7 Ways We Talk Ourselves Out Of Investing

7 Ways We Talk Ourselves Out Of Investing

Most people are aware that investing in property is a great way to grow your money and diversify your financial assets. But buying an investment property is a huge decision, especially if it’s your first. The thing is, if you never take a single risk you’re unlikely to make much money! And you’re also unlikely to live a very stimulating life.

Of course, an investment property is… well… an investment. A big one. So it’s understandable that taking the plunge is difficult for many people. But with house prices continuing to head skywards even through a year as difficult as 2020-21, buying a property to rent out and eventually sell on is actually one of the most sensible things you can do with your money. 

If you need more convincing, here are seven questions that many first time buyers of investment properties have and the answers that take the sting out of their tails!

What if I buy a worthless property?

Every time you buy a property, you’re going to worry that it’s a dud. This is a natural fear. But proper preparation renders the risk of this happening vanishingly small. 

You should be prepared to work with a surveyor and a property agent, as well as any other local experts (such as the staff of a local planning office) to make sure the property you’re going for is a sound investment. This involved time, research and some financial outlay, but it’s always worth it in the end. I have seen many disasters avoided with a simple survey. 

Additionally - it’s actually pretty rare to find a worthless property. If you have made sure there are no structural issues, it’s still a bricks and mortar asset even if you end up selling it on earlier than expected.

What if I get taken advantage of?

This is another one that, in a way, is up to you and your planning skills. Do your research, seek professional advice, and beware of anything that seems too good to be true. Trust me, it definitely is!

And remember, when you’re buying an investment property it’s crucial to leave your emotions at the door. You’re much more likely to be talked into a bad deal when you’re driven by the beauty of the area or the charm of period features than when you’re looking at the practicality of renting the house out in future. 

What if I move far away from my investment property?

This might have been a concern ten or twenty years ago, but these days managing a property remotely is easy. You might have to employ a property management team close to your investment property, but let’s face it, you should have a team anyway. With instant communication possible pretty much all over the world you can stay on top of what’s happening with the property wherever you happen to be, and even with a team of professionals doing the day to day work of interacting with your tenants and handling property upkeep you can be as hands on as you like even if you’re abroad. 

In fact, plenty of property investors live full time in, say, Sydney, and half their portfolio of properties is in Brisbane. As you learn more about the property market, you start to follow trends nationwide when searching for a great investment!

What if I can’t handle the mortgage?

The key to successful investment is not to stretch yourself too far. You need to be able to hold your assets for as long as possible, allowing them time to grow in value. In order to do this, you need to be realistic about the level of mortgage you can handle, as well as what you buy with it. When you are making calculations about how much you will be making in rent from your tenants, be realistic. Don’t assume you’ll be able to immediately rent a property at the highest end of market value, and plan for things like untenanted months and early negative gearing and then make money decisions.

Of course, the cash buffer you save from the money you borrow to buy the property is key to getting through lean times. You can also add to this in good months to give yourself a sense of security. 

The bottom line? Don’t take on a mortgage you only might be able to afford in the long term. Do your due diligence and work out how you would fare in various scenarios. An investment property is a responsibility, so treat it like one. 

What if a better property comes along?

Let me tell you a little secret… there is no perfect property. Just like when we choose our own home, buy a car, or even settle down with a partner, we have to take a certain leap of faith with an investment property. Don’t settle for something just okay, but equally don’t stunt your growth (and the growth of your capital) by waiting around for something perfect.

And remember, this is just your first investment property. If it goes well, there will be more. And you’ll learn lessons from this one that will inform the purchase of the next one. That ‘better’ property, in the light of everything you end up learning, might not have worked for you at all!

As with all of property investing, take a long term view on this!

What if I have awful tenants, or can’t find tenants?

There will probably be periods in which your property is empty. This is why it’s not advisable to rely solely on income from a single property. Unless you’re being very frugal and clever with what you have coming in, you should have a second income. Either way, you should save enough to get you (and your properties) through a couple of untenanted months.

In the same vein, bad tenants happen. All the vetting in the world can’t change that. That’s why Landlord Insurance exists! Do your research early, and find an insurance plan that works for you. And remember to regularly check that your current plan still works for you - you might need to up it if you invest in more properties, or periodically check for better deals.

Finally, you have that ace and carefully chosen property management team right? They’ll handle maintenance, interaction with tenants, negotiating contracts, and advertising to find new tenants. 

What if I lose money?

This is the ultimate fear at the heart of all these questions. 

Just like with all investments, buying to rent carries a risk. If it didn’t, everyone would do it and the maths wouldn’t work at all. You will have noticed that a lot of my answers to these common questions involved planning, and that’s because planning is the best way to make sure you make money. It might take time, it might complicate the process, but having a plan based on your goals and a realistic assessment of your finances greatly increases your chances of success when investing in property.

You might not make much money right away. That probably isn’t what you want to hear, but it’s the truth of it. Remember to see property investment as something long-term, and, importantly, to treat property investing like the business it is. 

The market won’t always go your way, sometimes you just have to wait it out, but whatever the market is doing you should forge your own path. Again, this is all in the planning. Regularly assess your properties and their performance to make sure they’re doing the best they possibly can be, and to avoid being blindsided by expensive problems. Make gradual improvements to properties. Always keeping up with repairs. 

If you want to defy the market in bad times, you have to create a trusted, quality property empire.

Building a property investment portfolio isn’t a magic money bullet. You will have to put in work, and stay on top of what’s happening at all of your properties and the local housing markets they’re a part of. In the long term, though, investing in property is probably the best thing you can do with your money. Just make sure to plan ahead every step of the way.