David Johnston – Property is a Get-Rich-Slow Scheme

© PPA Articles — www.propertyplanning.com.au.
Reproduced with permission.

One of the biggest risks in property investment is trying to make a quick buck. Hastiness often leads to poor decisions, half-baked plans, buying from spruikers, developing without the appropriate skillsets, and ultimately underperforming investments.

Successful property investment, like many aspects of life, is about being patient.

Unlike shares, superannuation and our bank balance, you cannot log online every day to see incremental increases and decreases in the value of your property – at least not yet!
(There are some data companies that revalue property weekly based on algorithms, but the accuracy is hit and miss.)

Property is a completely different beast to other forms of investment. Some of the key reasons property is mostly a get rich slow scheme include –

  • The time it takes to prepare, plan, search for, purchase and then settle on a property.
  • It is the most expensive asset in life, so it is harder to purchase often or rapidly.
  • It carries large add-on costs to buy.
  • It carries significant time and costs to sell.
  • To create wealth rapidly from property you need to take high risks such as developing or being highly geared which is not everyone’s cup of tea!
  • The power of compound growth kicks in at a faster rate, the longer you hold a property.

Most of our lives, financially speaking, we are earning an income, saving money and paying down a mortgage. This means that we are not making a lot of property decisions. Let’s put this into perspective: if you retire or transition to the flexibility stage of life at 65, you will have lived for 23,725 days and most people will have purchased a property on 5 of those days or less. That means most people are signing the dotted line on a purchase once every 5,000 days prior to retirement or every 10 years or so. Even more active property buyers who complete 10 purchases are still only making a purchase every 5 years approximately.

If you only need to make major property decisions every five to ten years to be successful, you need to ask yourself this question, do I need to be making lots of property decisions quickly?

The reality is that people buy more properties over the journey of life than they own at retirement. How can this be possible?
This is because they buy and sell, buy and sell.

Ok, so why does this happen?
Mainly because each property decision is made in isolation, rather than in the context of a long term (Property) Plan that is developed though understanding our lifestyle and financial goals right through to the flexibility stage of life.

This is why we advocate that you should make as few property decisions in your life as possible to achieve your lifestyle and financial goals and aspirations. This ideally means never selling any property that you have purchased. Selling is a critical way in which wealth is lost during the financial accumulation phase of life. In fact I believe it is one of the seven critical mistakes you make in property. Why would you want to make more decisions than is necessary when you could be spending that time with family, friends and relaxing.

Who wants to spend their life selling, buying, moving and losing money if it is unnecessary?

Not me….

The simplest and lowest risk strategy to property investment for time poor professionals is to buy and hold good quality property within the framework of a long-term Property Plan. The key is to make great decisions with one eye on the now, and the other eye on your end goal. The next step is to have a successful money management system and mortgage strategy, sit back, enjoy life and be patient. The alternative could mean losing your shirt, or more importantly, losing life’s most valuable commodity, which is time!

What’s most important to you in your life?

All the best with your Property Planning

David Johnston is the founder of Property Planning Australia and the author of ‘How to succeed with property to create your ideal lifestyle’ and ‘Property for life – using property to plan your financial future’.

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