When it comes to investing in real estate, many people still make mistakes even today, despite the abundance of available resources online.
Amazing YouTube channels and blog sites have been educating people about real estate market trends for years, but many still make the same errors. I’m here to help you avoid these pitfalls. With numerous strategies, opinions, and headlines presenting extreme views, let’s dive into some common investing mistakes and learn how to navigate this challenging market successfully.
But I'm here to help you avoid those pitfalls.
There are numerous strategies, opinions, and headlines out there, often presenting extreme views. So let's dive into some common investing mistakes, and I'll share my insights on how to navigate this challenging market successfully.
Top Investing Mistakes
Investing in real estate Australia, especially for the long term, is not easy, but with the right guidance, you can make informed decisions.
Number One: Constantly Watching the Markets
Unless you're in crypto, you don’t need to constantly watch the markets.
For real estate, the market moves slowly. You won't see dramatic changes in property values within a single day. The strategy for property investment involves taking a long-term approach and not getting caught up in daily price fluctuations. In Australia’s real estate market, it’s essential to avoid being swayed by short-term movements and keep your focus on long-term gains.
In fact, I would argue that if you are watching the markets and you're in crypto, you've probably lost all your hair and you don't sleep much at night because that market is 24/7, and its volatility is so extreme that you could probably have a heart failure by 6 PM but by 12 AM, you're at the clubs having fun (you know what I'm saying? Haha! Jokes aside).
When it comes to investing, you need to take a long-term approach. You are only going to apply logic over the long term in a market like this when you're not constantly looking at prices.
Now, the good thing about real estate here in Australia is that it moves fairly slowly. So you're not going to sit there and go: Oh well, I bought a property for $400,000 at 9 AM. By the time it's 3 PM, I could probably quit my job, and then by 12 AM the next morning, I'm probably on a flight to Bora Bora.
It doesn't work like that. How it works is that it takes time for that market to realise those price gains. Although there are markets that are absolutely killing it and going up a lot quicker, it generally takes a lot longer.
Now, because there isn't really a gauge to see how much your property is worth every single minute of the day, it's actually a good thing.
Why? Because the longer you can stay away from the market, not looking at those prices, the more you're going to keep your emotions in check, and understand that if you come back and look in six months and 12 months, how much it is worth and what the property has done, you'll find it's a lot easier to stay in the market long term.
Number Two: Chasing the Trends
Many people are easily swayed by current trends and headlines. This impatience often leads to chasing after properties that have already seen significant price increases. By the time you see headlines about rising property prices, the best investment opportunities might have already passed. To truly excel, you need to focus on real estate market analysis rather than reacting to headlines and trends.
What I mean by this is that people get swayed so easily because we're highly strung when it comes to emotions.
We're so determined to get instant gratification that unless something is happening right now, we lack patience.
I'm sure there's some sort of study that's been done where we track how much patience people had on average—like 30 years ago, and where it is now. I feel like it is so much lower now because they want quick dopamine hits, and that's because of social media and other things like technology that make things easier.
However, as a result of all of this, we have so much information coming at us from left, right, and centre.
You might hear my thoughts on my blog site or YouTube channel, followed by another blog or video by someone else, and you'll be like: "I'm so confused,” then you read a book and then you go and see some headlines and now, you're definitely confused, and you don't make any moves at all.
So chasing the trends and chasing headlines will always mean that you're behind the eight ball. What I mean by this is by the time it's a headline, it's already done.
The best way to understand this is when, at the end of the year, you see articles that come out and say: Oh my God, property prices went up in these areas.
What most people do, (if you're one of them, it's okay, because I've been one of them before) is sit there and go: Okay, these are the best places to invest!
You see all these places that have grown by:
Then, you’re like: "Great, what's the next move?"
You then go to realestate.com and you go: I'm gonna look up all those areas because that's the best place to invest.
However, the problem is: you're entering a market now that is 14% higher than where it was 2 years ago. So the best time to actually invest was before the move was made, right?
If you're looking at headlines, the market has already made its decision, and yes once those headlines come out, more attention comes in, and that's when you start seeing FOMO pricing and prices go a bit silly.
This is when we don't want to be buying in those markets. In fact, we've already created our positions, established them, let the market do its thing, the retail emotional buyers come in, and we've already moved on to the next place.
Meanwhile, we get the equity from those markets, we can then use that in the next market. Simple as that.
Number Three: Following Bad Advice
Be cautious about the advice you follow. Whether it comes from social media, well-meaning relatives, or casual acquaintances, the context is crucial. For reliable information on building wealth through real estate, seek advice from professionals actively involved in the market today. Make sure the advice you follow is relevant and based on current market conditions.
Now, this could be through social media. It could be through those uncles and aunties that think they know everything, most likely some random uncle that you know at a family gathering.
However, essentially, they have an idea of what they think the market is, but if they're not doing this on a day-to-day basis, and they actually haven't achieved that in today's market, then it's pretty null and void.
I've been in this position personally as well where you just sort of go: Yeah, but I totally get what you're saying. But I don't think you know what you're talking about.
Sometimes you just have to do that, because family is important, right?
However, whether it's coming from your uncle, your hairdresser, or the Uber driver, you need to take stock of where this information is coming from, and get context.
