30 Jun Why property investors fail – Part 2 – Michael Yardney
Fifty percent of those who buy an investment property sell up in the first 5 years. Put another way – most Australians who get into property investment never achieve the financial freedom they aspire to, and worse still many property investors lose a heap of money and lost opportunities along the way. Michael Yardney shares some thoughts on how not to fall into that category.
Kevin: And coming back with the final five common investor concerns that Michael Yardney and his team have found in talking to investors for many, many years. We’re going to touch on the last five.
Let’s have a look at the first few, Michael. You shared with us that number one was poor property selection, number two was poor cash flow management, also wrong ownership structure, running out of time. That’s a terrible feeling – the feeling that they have missed the boat. Then the final one that you gave us earlier in the show was off-the-plan woes.
I guess that leads us to the next one, doesn’t it, about hype in the market, Michael?
Michael: Yes, Kevin. Many unfortunate investors bought the wrong property because they looked for the next hot spot. While some enjoyed some short-term capital growth, since then, property values in all of these so-called hot spots as well as rentals have actually dropped considerably, and unfortunately, we’re seeing a lot of investors with negative equity. In other words, their loans are more than the value of their properties, especially those who bought in mining towns.
Many of Australia’s worst performing property markets over the last couple of years have really mirrored these mining towns that have gone up and down, and investors have been burned by those hot spotters who recommended them.
Kevin: Yes, that’s certainly one to watch out for. What was number eight, Michael?
Michael: Some investors didn’t maximize their tax position because they hadn’t obtained a depreciation report. Depreciation deductions can make a real difference for investors by helping them reduce their taxable income. Again, it’s not a reason to invest, but it’s nice cream on top of your other rewards, Kevin.
Kevin: Yes, it is indeed. And if you are confused, of course, you can always talk to our good friends at BMT Tax Depreciation.
Michael: Well, Kevin, can I say that just recently, I’ve organized another depreciation schedule on one of my properties and I did it online through BMT, and gee, do they make it easy. I’d definitely recommend that, too.
Kevin: Yes, indeed, and you can get on to them through the link on Real Estate Talk, of course.
Moving on to the next one, number nine, Michael?
Michael: Another regular concern I’ve had is people who have tried to save money by using a cheap property manager, or, Kevin, worse still, managing their own properties and running into trouble.
Good business owners – and that’s what you have to be as a property investor – recognize they can’t do it all themselves. They hire a good team of professionals around them, and that includes a professional property manager. Anyone can collect rents; it’s when things go wrong that you need a good professional property manager on your side.
Kevin: I’ve always found it’s great to have that arm’s length relationship. Just to have someone in the middle there, Michael, so that you’re not dealing with the tenants yourself.
Michael: Definitely. The legislation is too complicated. It’s too hard to do it on your own. It’s a false saving, Kevin.
Kevin: Yes, and of course, many investors go across borders, as well, and the rules do change state to state, as well, so you just have to be very, very careful.
Gee, we’re up to number ten.
Michael: Another concern is that the Internet is currently littered with stories of investors who have succumbed to a lot of the properties spruikers’ tactics. They went to a seminar and they got pressured by high sales tactics. You rush to the back of the room and make a decision and sign the contract now, and if you do, you’re going to get a discount on buying this property.
They’re buying off stock lists. At people’s seminars, they have this list of properties to sell. Sure, they can be claims of strong capital growth and no money down, but similarly, people got a bit taken by project marketers who are working for the developer and lost out because the advice they received was far from independent, Kevin.
Kevin: And the final one, Michael?
Michael: I guess we’ve mentioned it a couple of times, but it’s the concern that they didn’t build a good team around themselves early enough. These investors realized that they didn’t get the maximum out of their properties, so I’d be recommending that you get a good network early in your investment career. That includes a good finance broker, a smart solicitor, a property-savvy accountant, and a knowledgeable property strategist.
Kevin: Yes. Just to recap, in this little segment, Michael has shared with us the 11 common investor concerns in the show this week that he and his team have gleaned and put together from all of the people they’ve spoken to for many, many years.
Just to recap on this little portion, they believe the hype, the confusion about depreciation, property management problems, getting caught out by spruikers, and the final point you just made, Michael, about putting a great team together.
At this point, too, it’s always good to mention that if you really do want to get a great team together, you could probably do a lot worse than start with talking to Metropole Property Strategists.
Michael: Thanks, Kevin. I guess in summary, I often say, “Property investment is simple, but it’s not easy,” and that’s really not a play on words. If you follow the formula, it works, and if you try and be smart and miss steps along the way, you could up end up failing.
Kevin: You could, indeed. Michael, great sharing some knowledge with you. Thank you very much for that. Your extended exposure today in the show was very, very welcome. Thanks for your time.
Michael: My pleasure, Kevin.