Curated for the Inquisitive Mind

Real Estate

11 reasons why we aren’t all property moguls

Are you looking for financial freedom through property?

Are you keen to build a substantial property portfolio?

Well…statistics show that most property investors stop at just one investment property.

In fact, the latest ATO data shows that 71.5% of investors only own one property, and that drops dramatically to 18% owning 2 properties and just 9.7% owning 3-5 properties.

Why is it that so many investors never get past their first investment?

Here are 11 reasons why there aren’t more property moguls…

1. They don’t have a strategy

Investing may be simple, but it’s not easy and that’s not a play on words.

I’ve often said property investment is a game of finance with some houses thrown in the middle.

So, when it comes to building a substantial property portfolio, a time-tested, proven property investment strategy is critical and part of that is having a sound financial strategy.

Without a property strategy in place, your property investment will lack direction, and the wrong investment decision will be made at the wrong time and for the wrong reason.

How to overcome this obstacle:

Investors should ensure that they have a solid, time-tested strategy in place, know what their ultimate goal is, what stage of the journey they are at and the type of property that suits their risk profile, their strategy and their cash flow requirements.

All our clients at Metropole understand how important having a strategy is, and, with our help, all have one in place to help keep their investment decisions on track.

As a result, they don’t get distracted by the latest fad or idea and they are able to avoid distractions.

They have risk mitigation strategies in place, own the right properties in the right entities and have financial buffers in place to ensure that they can ride the market as it goes up and down through each cycle.

As a result, when it comes to our clients, our numbers are far higher than the average – 21% own more than 2 properties for example, while 7% own 6 or more properties, which is 7 times the national average.

2. They believe their income isn’t high enough

One key issue preventing many property investors from buying more properties is their perception that you need to be rich to invest.

While it’s true that a regular income is vital for securing finance and paying continued out-of-pocket expenses, that doesn’t mean a disciplined investor with a lower income is excluded from the opportunities to invest in property.

How to overcome this obstacle:

The key is developing the financial discipline to spend less than you earn, save the rest until you have a deposit and then invest or many beginning investors use the equity they build up in their homes to get into the property market.


3. They lack cash flow

Another preventative stopping many investors from becoming true property moguls is the misconception that they need to pay investment losses out of their leftover cash flow from their income.

In other words, many investors believe that they need to cover the difference between their mortgage and rental earnings from their wages.

If that equates to $10,000 and you earn around $70,000 or even $100,000 then there would fast be a limit on how many investment properties you can afford to cover on top of your day-to-day bills and expenses.

How to overcome this obstacle:

The finance strategy we provide for our clients of Metropole allows them to buy time, not just properties.

Their finance strategy allocates a financial buffer to “buy” themselves a number of years of cash flow shortfall as well as allowing them to ride the ups and downs of the property cycle.

4. Their investment lacks capital growth

Sure cash flow keeps you in the property game, but it’s really capital growth that gets you out of the rate race by allowing you to build a substantial asset base.

One of the most common mistakes that novice investors make is being fixated on rental yield instead of on capital growth, which is where the secret of investing success really lies.

Many beginning investors want cash flow-positive properties because they are looking for choices in their life, but they don’t understand they need to build an asset base first and then “buy” cash flow from their property portfolio – it must be done in the right order.

When investors own a property that lacks strong capital growth, this means they can’t then leverage upon it to buy the next investment property.

Chasing a magic property investment formula can be a fruitless exercise and if you do what most property investors do, you’re likely to get the same result – your wealth creation journey will come to a halt as well.

How to overcome this obstacle:

The best way to grow a substantial property portfolio is with good capital growth which isn’t taxed like rental income is, and the way to secure this is by only buying investment-grade properties.

This will allow them to use their equity to reinvest in more investment properties.

The best way to identify these high capital-growth investment-grade properties is by getting good advice from a knowledgeable professional.

These people will be able to advise on where the best prospects are for capital growth and not buy using historical data as most people do.

That’s looking in the rear vision mirror.

And not buy looking for the next hot spot, as this year’s hot spot becomes next year’s “not spot.”

The research department at Metropole spends a lot of time identifying areas that are going to have long-term, strong economic growth, which leads to jobs growth, which in turn leads to population growth, which in turn leads to demand for rental and housing accommodation and eventually, this pushes up rents and property values.

We recognise that strong capital growth is the key to creating wealth through property investment.

And our clients invest with the main goal of capital growth, realising that this may mean less cash flow in the short term but it enables them to buy more properties in the long term and boost their capital growth further.

5. They don’t think long term

Some property investors don’t become property moguls because they are looking for cash flow and thinking about the here and now, rather than the long-term.

They buy properties that may solve a short-term problem (cash flow) but won’t give them the long-term results they hope for.

Others invest to minimise their tax and yet others lack confidence and are concerned about accumulating debt, or are confused about the benefits of negative gearing.

Either way, they don’t think about their property investment as a long-term exercise, and this prevents them from doing it effectively.

How to overcome this obstacle:

Sure, some people are happier to take more risk than others, but essentially what is needed here is a change of mindset.

Having the right information and getting good financial and investment advice could help any investor to have the confidence to keep building on their investment opportunities and see their wealth keep growing.

As is adhering to a known, proven and trusted property investment strategy that has stood the test of time.

Mortgage Stress

6. They’re impatient

It’s common for investors to lose interest when the speed at which they expect their wealth to accumulate is out of step with reality.

It’s unrealistic to expect to build a high-quality portfolio overnight – often it can take several years to build enough equity to build on a property portfolio and buy your next property.

And it takes most 20 to 30 years to build a sufficient asset base to be financially free.

Of course, this is not what most investors want to hear – they like reading stories about property moguls who now own 10 properties but only a couple of years ago were flipping burgers at McDonald’s.

I know there are people out there telling you they will teach you how to do that, but in my mind, that’s a bit like selling tickets to see unicorns.

How to overcome this obstacle:

Strategic investors understand that successful investing is when you give yourself choices in the future.


Your email address will not be published. Required fields are marked *