Understand Your Investment Profile
Your next step is to determine your personal approach to investing. And you’ll find investors normally fall into one of three categories:
- The first type is those who love to tell stories about how they ‘gambled the lot’ knowing that they would either go broke or make a fortune. Such people are fun to listen to, but dangerous to imitate. Remember: if your strategy is to go for broke, you stand a good chance of ending up there.
- The second type is the armchair investors, who always talk a good line.
They attend a number of seminars and can answer most technical
questions about property and the economy; but they never quite develop
the courage to have a go. They prefer the safety of the savings bank
account, to any risk with real estate. - The third type is the mildly aggressive investors, who increase the
size of their portfolio only when they have sufficient funds in
reserve. They cover most of the reasonable expenses that go with a new
purchase, without putting their existing properties at risk. These
careful investors are the ones most likely to succeed.
Creating The Right Mindset
Creating The Right MindsetThe first thing you should do is to draw up a Statement of Position — a list of all your assets and liabilities, which tells you exactly what your Net Worth is.
You see, if you’re starting out and plan to invest around $400,000 … you may suddenly start thinking to yourself: “That’s a hell of a lot of money.”
But when you prepare your Net Worth Statement, you might well find that you are actually worth $2 million … taking account of your home, your weekender, your cars, your boat, your furniture & pictures, your insurances and your cash.
Most people generally discover that they are worth far more than they realise.
Therefore, $400,000 is actually only one-fifth of your Net Worth. If you lost it all, it wouldn’t be a total disaster — not that this is even likely. The point is, that you need the correct frame of mind to extract the utmost out of your property investments.
So, What is Your Profile as an Investor?
If someone is looking to invest under $1 million in equity, you tend to think of them as an ‘amateur investor’ — certainly a person with money, but probably not knowing all that much about Commercial property.
Once you have over $1 million in equity to invest, you’re generally an investor with more experienced; or you maybe you hold a senior position at a corporate level.
Normally, having equity of up to about $250,000 tends to put you under the profile of Residential property. Although, for the same equity, you could secure a small Office suite … where the tenant pays your outgoings for you.
When you move into Commercial property (offices, shops & warehouses) anyone buying property under about $800,000 faces a lot of competition. And, as you’d expect, once you’re able to invest over $1 million… your range of options opens up considerably.
With that said … you should now start by deciding under which profile you feel you probably belong.
As you know, there are three more RULES to cover in this mini-course.
However, if you’re ready to fast-track the whole learning process … then, I would invite you to discover more about Commercial Property.
What you covered in the previous RULE …