Why do property investors fail and how to deal with reality? The change of markets and relationships are part of the deal, clichés are roadblocks, what can you do?
Property Investors fail
Clichés and the Past - Roadblocks for Success?
Why do so many property investors fail?
That kept me thinking quite a while, not sure why, but knowing the roadblocks for success would certainly be a great motivator for people who are struggling with wanted results or someone who is considering to become a property investor.
There are many stereotypic answers to this question. The most common answer is, people have been made believing that making money with properties is easy. Statistics show, believing that—you are prone to fail, too.
The motivation for investing in properties differs, but the reasons for failing are similar. It starts with money and at some stage people give up because of (loss of) money or relationship breakups. An often seen reason is losing control as paying client to lawyers, accountants, property managers, trades people and real estate agents.
Encouraged or misguided and reality
Following the media hype for making profits from properties is a huge temptation and selling the family home with gain might be easy. That makes people thinking – why not making a living from it and escape the daily rat race?
But repeating a strike of luck is like winning LOTTO twice. Second times people get caught with taxation issues, realising the reality is a bitter pill to swallow. As you know, since the GFC property investors have been constantly in the fire line and lots of changes to taxation rules have been made. The recently new introduced two-years rule for capital gain tax is a little reminder that the Inland Revenue Department is vigilant.
Motivated for becoming wealthy or quitting a day-job
Who does not want to live comfortable on good income or quitting an unloved day-job? And certainly there will be a day you may no longer have a job. So, it makes sense planning the destiny in life and future.
Often neglected, it is knowledge that gives people the ability to make informed decisions and an understanding that cumulating wealth through home ownership and making money with properties are two different pair of shoes.
Motivated but not having carefully planned or following a given advice by people who derive benefits from your investment lead to certain disaster. It has little to do with bad luck or changes in the property market. Becoming wealthy or building a business to quit a job are long-term adventures and changes over that period of time are almost certain.
Investing for becoming wealthy
High income earners, who are driven by career, would invest to become wealthy in balanced portfolios including properties by off-setting loss (tax benefits) and using other people’s money (banks). For them paying for property management, legal, accounting and finance services by only keeping an eye on achieved results is a success strategy.
For people with basic income on the slow lane it is more difficult to off-set loss with income from day jobs and financial constraints might limit the engagement of professional services even further. The chances to become wealthy depend pretty much on personalities who stick to the plan.
Income from properties replacing your job
It is most people’s dream having a reliable source of income and being their own boss. By default most people are not meant to get so far. But if you are determined to become a full time property investor you would setup a business operation before you quit the job.
To run a larger property portfolio you need a business (company or partnership business) and an asset protection (trust) structure.
That can be a landlord business based on RTO (return on investment) or a trading business for generating profit from buying/selling or developing properties. The key focus would change from paying for services with little control to take control. When not taking control – you are doom to fail!
Clichés are not investor’s friend
As an example, I have been confronted with predictions... by “gurus” in property forums and life presentations. They believe in forecasting the market based on historical data. I don’t have a clue what will happen to the housing market in near future, but I do apply rational logic to the long-term future of housing. What people spend for housing, will be limited by their income not by house prices, which double every XXX years, right?
Clichés are certainly not your friend. When starting new again today, what would I do differently? I would make mistakes, different ones today as I did yesterday. I just do not believe in “history repeats itself”.
Why? Each event that happened does not happen in the future again, because of changed circumstances like age and time. Even recurring events are not the same because of technical different conditions.
Can somebody repeat Apple’s success? Everything is moving like the crust of the earth (true, we had an earthquake today), the globe, stars and time – otherwise the future would be similar to stone-age from the past. Look at the Hyperinflation in1922 and the recent GFC. Or compare the invention of printing books with your smartphone online reader. I believe in “Err is human”, take for instance English grammar (follow my blogs, you know why).
The risk of failing as property investor rests with you. The more you depend on people telling you to buy their CDs or books, the more likely you lose the focus executing your plans. How many people have successfully copied Bill Gate’s success story?
Be grateful about everything that shaped your life – only your achievements get you there where you want to be. YOU have to work it out. Mistakes are human – failure is when giving up. You start on the bottom line and grow with every day if you make decisions which progress your situation to greater success. Good Luck
Investor’s & Landlord’s Blog
Investor’s & Landlord’s Luck and Failure
Klauster Blogs lead to a real person, IT professional, investor, landlord and business owner with interests in technologies, properties and trading.
His passion, making experiences available and helping people like you, comes from extensive travelling and the principles of life—how to avoid pitfalls in unfamiliar territory when investing or forming relationships.
The philosophy to treat life, partnerships and hobbies as an investment has helped people in his circle. Life is a dream with a deadline, happiness comes from making the right choices and having realistic expectations.
Come along and share your views—learning from each other gives confidence