If Johnny jumped off a cliff, would you? It’s a question I’m sure your incredulous parents asked of you, as I was asked of mine, at some stage in your childhood.
Of course what’s implied by this absurd interrogation is that you shouldn’t blindly follow the masses (because sometimes the ‘m’ is silent – thanks Facebook!). After all, who knows where you might end up?
Humans are an interesting species, however. Despite this apparent early encouragement to ‘be your own person’ via such parenting pearls of wisdom, we seemingly still prefer to follow the herd.
This is particularly evident when you consider the psychology of investing.
Most people fall victim to their own self-limiting internal dialogue when it comes to planning, strategising and creating financial freedom.
Not necessarily because they’ve had a bad experience with investing, but because they know someone who has or have just seen those dreadful ‘scam’ stories on TV where people lose their life savings.
Culturally, we tend to run with the pack we best associate with. So it’s no surprise that given the majority are middle class, middle-income earners who’ll probably retire reliant on traditional superannuation schemes and a government pension, only a relative handful of investors ever achieve the wealth they aspire to.
Let’s face it…none of us consciously set off for a future of financial destitution. But the fact is, when we decide to ‘go with the flow’ and fail to undertake our own personal goal setting and planning, we risk falling into that ‘mass’ mindset of money mediocrity.
Have you been there? Are you there right now? Might you end up there if you stay your current course?
Moreover, how do you know when you’ve fallen into the mind trap that will invariably convince you NOT to be a pro-active participant in your own financial future?
A good indicator is the ‘what if’ syndrome, where you essentially live in a state of perpetual fear that comes from the unknown (and entirely unplanned) future you’re heading into.
Here are 5 common ‘what ifs’ that can trick you into not investing, and the answers that will get you over these self made hurdles…
- What if I buy the wrong property?
While you can certainly end up with a dud investment weighing down your entire portfolio down, what’s really the worst that can happen? You sell for a bit of a loss.
Property is a far more forgiving commodity than most, because it’s an essential asset that everyone needs – shelter. As such, it will always be in a varying degree of demand.
To what degree demand exists for a particular property or location determines the ultimate value movements of residential housing markets over time.
As such, with some well-rounded research into historical price movements and the market you’re contemplating purchasing in can entirely eliminate the question as to optimal asset selection. It’s a case of knowing the tenants and owner-occupiers you’re catering to and investing accordingly.
Of course these days you can also engage any one of the many professional buyer’s advocates to advise you on the right property for your needs, thereby removing the guesswork.
- What if I can’t afford the repayments?
Overcoming this little mental obstacle is as simple as getting your financial ducks in a neat little row before you begin.
Ensure you have sufficient income and/or equity to cover future repayments, as well as establishing a decent cashflow buffer in case of emergencies.
Importantly, seek professional advice from a mortgage broker who specialises in property investment finance and can assist with optimal debt structuring, as well as an adviser who can help you establish the best possible ownership structures to boost your tax savings and cashflow, while minimising your risk exposure.
- What if I end up with problem tenants? Or none at all?
There are no certainties in life aside from death, taxes and the occasional terrible tenant.
Okay…so some investors luck out and never encounter the latter. But it’s always best to expect the best from your tenants, whilst preparing for the worst.
Landlord insurance is a must have for property investors and will protect you financially should something go awry with your rental residents.
Ensure your policy covers you for things like loss of rent and the cost to repair any damage that might be done – either accidental or intentional.
Finally, prevention in the form of an excellent, professional property manager who can qualify good tenants and manage the asset on your behalf is the best way to quell this ‘what if’.
- What if I lose money?
It can and most likely will happen when starting out on your investment career. One of the best ways we learn is through the mistakes we make. The idea is, you get back on the horse, learn from the experience and regain what you lost, with interest.
Plus the unique beauty of real estate is that you can add value to an underperforming property and at the same time boost cashflow through things like renovations.
Property allows even novice investors to take control of your asset, rather than simply leaving it to lady luck and market forces. Unlike shares in a company that relies on the management of others, you are the director of your own fate when it comes to housing assets.
- What if it’s a scam?
Once again, effective research can entirely eradicate the possibility of you falling victim to the latest and greatest investment fad or scam.
When seeking advice, make sure the source is independent and doesn’t have a product to push.
Of course once you identify and determine concrete investment goals and a strategy to reach them, many of these ‘what ifs’ become entirely irrelevant.
The more planning you put into your financial future, the less you’ll face the fear of such unknowns and have the power to progress on your wealth creation journey with confidence. With nary a cliff in sight!
Still need help alleviating some of your fears around property investment? Why not connect with the team here at Trilogy Funding?
We have the answers you need around optimal finance structuring, so you don’t have to worry about the ‘what-ifs’ when it comes to your borrowing power. Click here now to contact us.
About the Author
Since 2008, David Thomas has built a business aimed at servicing the needs of property investors, owner occupiers and small business owners. David is recognised as one of the top 10 independent mortgage brokerages in the country, David and his team have settled almost billions of dollars worth of residential and investment loans over the last decade.
Known for his straightforward, relatable style, David believes by educating people about property funding; they fare better in the market. By sharing his expertise openly, some of the people he educates will likely become his clients. It's a win-win approach.
David Thomas is a credit representative (Representative Number 506153) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237).