The property investment journey begins…
I understand that deciding to embark on property investment journey may be difficult, cumbersome, overwhelming and may require courage. The whole end to end process may seem at first too complicated and uncertain. I know, I have been through this myself. My aim is to help you start your property investment journey. I want to share with you my experience and the experiences of many other successful property investors that I am lucky enough to know and learn from.
There are many ways you can start your property investment journey and given that you adhere to the simple property investment principles I am more than certain that you will succeed. I would like to share with you my story, the steps and decisions that I took along the way. It has worked for me and it can work for you too, so let me share it with you…
Additional Source of Income
I do not remember how I got to the point where I realised that having only a day-to-day job to support me and later my family was not enough. I actually believe it was never a question for me but rather a statement that I never questioned. There are plenty of reasons to justify the need for the additional source of income. For anyone who needs convincing here are a couple of them:
Single Point of Failure
Not having any other sources of income makes you a single point of failure. What would happen if for whatever reason you are not able to go to work tomorrow? I think your family would be up for some heavy and unpleasant decision-making to go through pretty soon.
How often do you think about your retirement? When was the last time you’ve checked the balance of your super? How are you planning to support yourself when you retire? Is living on a government pension an acceptable option? Would the pension support the lifestyle that you want to have? For some reason we tend to think very little about retirement. Some of us struggle to plan a year or two ahead, let alone the retirement. The bottom line is, – the reality will kick in one day for all of us and we will have to face the retirement. The sooner you start building for it, the better lifestyle you will end up having.
Does fear of debt make you stressed or does the total dependency on your 9 to 5 job stresses you more? The answer to this question really depends on your personal circumstances, but contrary to many people’s beliefs ‘good’ debt actually reduces stress, anxiety, uncertainty and concerns about the future. You just need work with your mindset if you are on the risk averse side of thinking.
Options in Life
Do you want to have more options in life? I definitely do. I do not yet know when and how would I use those options, but simply having them gives me the piece of mind.
The list can go on as there are many more out there. For me, any one of the reasons above on its own was convincing enough.
Property or Shares?
Next I started to research the types of passive incomes available. Cutting the long story short, at the end I only had to decide between shares and property. Given that the historical performance of shares and property is comparable I have decided to focus on property. This was purely due to the fact that I wanted to leverage the bank’s money. You can do that with shares too, but nowhere close to the same extent as with property.
The quick example below compares shares and property performance over past 10 and 20 years. According to the chart below, Australian residential property price growth is comparable with the stock market performance over the long-term. Yes, if you look at the 10 year time frame, the shares have done better than property, yet if you look at the last 20 years you will find that residential property has outperformed shares slightly.
So here I was, with the property investment as my chosen tool to my future life I wanted to build. I went on a book buying and seminar spree to understand how it all works and what makes a good property investment. The information that you get from the books is usually full of theory and often lacks practical guidance. I remember being very selective when choosing the author of the book as I wanted someone to back it up with evidence, someone who has been there and done it, not once but multiple times, across multiple property cycles, for decades and still stayed in the game.
You can find the books that I found the most influential in the Resource section of this blog. I will definitely keep that section updated as I read more.
Sharing the Excitement
After over-saturating myself with the information, data, practical steps and real success stories I started to share my excitement with the world. I was quite frankly and quite quickly shocked with what I was getting on the other side of the fence (do not go there). Have you ever shared with others your investment thoughts on property or shares? What was their reaction? I found that most of the time you would get dozens of reasons NOT to invest and the risks you expose yourself to. This is almost natural, as we tend to think about the risks first and not the opportunities.
I have later realised that my shock had a lot to do with the fact that I have approached the people searching to validate my learning, but in return I was getting exactly the opposite. I have also learned that there is no shortage of opinions and everyone seems to always have something to say on property investment. The interesting thing is that the people with the least knowledge and experience can often have the strongest opinions and can sound so convincing that I have almost fell for it myself.
Are All Property Investors The Same?
After a short period of uncertainty and discouragement I managed to pull myself back together and asked, – If what people are saying is true, then how did the other guys that I have watched and read about managed to get it right? I got quickly back into the positive mood (almost as quickly as I got discouraged before) and set myself a mission to understand why there is such a disconnect between what I read, watch and what other I hear from other people. What I have eventually gathered was pretty fascinating, raising a lot of questions and definitely has a lot to offer in terms of food for thought. I have discovered that only 7.9% of Australians or 1,764,924 people owned an investment property, yet that is not the most interesting bit, the breakdown is by far more catchy:
|Properties owned||Number of investors||Percentage of investors|
|6 or more||15264||0.9|
To summarise the table above – out of all the people who owned an investment property 72.8% owned only one while just 0.9% owned 6 or more. I need to emphasise the last point, – out of the 1.7 million people who had ever invested in property, less than one percent of those own 6 or more properties. That is only 0.9% of investors and 0.068% of Australians. This equates to 680 people out of 1 million (given the Australian population of 22,34 million in 2011). Or simply – just over 15000 people in the country.
We have to leave a bit of room here as the data collected from Census, ATO and RP Data goes back to 2011. Now that the new Census has recently been conducted we should expect new numbers, so once it becomes available I will definitely do another post to analyse the trends.
What is Next?
So my only question once I have completed analysing the data was, – what do those 15000 people know or do differently to everyone else? How did they manage to do it and why not many others can do the same? Is it just luck? I thought perhaps they knew a secret about how to grow a property investment portfolio that no one else knew? Understanding the differences between the super successful property investors and not so much was the next stage of my property investment journey that I have decided to embark on. I will cover my findings in details in the next post, so please stay tuned for more!
I wish you a very successful and happy investing!
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