What kind of property investor are you?
Property expert Luke Harris shares his thoughts on why most property investors fail and how to avoid being one of them.
The vast majority of Australian property investors only own 1 or 2 investment properties. There's a huge difference between those who simply buy a property or 2 as an investment and professional property investors who have the knowledge and skills to build long-lasting property portfolios. So, why do most property investors fail to achieve their investment potential?
First, you need to decide what type of investor you want to be. Are you happy investing in property as a hobby and satisfied with relatively modest results? Or, are you seeking outstanding results and willing to treat investing as a professional business by putting in the corresponding time and effort? Keeping this question in mind, let's take a step back to establish what type of investor you are.
If you're not already financially free then you likely fit into one or a combination of the investor types profiled below. Bear in mind that while the categories are obvious generalisations, you're still likely to recognise parts of your personality.
9 types of property investors
1. The Wannabe Investor has a genuine interest in investing and enjoys reading and engaging in investment information sources. But their talk doesn't always match their walk. They know a lot, but require more confidence to carry out meaningful action.
2. The Frugal Investor struggles to see the benefit in spending money upfront to make money later. They end up saving pennies but missing out on the pounds, and would be better off in the long term by seeking out valuable input from seasoned property professionals to help them achieve better results.
3. The "I'll Try Everything at the Buffet" Investor is eager to dip their toe into anything investment-related to broaden their knowledge, and they're happy to spend money to educate themselves. However, they tend to seek a single magic strategy that can mean they waste time and money on trying everything (and leaving little capital to invest), rather than honing in on a strategy and knowledge relevant to them and their specific goals.
4. The Impatient Investor has a passion for property and is eager to get started. However, they tend to throw their money at any old wall (or, in this case, market) to see what sticks without establishing a sound strategy first. They prefer to bypass all the "boring/trivial" education to try and get rich quick. They're addicted to immediate outcomes rather than planning for the long term.
5. The Burnt Investor tends to dwell on past investments that "went wrong" or didn't live up to their expectations. Their inability to let go of the past, learn from their mistakes and create a better strategy holds them back. These investors need to own the outcome of their investing – and take responsibility for it – so they can learn from their mistakes and move forward successfully.
6. The Cynical Investor asks lots of questions and doesn't settle for mediocrity. They have a curious and eager mind, with just enough scepticism to think critically. However, they tend not to trust themselves and, by extension, anyone else – letting doubts and worries get the better of them and impede their decisions. To get better results they need to spend more time educating themselves on what could work, rather than focusing on what doesn't.
7. The Been There Done That Investor has had their successes in the past, big or small, and may erroneously think they know it all. They can be just that little too proud to ask for help when they need it, even if it could take them to the next level, safer, faster and more predictably.
8. The Ah-Ha Investor understands that all investments carry some level of risk, but also recognises that they need to take action for anything to change. They have let go of their ego, decided to ask for help and have surrounded themselves with an expert team. They accept that they don't know everything and are willing to get their hands dirty if necessary, but also know when it is better to delegate specialised tasks to professionals.
9. The Armchair Investor understands that their skillset is best focused on their line of work, and that to build wealth they can't do everything themselves and can often achieve better results by seeking external help. They're focused on value, not cost, and usually have an efficient and trusted team of advisors.
What kind of investor do you want to be?
There are numerous variations on the investor types above, but you can see that there are only 2 groups that can succeed at a sustainably high level: the Ah-Ha Investor and the Armchair Investor. If you identify with any of the other types, that's okay, because that means there's room to grow if you want to pick up your property game.
At some stage of my investing career, I have been one or more of these different investor types. The key is being aware of the investor types first. You may not perfectly match one of these investor types, or may be a hybrid of a few of them. Of course, once you know how you behave as an investor, and more importantly, how you are making decisions with your investing, then you can take steps to improve your results.
I have found that there is a different approach required to work with and mentor each of these investor types, but most of these need more educational readiness and emotional readiness before moving forward with their investing.
There is no silver bullet to help any investors. And as I always say, there is no perfect property. Hands-on mentoring helps people to understand what kind of investor they are and to deeply understand their educational readiness, emotional readiness and financial readiness. It can be a slow process, but of course investing is a long-term commitment.
The choice for any investor is: do you want to continue making the same (largely avoidable) mistakes, or are you looking to enhance your learning experiences and increase your investment results?
Whatever your reasons are for investing, if you accept that you need to create a clear plan, surround yourself with great people and recognise that achieving results is going to take time and effort, then anyone can achieve outstanding results.
Luke Harris is the author of Property Fit (Major Street Publishing $29.95) and is the CEO of The Property Mentors, a Melbourne-based business that educates, motivates and facilitates clients from all around Australia to achieve financial freedom through property. For more information visit www.propertyfitbook.com.au.