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12 Ways to Fail When Building a Property Portfolio

There seems to be a disconnect between what is myth and reality when it comes to the number of investment properties that people own.

We sometimes hear about “greedy” investors who own dozens of properties when this is not really borne out by the facts.

Did you know that around 70 per cent of the 2.2 million property investors in Australia own one solitary property?

And despite the property boom we’ve experienced in 2020-21, of those 2.2 million property investors in Australia, only a tiny percentage – around 20,000 people as it turns out – own six or more investment properties.

Of course, only owning one investment property isn’t going to help you achieve financial freedom.

This means most Australians who try and secure their financial future through property investment fail.

So why don’t investors own more properties?

Well, generally it’s because they make one of the following mistakes, which stymie their chances of growing a portfolio.

1. Property investing as a hobby – not a business

 Australians tend to love property, they love going to open homes and auctions.

They love the excitement of buying a property and renovating it.

They love the thought of becoming a property mogul.

In short…they’re having fun.

That’s not the way to become rich through property – you need a business mindset.

If you’re looking for fun go bungee jumping, go trail bike riding.

Property investment should be boring, but the results can make the rest of your life exciting.

If you treat property investment as a business you won’t think as much about each individual transaction, but the big picture – your long-term goal because property investment is a long-term process, not an event.

You’ll have a business plan which includes cash flow management, a finance strategy, asset protection, insurance, and correct asset selection.

2. No strategy

Following on from the point above, owning an investment property is not an investment strategy.

The problem is, that most people become property investors without putting much thought into it.

Some upgrade their home and turn their old house into an investment.

However, that doesn’t mean it will make a good investment because they probably bought it for emotional, rather than objective, reasons.

Others buy an off-the-plan property based on promises made by marketers, while others buy a property in their comfort zone – close to where they live.

Now don’t make the mistake many investors make and buy in your own backyard because you’re familiar with the location.

That’s really not a good reason to buy there.

In fact, a recent university study showed those investors who bought a property close to where they lived tended to buy underperforming properties and didn’t even get a price advantage on purchase.

You’ve heard it before – failing to plan is really planning to fail.

On the other hand, strategic investors devise a strategy – they bring their future into the present and devise a plan to achieve the results they want.

You see…attaining wealth doesn’t just happen, it’s the result of a well-executed plan.

Successful wealth creation through real estate requires you to set goals, determine where you want to end up, and then devise a cohesive plan to get there.

You need to focus on both the short and long term and ensure your investment decisions gel with your overall strategy.

Work out what you want to achieve with regard to income – are you chasing short-term yields or long-term capital growth – and how you can best manage your cash flow as a smart investor.

What type of property do you need to buy in order to meet your income goals?

With a carefully thought-through outline of your investment journey, you will end up exactly where you want to be.

So plan your action and then activate your plan.

If you’re a beginner looking for a time-tested property investment strategy or an established investor who’s stuck or maybe you just want an objective second opinion about your situation, why not let the independent property strategists at Metropole build you a personalised Strategic Property Plan.

When you have a Strategic Property Plan you’re more likely to achieve the financial freedom you desire because we’ll help you:

  • Define your financial goals;
  • See whether your goals are realistic, especially for your timeline;
  • Measure your progress towards your goals – whether your property portfolio is working for you, or if you’re working for it;
  • Find ways to maximise your wealth creation through property;
  • Identify risks you hadn’t thought of.

And the real benefit is you’ll be able to grow your wealth through your property portfolio faster and more safely than the average investor.

Click here now and learn more about how you could benefit from having a Strategic Property Plan built for you.

3. The wrong strategy

Planing Strategy Future

Almost as bad as having no strategy is following the wrong one.

Residential real estate is a long-term, high growth low yield investment.

Your strategy should be to use the capital growth of your property portfolio to grow a large asset base that will give you more choices in the future.

Yet many beginners chase cash flow or the next hot spot or try and make a quick profit by flipping. All recipes for investment disaster!

Others chase tax benefits because they think negatively gearing new properties will “keep their tax down.”

So they buy a new house in an outer suburb or put a deposit on an off-the-plan unit due for completion in two years’ time, because of the higher depreciation deductions on offer.

The problem is that these properties just don’t offer the capital growth you require to grow your wealth.

4. Changing strategy

Unfortunately, some investors get spooked when markets soften, and rather than sticking to a proven strategy to secure their wealth creation through capital growth, they opt for something cheap and supposedly cheerful instead.

Rather than looking at what has “always worked” over the long term, they look for “what will work now.”

It’s no surprise then that their smiles turn into frowns when that inferior property underperforms down the line.

5. Unrealistic expectations

Expectations

Another reason investors fail is that they’re not patient enough.

They’ve read too many stories about “overnight successes” and go into property investment hoping to make quick profits or thinking they can buy seven properties in seven years, or possibly ten properties in ten minutes.

In reality, successful property investment is a get-rich slow process.

It takes most investors up to 30 years to grow a big enough asset base to provide a cash machine for their retirement.

By then, though, many people have thrown up their hands and sold up because they had unrealistic expectations to start off.

Too many investors look for that one big deal that will make them rich – property just doesn’t work that way.

As Warren Buffet wisely said: “Wealth is the transfer of money from the impatient to the patient.”

Successful property investors go through the following 5 stages of their journey:

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