Getting Started

6 Tips to developing your investor mindset

May 30, 2019
Invex
Invex Team

While a leap of faith is undeniably required for first time property investors, those who undertake the appropriate due diligence and have the financial capacity to invest will almost certainly reap the rewards.

1. THINK LONG-TERM

According to the ATO, 72.8% of all property investors stop after investing in just one property, isn’t that strange?  They’re ignoring the exponential benefits of building an investment portfolio. Sometimes it’s an intended approach but most of the time it’s due to lack of long-term planning that’s preventing the investor the means by which they can build their portfolio for financial freedom (that being your goal).

Every decade over the last 40 years property values have at least doubled in Australia. While investors should rely on due diligence and focus on active management of their investment properties, as opposed to speculating on future performance, it’s important for investors to think in terms of decades, not in moments or years as the long run is where you reap the real rewards.


2. HAVE A GOAL

Most investors have a rough objective in mind, such as improved financial comfort now and greater financial security in the future. But not being specific enough about your goal can be just as bad as not having one. Maybe you want $50,000 in income replacement within 10 years or $100,000 in passive income when you retired in 25 years. Either way, you should look at how you come up with these numbers, there is a wealth of calculators and forecasting strategies online to help you work it out.


3. HAVE A PLAN

Investors too often fail to pursue their objectives by thinking the task is complete after securing their first investment property. For some, one investment property might be the goal. But for those pursuing financial independence and long term security, it’s going to take more than one to reap the benefits  compounded benefits of building a portfolio are significantly more attractive. So if you’re dreaming big, put a plan in place of what you need to do to achieve that goal.


4. THINK COMPOUNDING

By stopping at one investment property, the investor is robbed of the chance to access compounded depreciation and other tax benefits, as well as the chance to organically grow a portfolio and enjoy the security of steady returns and capital growth over the long term. Investors with more than one investment property have an advantage when it comes to negotiating finance and amortising expenses.


5. ALL ABOUT LEVERAGE

Those with equity in their own residence and are in the process of building a quality portfolio will find their borrowing capacity is enhanced. Leveraging this capacity is an important advantage enjoyed by the most successful investors.

Investors building a portfolio can also negotiate improved terms when it comes to mortgage insurance, property management fees and other expenses, reducing the outgoings pertaining to each individual property in the portfolio and therefore enhancing the overall performance.


6. BE UNEMOTIONAL

Fear is what prevents most investors from moving forward and building a portfolio. Those who can remove emotion from their investment decisions are free to act in a purposeful way toward an end goal, based purely on the research and the numbers. A non-emotional approach might involve investing outside your own backyard, even your own state. Diversity in an investment portfolio is an important risk mitigation strategy, but it’s a strategy that requires a certain investor mindset. Most committed, successful investors think about investment as a way of life. An investor mindset alleviates fear and enables objectives to be achieved.

Photo by Terry Tan De Hao on Unsplash

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