It's like the equivalent of you coming on here and trying to understand what my thoughts are on the latest makeup trends (um…I wouldn't know right, and I've just chosen makeup because I suppose that would be the weirdest thing I could talk about in this blog, personally).
However, if you came here to understand how real estate works, then yes, you'd probably have come to the right place. So it's the context behind the advice.
Now, you could also speak to someone who's done quite well, and they'll share those experiences going: This is all the stuff that you can do and it's fantastic.
However, you could also equally speak to someone who's had a really bad experience, and they’re so scarred from it that they'll tell you to never invest again. This is probably the wrong way you want to do it.
Number Four: Not Having Patience
Real estate markets are cyclical and can take time to show results. If you're constantly checking your property’s value and comparing it to others, you might become disheartened. Patience is key in real estate investing. By being patient and focusing on the long-term, you can better navigate the ups and downs of the market.
Say, for instance, when it comes to markets, they're all cyclical, right?
Everything sort of rhymes. They're about the same, but they're not exactly the same, and that's largely driven by the emotions that people have.
When you're at the top, and everyone wants to buy, every friend has made so much money, they're telling their friends. You're not telling your friends when you've lost a bunch of money, right? You're probably keeping it to yourself. You're not posting anywhere, and that's how cycles end up working over time.
However, some cycles take longer than others, and so if you're sitting there and going:
"Oh why hasn't my property gone up in value?"
"The rents haven't increased but Ravi's telling me everything's increased."
Or you're sitting there, and saying: "Well, every other crypto went up, but mine didn't."
Just got to take some time. Yes, you've got to cut the losers. There sometimes might be a dud investment in your portfolio, but just give it time. Just be patient. Things will work out as long as you're active in the micro and just patient in the macro, you'll be okay.
Number Five: Using Money You Actually Need
I've heard this time and time again where people will go and overstretch themselves, over-leverage themselves with money they actually need, and then three months later, they're like: "Ah yeah, I kind of need that money and now I'm screwed."
A classic example of this is over the last 4 years, if you had people go in and throw all their money into the stock market, all into crypto, and you're like: "Cool, I know this is going to grow. So in like two years, I'm going to be able to take out 30 extra, and life's good."
But then, in the meantime, we've seen interest rates go up, and suddenly that house mortgage is costing a lot more, and all your money is now stuck in stocks, but the stocks you bought actually went down so you're negative on your position and now you have to sell it in order to go and fund your actual investment or your own house.
This is where the problem is. If you aren't forward planning, and you don't allocate your resources properly, it could mean that you're out of the market when in fact you should be in the market, and be doubling down at that time.
So just don't use money that you can't afford to lose and, on top of that, money that you actually need. Have the foresight to say: Okay, I can be patient with this. I know I'm going to need this money in two months, so let me put it aside and not use it.
Number Six: Not Having a Strategy and Clear Defined Goals
A clear strategy for property investment is essential. Know your end goals and create a roadmap to achieve them. Whether it's for early retirement or another financial milestone, having a well-defined strategy will guide your decisions and help you stay on track.
It's important you know where you're going, right?
What I'm focused on is the vision.
Yes, the strategy makes up for it.
Yes, there's a road map to it.
However, we need to know what the vision is.
I ask people a lot of the time: what are you actually investing for?
It might be early retirement. Great, but why do you want to retire early? What are you going to do with that time?
These questions are often followed by: "Oh, I don't really know."
So what you need to do is go beyond just wanting early retirement. You need to start taking steps backwards to understand:
What exactly do I want? Why do I want it?
These questions will then clearly define how you go and actually achieve it.
By having a fluid strategy, it means that yes, the markets are going to change and do unexpected things, but if you're fluid in your approach, you'll be able to adapt and navigate quite nicely through those turbulent times.
Now, for my final tip: not investing at all.
Before diving into new investments or buying into the next big thing, ensure you have an emergency fund. This buffer will provide peace of mind and prevent rash decisions based on emotions. Having an emergency fund allows you to stay calm and focused, enabling better long-term investment decisions in the real estate market.
It is: save an emergency fund.
Before you go out there and look at the next shiny thing, or you really want to buy a Charizard card, or it might be an investment property, just have an emergency fund first.
This is going to give you so much peace of mind. Even if you do 99% of the numbers and everything checks out, by having the emergency fund, it's going to keep you away from making a rash emotional decision.
The number of times I've been in a position where I've been swayed emotionally to do something, as long as I've got an emergency fund, I simply have to switch my computer off, take a walk, and often come back more logically about it.
Why? Because I've already got the money set aside. I don't need to sell the bottom on anything; I just need to wait and be patient. This emergency fund is going to give you peace of mind. It's going to give you the ability to sleep at night. And of course, the emergency fund is in case of an emergency.
So don't think, "I've got to take a holiday. It's an emergency."
You've got to actually put that aside to go:
What happens if there is a cyclone, and my house gets ripped apart?
What happens if my car gets totaled and now I don't have a way to get around?
What happens if my kid needs something and I'm not able to provide it?
The whole idea of the emergency fund is this buffer that allows you to sleep at night.
It allows you to stay in the markets and, as you go through the ups and downs, you're able to logically focus on your vision. This is how you can achieve actual wealth, rather than a lot of this other stuff that people put out there saying: "You'll get rich overnight."
Yeah, no, I don't think so.
I hope you guys have learned a lot from me in this article.
Thank you!
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