Time for Property Investors to Look Down, Not Up
Dear
Property investors traditionally are long term or at least medium term thinkers; they are usually not affected by ups and downs in the short term market, but the recent global financial crisis seem to change that stability a bit.
It is very common for people to avoid something if it presents an unacceptable level of uncertainty; this may have something to do with the lower activity level from property investors in the last 12 months.
Having said that, I have seen property investor’s activities pick up in the last few weeks, and I agree that this is the right time we stay active as property investors.
In the medium to longer term, it is almost impossible not to see property prices and rental continue to go up (at least on paper value) because the recent global effort to increase money supply.
Hence I am not too concerned whether property prices will eventually go up, they will. This is because people don’t have to own shares or any other paper assets, but they have to live somewhere, and our population is increasing.
The key to reap this benefit is to manage our financial affairs properly to hold onto our properties in the near term.
Let’s play a game called “looking up and down”, this is how it works:
· When you look up, you are looking at the external market such as property prices, interest rates and how much money other people are making or losing;
· When you look down, you are looking at your own circumstances such as your job income, your business profit, your rental income, your mortgage repayment, your expenses, etc.
I figure out that if I want to go from A to B, I can’t always look up because I may trip over something in front of me, I only need to look up occasionally to check my direction. If my general direction is about right, majority of my time should be spent on looking down and mind my steps, and eventually I will get to the destination.
Following the same principle, I believe my general direction of investing in residential properties is about right, as they will eventually go up in value. So there is not much point for me to look up all the time and watch the property prices movement every day. I would be better to spend most of my time looking down and mind my own business and make sure that I don’t trip over.
It is very easy to spend too much time looking up, listening to media and wondering what will happen next in the market, especially when the external noise is too loud, and forget to look down and miss out on the things we can do to give us more money today.
I believe it is time for property investors to look down and mind our own business; there is not much we can achieve by looking up and worry about what will happen next.
What are the activities we can do when we look down? Here are some suggestions:
1) Control Existing Expenses:
o You can’t control something if you can’t measure it. So keeping record of your expenses is usually the first step, this includes personal, business and investment expenses.
o For personal expenses and especially cash expenses, I have found the habit of recording them on the spot is the best way to control them (I use my blackberry to email it to an email folder for end of month bookkeeping purpose).
o Have a budget, I know it’s old fashion for some, but you will be amazed by the power of setting out an intention ahead of time on how much you will spend for the month, it can sometimes dictate what types of events are allowed to happen to you, hence a budget does have the power to control your expenses to a large degree.
2) Increase Existing Income:
o If you run a business, are you doing your best to increase your existing income (not necessarily new income) by adding more value or doing a better job for your customers?
o If you have a job, are you doing your best in that job (not necessarily a new job) so that you can be better rewarded financially?
o If you have investment properties, are you doing your best to get better rental income from your existing properties?
o If you have sufficient capacity to hold onto more properties, are you still investing in properties regardless of market condition?
3) Create New Income:
o This is not as important as most people think, if you still have a lot of room to improve on your existing income.
o The most cost effective way to create new income is to build on what you already have rather than going away from your core competence, because they can sometimes become very expensive R and D exercise with little financial reward and cause loss of opportunities with your existing activities.
You may have noticed that I have put Control Existing Expenses ahead of Increasing Existing Income, this is because once you have your expenses under control, you will find that you actually have more money left over even with the same income, this will decrease your anxiety of not making enough money (and not one doesJ!).
When your anxiety level is low, you will find it much easier to stay more focused on what needs to be done right now instead of being absent minded, this makes increasing income a much easier task. Money making opportunities are usually within our reach but we don’t see them because of lack of attention.
So it is time to look down and look after what you already have, you will be amazed how much fun you will have with them.
Over the next few months, I will bring to you a few tips to help make you more money, so watch this space!
This article was written by Bill Zheng, founder of Investors Direct, an award winning Mortgage Company specialized in strategies and finance for residential property investors since 2001. Investors Direct is the finalists in the 2008 Australian Mortgage Award for Brokerage of the Year (Over 12 Staff Category) & Best Customer Service from an Individual Office.
