OK. Day seven of the 21 day property investors course.
We're looking at avoiding loss in profit investing and with mortgages.
So creating financial freedom, that's a long term game
and a lot of people come into property
investing or they've had a mortgage for a while or they're starting to think,
All right, I got to get I got to get passive income up.
I've got to get financial freedom. I've got to get ready for retirement.
There's young people in their twenties
and thirties, that feel like I got to do this now.
And then there's people that get in their fifties and sixties
that are panicking that they haven't figured out retirement, unfortunately,
most of the time, property investing is a long term game.
You just have to understand that from the start.
That doesn't mean that you can't achieve what you want to achieve.
You just need to keep that in the front of mind.
The first two rules Warren Buffett has about
investing is don't lose money.
And remember the first rule you can't be speculating
with property investments and expect to win every time.
So we've got to be setting ourselves up for success
by not losing money in our property investing.
Now with property investing in New Zealand.
The good thing about it is that values
generally over the long term, they keep going up.
We look at history, go back 10, 20, 30, 40, 50, 100 years.
All property values in New Zealand have gone up.
There's volatility. But
you know, when they say safe as houses, they mean it.
In New Zealand because the population is going up
and because there's a lot of demand and interest in living in New Zealand,
I think it can be fairly expected that
over the long term that property values will keep going up.
So in terms of not losing money, buying property in New Zealand
is a relatively safe investment
now with with inflation at the moment.
The good thing about inflation for property investing in New Zealand
is that it erode away the debt.
Now what does that mean?
Let's say you bought $100k House
say 20-30 years ago,
let's go 30 years ago and you got
$100k of debt.
100% financed that property.
Now if you never ever paid off that debt for the last 30 years
and now that property is worth $2 million,
then what you have because of the inflationary pressure and house
prices going up in value, what you have now is $1.9 million of equity
and you've still got that $100k debt if you never paid it off.
But there's plenty of people that bought houses 30 years ago
that were 60 grand, hundred grand that are now worth $2 million
and it can be fairly expected that in ten, 20, 30 years
the $2 million house is going to be $4 million or $10 million.
The price of what a dollar gets you now it's going to change.
There's going to be inflation and we're seeing that already at the moment.
The mistake I see a lot of people
making with property investing is they start thinking about it as hunting.
They're looking for that big kill, they're looking for the perfect investment
option that's going to feed them for a really, really long time.
Now there are those kinds of deals out there,
but a fishing mentality I think is more appropriate.
Fishing requires patience, it requires preparation and it requires adjustments.
And it also involves like throwing things back if it's not the right fit.
So it's just having that right mindset.
The mentality is going to help you avoid loss, and that's what it's all about.
So why do people fail or lose and property investing?
Now there's five high level reasons.
So the first is preconceptions.
Preconceptions meaning that maybe proper investing
is dangerous or risky, or maybe they've had a previous experience
where they've lost money through property investing
or they've heard about other people that have.
I would challenge that and just say,
Hey, if you're not going to be buying properties
and how are you going to get to financial freedom how are you going to create that
income for life if you have a better alternative
The share market, small business, inheritance,
lotto like if you have a better alternative than property,
then by all means avoid what you might feel to be as risky.
The thing is property of all things, how constant, is
the safest investment option for most New Zealanders.
So you've really got to challenge
that mindset that, hey, the market's going to crash.
It's really a terrible time to buy because people have been saying that,
they always say that.
And maybe the property market drops 10% the day after you buy,
but it's not, if you're doing everything's right, it's not going to be the thing
that puts you into bankruptcy.
As long as you hold and the fundamentals are good,
then buying property that drops in value the next day is totally fine
because in the long term it's going to make it back up.
Now the second reason, the short term
thinking, short term thinking is Hey, I'm just going to wait for this,
hey, I'm just going to wait for that or I can do this then.
Short term thinking
doesn't help you escape out of that rat race.
You've got to have more long term thinking because that's that's
how we're going to get to financial freedom.
It's in a ten year period every two to three years buying a property
and actually really sticking to it
and knowing that you're not going to be able to just one day decide
you're going to buy a property and find the right one on that day.
It's that you're going to have
to create habits
that every two to three years are going to find the right property.
That means taking the necessary action with property filters, talking
to agents, getting approvals, knowing that
you're going to have to take action sometime.
Unclear goals, I think is a really big problem for a lot of people is
they don't have financial freedom in their sights, they don't have a plan.
They don't have an agreement with their partner
or their family about financial freedom being really important.
And so with no goals, there's generally very little action
and those years turn into decades and people don't get what they want.
That kind
of ties in with reacting and waiting.
People will
sometimes expect that the right deal is just going to find them magically.
There's going to be a lot of work required to find good deals,
and it's not surface level just going to jump out and say, I'm
a really good deal you're going to have to look at things and understand
the moving parts and uncover how those deals are good.
You have to be proactive, not reactive, and
my favorite is
the numbers.
People are going to fail or lose money if they don't understand the numbers.
You really need to have somebody in your team
that understands yields and understands
y'know definitely around the finance side of things
so that you don't get caught out with a property that's going to cost you a lot
more than you realized,
or it's not going to have the gains that you're anticipating.
To avoid getting into a situation where you are caught out by mistakes
before you buy a lemon of a property, before you lock in the wrong structure
on your mortgages.
Before you buy the wrong property in the wrong place,
before you sell a property and attempt to buy something else and get caught out
before you lock in any terms or any agreements,
just think, why am I doing this myself?
Why am I not getting help?
Why don't I have this person in this person in this person on my team
or giving me insights before I make these decisions
and just think about how funny it would be
to have someone who's not handy and has no automotive skills.
For example, imagine if I said to you, Hey, look, I'm going to change
the engine of my car and I know nothing about cars.
Imagine you're a mechanic and you've got a guy that knows nothing
about cars changing an engine or changing spark plugs or whatever.
It would be a laugh a minute.
It would take me
ten times, if not a hundred times longer than somebody with expertise.
And the hourly rate difference is like, I should just pay someone to do what
I need done because it's going to get the outcome and help me avoid loss.
So just imagine your job
and somebody trying to do your job and has no idea how to do it.
Trying to do it how funny it would be.
And that's sometimes what happens when people try
and do the mortgage and property stuff and legal stuff on their own
without getting experts involved.
It might save 100 bucks here and there, but sometimes it's going to cost you 50
or 100 grand of lost, compounded return or even direct costs.
So just try to remember that we're not trying to do everything ourselves.
We're trying to avoid loss.
And part of avoiding loss is working with professionals
and experts and people that have done this sort of thing before.
And I would just be saying, Hey,
make sure you understand the numbers and you've got good, clear goals.
Long term thinking is great.
But long term thinking with action is important.
Any questions? Let me know in the comments.