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4 property investing tips for a volatile market

How to overcome your property investing fears. Source: AAP

Times are changing and property news is no longer all positive, which leads some would-be investors to doubt their decisions.

Fear and uncertainty leads to procrastination and lack of action as you tell yourself “I’ll get around to it”, but you never actually do.

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So, to overcome fears you may have about property investment you must ask yourself two questions:

  1. What do I fear about investing?
  2. How realistic are those fears?

Sure, your feeling of fear is real, but it doesn’t have to be paralysing.

Here are four strategies to help invest in a volatile property market:

1. Only listen to people who know what they’re talking about

When it comes to real estate, everybody has an opinion. But opinions are like bellybuttons – everybody has one, but in general they are useless.

While your family and friends may have the best intentions for you, how many properties do they own? Are they financially free?

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If they’ve only ever bought their home and never invested, they won’t understand why you might want to invest in property.

It’s wise only to listen to people who have experience with property investment and have achievements or goals which align with your own.

2. You don’t need to know everything before you get started

Be comfortable knowing that you have enough knowledge to get started and understand you will learn more along the way.

Accept that you are likely to make some mistakes but minimise them by getting a good team around you including an independent property strategist, a proficient tax accountant, a smart mortgage broker and a buyers’ agent.

These people have the type of experience that money can’t buy, but you can hire their expertise and profit from it.

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3. Protect yourself with risk management

Too many novice investors buy with their eyes wide shut when it comes to the impact it will have on their future finances.

Sophisticated investors, on the other hand, have risk mitigation strategies which allow them to hold and grow their property portfolio over the long term.

They understand that while capital growth is the key to wealth creation, its cash flow that will see them through the ups and downs of the property cycle.

Sophisticated investors not only buy real estate, but they buy themselves time to see them through the rainy days allowing them to last the distance.

They have cash flow buffers, perhaps through a line of credit or an offset account, to cover any shortfalls when their property is vacant, or an unforeseen expense arises.

Other risk management strategies they use include:

  • Fixing the interest on a portion of their loans to minimise the risk of rising interest rates.
  • Protecting themselves with life and income protection insurance.
  • Taking out landlord insurance to cover for damage to their property or unpaid rent.

4. Understand the biggest risk is inaction

Money doesn’t discriminate; it doesn’t care who you are or where you come from.

No matter what you did yesterday, today begins anew and you have a new opportunity to become wealthy. Yet, the sad reality is that the majority of Australians will never achieve financial freedom because they don’t take action.

Of course, while property investing may be simple, it’s not easy.

And that’s not a play on words.

Fact is, around 20% of those who get involved in property investment sell up in the first year, and close to half sell in the first five years. Of those investors who stay in the investment game, about 90% never build their portfolio beyond two properties.

So, if you want financial freedom from property investment to fund your dreams, you’re going to have to do something different to what most investors are doing. You’re going to have to listen and learn from different people. You’re going to need to set yourself some goals and follow a strategy that’s known, proven and trusted.

Then you grow your property investment businesses one property at a time.

It really is as simple as that.

So, there is really nothing to fear – is there?

Michael Yardney is a director of Metropole Property Strategists, which creates wealth for its clients through independent, unbiased property advice and advocacy. He is a best-selling author, one of Australia’s leading experts in wealth creation through property and writes the Property Update blog