I met an old friend from my real estate land development days recently and by talking to him it reminded me how easy it is to fail in this property investment business, unless you have a plan, and of course that means the correct plan. There are four reasons that I know will certainly contribute to making anybody a failure as property investor.
- Having a shotgun approach
- Having a get rich quick mentality
- Investing using a one size fits all strategy
- Feeling that you are missing out
Having a Shotgun Approach
This basically means that you have not got a plan at all and that you are prepared to run around and hoover up every opportunity that becomes available and forgetting the end result that you are trying to achieve.
You have got to keep the outcome that you want to achieve uppermost in mind and focus on that goal to the exclusion of all others. For example if it is your plan to only buy real estate within 30 minutes drive of your home then stick to that plan and just because a good deal comes up which is 3 hours drive away be brave and ignore it, unless of course your plan is to buy property that far away. I speak from experience, and the only major problems that I have experienced with property is when they fell outside of my plan either geographically or by real estate classification.
Having a Get Rich Quick Mentality
What I mean by this is that although there are ways to get rich quick in real estate, by for example, buying property and turning it for an immediate sell on profit, which is known as flipping. Money can be made this way but does it form part of your plan? By far the most constant way that money is made in property investing is by using the same strategy that Warren Buffett uses when he invests in companies which is the principle of “Buying and Holding“.
Investing In A One Size Fits All Strategy
This is where you would buy, for example, a portfolio of properties in one area of the country believing that they are a good investment as the prices are cheap in relation to the rents achievable, which in turn pushes the yield up. That is fine if you are going for an income strategy but not so good if you are going for a growth strategy where you may need to liquidate that asset quickly and take the profits to reinvest elsewhere.
Feeling That You Are Missing Out
This is where your local real estate agent or property sourcing company uses the marketing tactic of scarcity. You know the sort of thing, where you get the phone call from the agent saying that unless you buy quickly you will miss out as the properties are selling really quickly. Another tactic is to tell you that the prices are going up tomorrow so you had better buy today. We have all had those sorts of calls be it for real estate or double-glazing or whatever.
I am not saying that any of the above do not have a place in your property portfolio growing business; but please be wary of them that unless they form part of your real estate portfolio plan, which I would strongly recommend is written down and reviewed regularly to measure your progress, then they can come back to haunt you.