I was chatting to a farmer recently about what’s commonly referred to as “ethical” agriculture and the moral implications of raising animals for human consumption.
I wondered how they managed their investment – their livestock of sheep and bovine – to ensure optimal wellbeing, while maintaining enough detachment to send them to the slaughterhouse. I know…graphic images, but it’s where our food comes from after all!
She explained to me (did you immediately picture an old guy in overalls when I mentioned ‘farmer’ earlier?) that it’s much easier to see your stock as a commercial enterprise when you don’t name them.
Her and her husband found this little gem out the hard way mind you, after giving each member of their initial flock of lambs his or her own personal identity and in turn, establishing a more intimate connection with the animals.
This is the difference between having an objective interest in your investment or being emotionally invested in your interest.
The former allows you to make decisions based on reason and logic over sentiment and ‘feelings’. Whereas the latter can bias your judgment, causing costly mistakes that you’d otherwise identify as risks, and therefore either resolve or avoid.
What do sheep have to do with property investing?
The reason I impart this story is not to turn you into a Vegan or influence your WOE in any way (social media speak for what food you choose to stick in your gob).
Rather, I felt it was an excellent reminder that if we hope to be successful in property investment when it comes to building long term, sustainable profits, we must maintain this level of calculated distance between us and our growing portfolio.
As with farming however, this is often easier said than done. The financial investment we make in a housing asset is so significant that it naturally engenders a deep emotional response at an intuitive level.
But the more you can apply logic and reasoning to your intuition, the sounder your investment decisions will be…unless you’re really bad at planning of course.
A lifetime of logic over a second of sentiment
This is a good way to remember the need to remain objective when it comes to mapping your investment journey and working out optimal asset selection.
Applying rational analysis of the facts and figures surrounding the investment in question is key.
Whereas if you allow that second of sentimentality you’ll undeniably feel due to the large financial investment you’re about to make spill over, unconstrained by logic and reason, you’re more likely to be blinded into bad investments.
Ask yourself, will it yield the returns you need and assist in meeting your long-term objectives?
Yes? Then do some further number crunching and perhaps consult an expert or two for a second, unbiased opinion.
Not sure? Then consider whether the questions surrounding the asset’s suitability are coming from your head or your heart.
You’re well advised to seek experienced industry guidance and mentorship in the initial phases of your journey particularly.
As a more seasoned and confident property investor however, you’ll be less inclined to look for external validation of the decisions you make.
Can you weather all conditions?
The same applies to market conditions and how well you ride out the various peaks and cycles that naturally accompany any type of investment – be it property or poultry.
Farmers are often challenged beyond what many could endure by Australia’s unforgiving climate.
Those who survive droughts, floods and everything in between, generally enter their agricultural enterprise with a sound long-term plan, and the tenacity that comes from doing something with the intention of helping generations to come.
Building your future fund with real estate, as with building a sustainable modern farm, is about more than immediate personal gains. It’s about building a strong foundation for your family’s future.
Making the tough choices easier
As a property investor seeking profits, you’ll no doubt be required to make difficult decisions along your journey and be challenged by the innate personal feelings that arise when called on to make certain choices.
You might think that selling an asset, which happens to be dragging down your entire portfolio, is a fairly simple prospect to deal with on an emotional level for instance. It’s all about the bottom line after all.
But what if that asset happens to be the house you acquired with your new wife twenty years ago and brought your firstborn home to? The one you turned into a rental investment when the decision was made to upsize into a dwelling more suited to your growing family at the time.
Emotionally detaching from housing assets can be particularly challenging for the first time property developer, who risks becoming too invested in their first project.
Be it a small cosmetic makeover, a significant renovation or a brand new apartment build, the possibility of over-capitalising and missing the market is very real if you facilitate what’s often an emotionally charged experience without a decent application of logic and reason.
The bottom line is…don’t make it personal when it comes to property investing. Don’t be the farmer who names his cow Bessie or Daisy because, at the end of the day, it’s really a big Miss Steak.
If you would like to know more about making objective, sound property investment decisions, particularly when it comes to optimal debt structuring for your portfolio, why not connect with the team here at Trilogy Funding?
Our longstanding industry expertise can assist in helping you stay on your path and see your plans come to fruition sooner rather than later. Click here now to connect with us today.
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).