Menu

The 6 Insider Philosophies of the Wildly Rich and Successful Property Investors

What are the Insider Real Estate Investing Philosophies of the Rich & Wildly Successful?

1) Always retain capital

There is one main rule to investing – including investing in real estate to acquire wealth.

‘The first rule of investment is don’t lose money. And the second rule of investment is don’t forget the first rule. And that’s all the rules there are’ Warren Buffett

This means continually monitoring your balance sheet, and improving upon your net worth. Your net worth is defined as your equity which is your assets minus your liabilities.

After all: ‘It’s not about what you make, it’s about what you keep!’ Unknown

2) You have the power when you buy not when you sell

A strategy which successful property investors use to take the emotion out of buying is the 100/10/1 strategy which puts finding the right deal and the effort required in perspective:

  1. Researching and doing financial assessment on one hundred properties
  2. Make an under-market price offer on ten properties, and know your upper limit you are willing to negotiate up to
  3. Have one offer accepted

It’s important to realise that you have the power when you buy, to set your upper limit, stick to it and not be manipulated by real estate agents who are trying to get the best price for their vendor. Be prepared to walk away, and if it’s meant to be, it will come back to you!

3) Invest in Affordable Rental Accommodation, not Luxury

One of the biggest mistakes people make as new home owners or investors is to buy at a price that is at their maximum buying capacity or lending ability. For this reason, it’s important to note that as a rule of thumb:

I only ever invest in properties worth less than $500,000 (for standard single family homes).

If there is an economic downturn, basic and affordable accommodation will not be as affected as that of luxury homes. It’s much better to have four $500,000 properties than one $2 million property. You see people get carried away time and time again where they do well in one property and then each property they buy becomes bigger and more and more expensive - instead of buying multiple cheaper properties.

4) Don’t buy retail – Don’t buy with emotion

Be careful of brand new builds selling for premium prices, which offer 4% or less gross return, unless you are happy to wait longer and rely on capital growth to add to your net worth. Here you are buying retail. Aim to be the developer who is making 20% returns on each development, and more if you get to hold some as rentals as you are then paying cost price or wholesale price.

5) Invest with the aim of positive returns, not negative gearing

I aim for a gross rental return of 10% ROI or higher. It must be positively geared and not be losing me money every week. The idea is to not take away but to add to your financial life. If you look at investing in property as a business, you don’t want to be in the red, you want to be in the black and be profitable. Although negative gearing has some tax incentives, you still end up losing out.

6) Use creative strategies to add instant equity to your balance sheet

There are two ways to force value or manufacture growth for your rental property asset. One being an instant value add when you buy at a discount or below true market value. The other option is by improving the property through refreshing or better utilising the space to force the sale price or rent up higher.

Some strategies to force the price of your property up in value include:

Beginner to Advanced

Strategy Description

Strategy Type

1

Cosmetic renovation

Refresh

2

Convert extra living area into an extra bedroom or large laundry into an extra bathroom – with European laundry. Enclose verandah or porch.

Add more space (Utilise Floor Space)

3

Convert shed or studio, or other unused structure into living space such as granny flat or extra living area for the home (if compliant)

Add more space (Utilise Floor Space)

4

Split the house into two flats (compliant granny flat or dual occupancy)

Add more space (Utilise Floor Space)

5

Split the house into multiple flats or micro apartments (compliant boarding house)

Add more space (Utilise Floor Space)

6

Add extension to add extra bedrooms/bathroom

Add more space (Small Property Development)

7

Add granny flat (separate or attached)

Add more space (Small Property Development)

8

Add extra home as STRATA dual occupancy (two homes on one lot)

Add more space (Small Property Development)

9

Add extra home as Torrens title or dual occupancy STRATA subdivision

Add more space (Small Property Development)

10

Add multiple homes as STRATA Development (i.e. townhouses or apartments)

Add more space (Small-Large Size Property Development)

11

Add multiple homes as Torrens title subdivision (i.e. residential subdivision)

Add more space (Large Property Development)

12

Community title subdivision (homes are Torrens title with community common areas that are under STRATA with sinking funds and STRATA levies)

Add more space (Large Property Development)

13

Lifestyle village which is residential land lease communities (sell the home while not ever owning the land & collect the site rent)

Add more space (Large Property Development)