related skills may be different and that just may not work for you. Things you must take into account before investing:

  • Budget
  • Appetite for risk
  • Time frames
  • What you are hoping to achieve from investing
  • Available to time to spend on your property

2. Buying the wrong property

Most people implement a buy and hold strategy. That is, buying property and holding it for the long term. This is a great strategy. It is safe and in the long term builds significant amounts of wealth. While people opt for this strategy they then go and buy a property that does not suit this strategy, such as a second hand house or an apartment. Second hand or older properties do not suit this strategy because of the poor cash flow an older house provides therefore it is hard to build a huge amount of wealth like this. If you are opting for a buy and hold strategy, you need to build a new house. If you don’t match up the correct property with the correct strategy, then it will not work.

3. Buying in the wrong market

All markets cycle. Sydney and Melbourne markets have had an amazing run for the last 8 years but those markets have slowed down to a zero growth level and in fact are in slight decline. If you were to buy in those markets at the moment, you would be waiting for a very long time before they showed any significant growth. This could be + 6 years. You would be far better off looking at alternate markets that may be in a different part of their cycle and maybe on the rise. A good example of this at the moment is Brisbane. All indicators point toward that market taking off in the near future and going from a median house price of around $580,000 and getting closer to $850,000.

4. Selling

The property market in any location is extremely hard to predict. It is not an exact science. It is hard to predict when the market is at its top or bottom. This is why we need to hold property for a long time to really see the positive effects. In most cases longer than 10 years. In today’s age of instant gratification many investors find it hard to wait it out and end up selling if they cant see the immediate results. They generally sell right before things boom and they miss out on the capital growth they wanted. My advice to clients is, buy a property with the intention that you will never sell that property. You will hang onto it forever. That way you will always get the best of the cycles.

5. Procrastinating

Getting into property can be a bit nerve wracking. But like anything else, once you have done it a few times it becomes easier. For some people however, they can never get past go as they procrastinate because they are too scared. They come up will all types of excuses and often put it down to “research”. They continually research and research and never get into the market. If they do, then it is usually too late and they buy at the end of the cycle.