It’s difficult to ignore flavour of the month reality television. And right now, it seems most viewers are tuning in to catch the culinary chaos dished up by wannabe chefs on My Kitchen Rules.
It might surprise you that in a property investment newsletter we’re not talking about The Block, but a show that sees renowned celebrity chefs judge the goings on in everyday kitchens across the country.
Having caught a couple of episodes however (I admit it), and witnessing some of the train wrecks captured by the cameras, I feel there are a number of lessons we can learn about what to do and what not to do, based on common MKR contestant blunders.
Seemingly, a lot of the people who enter this reality TV world forget some important fundamentals about the cooking they’ve always done, or the ways around a kitchen their ‘mamas’ taught them.
The pressure inevitably gets to them and they make rookie mistakes, second-guessing every little move as all plans go out the window.
In today’s property market, where increased buyer competition is creating heightened emotions and a sense of urgency in some areas where auction clearance rates are out of control, the same thing can happen to property investors.
You get caught up in the underlying wave and next minute, all those strategies, plans and objectives you worked so hard to define have gone out the window.
To avoid that feeling of despair we see all over some of the MKR contestants’ faces across a dining table full of dissatisfied critics, here are 7 of the lessons you can apply from this popular reality TV show to ensure you stay on the track to property investment success…
1. Make a plan
How many times do we have to watch MKR contestants mindlessly running through supermarket aisles in a blind panic, only to realise they’ve eaten into their important cooking time and wasted an opportunity to come out swinging?
If you’re like me and tend to talk to your television, you’ve no doubt screamed at them about the importance of forward planning. ‘Where’s the written list of steps that need to be taken in order to achieve your end goal?’
Disasters happen when you don’t know what direction you’re heading in, so set those goals and then work out the process you’ll follow to get there, irrespective of what the market or anyone else in it happens to be doing at any given time.
2. Stick with it!
Frequently I see MKR contestants turn to their kitchen comrades and ask, ‘Is this how you usually do it?’
If your plan’s working for you, why would you suddenly throw it out the window and take an entirely untested approach? This is just asking for trouble.
Unfortunately, in a market where everyone has something to sell, it’s all too easy to forget your plans when being spruiked a product. If it doesn’t align with your personal strategy, don’t second-guess yourself. Always go back to that plan!
3. Do what you know best
‘I’ve never actually made the dish before.’ This is one of those cringe-worthy statements. Seriously? Why would you risk $250,000 by deciding to try something new at this point?
MKR contestants do it all the time though and so do property investors. All it takes is a cleverly structured ‘seminar’ and suddenly even an investor with a plan has acquired an asset that has no relevance to their overall wealth creation strategy or property portfolio.
If you always invest in high growth assets, without much of a focus on yields, why would you suddenly buy student accommodation with rental guarantees for its positive cashflow prospects? It just makes sense to stick with what you know.
4. Make sure you account for every possibility
Of course the unexpected can and does occur…’We forgot the chocolate for the chocolate fondue’ is a classic MKR gaff. But part of forward planning should involve risk mitigation.
Account for all the things that could go wrong during your investment journey and then make sure you have contingencies (and cash buffers) in place to absorb as much of the impact the unexpected can bring.
In terms of our current market, this is particularly important when undertaking financial forecasting and modelling.
It’s all well and good to be able to afford to hang onto your real estate assets during these more favourable interest rate climes, but what happens when they start going up again? This is all about sustainability of your portfolio.
5. Have a little something up your sleeve.
This is really just about having a Plan B. So you forgot the chocolate for the fondue, can you use some other key ingredient instead and salvage the entire evening?
Protecting your portfolio is about accounting for the many variables that can impact your bottom line. Try not to allow these more buoyant times in the property cycle, where yields are relatively high, interest rates are relatively low and values are generally trending upwards, lull you into a sense of complacency.
You need to have sound financial strategies in place to support your asset base and keep at least 5 per cent of your overall borrowings handy as a buffer…just in case you forget the chocolate!
6. Try to please your critics
You might not be forced to face down a Frenchman and his side-kick over a dinner table full of hyper-critical guests, but you do have to appeal to some different, but no less harsh critics when it comes to property investment; lenders!
There are numerous ways to become a more attractive borrower in the banks’ eyes. It’s important to remember that even though business is good at present and lenders are competing for your custom, there are still numerous hoops to jump through when lodging a loan application.
Now is a good time to make sure you have all of your fiscal ducks in a neat little row in order to score a ten, or at least the nod of approval, from your lender when you next require property finance.
7. Don’t give away too much
On the odd occasion I’ve seen MKR, I wonder why some contestants try to act the highly qualified foodie and intimidate all others around the table with their extensive knowledge of global gastronomy.
Needless to say, it’s always the ones who roar the loudest who subsequently fall the hardest when it comes time to don the apron.
As a property investor, it’s good to share some of your secrets perhaps as a mentor to those new to the game, but to give away everything is never advisable.
This is particularly true when it comes to negotiating a deal or bidding at a high-pressure auction.
At the end of the day, property investment comes with its share of ups and downs and valuable life lessons.
Learning from the mistakes of others can be a great shortcut to refining your overall investment approach and strategy, and who says that learning can’t come from a healthy dose of reality TV once in a while? Bon appetite!