top of page

Why investors need a lifetime mindset

It’s human nature to become set in your ways. We seem to find our familiar groove and, once settled, are happy to coast along.

But this is a false sense of security because the ‘safe zone’ is actually dangerous territory.

If we’ve learned anything from the past year it’s that expecting the status quo to be maintained will lead to disappointment, if not disaster.

And this applies to property investing too. You see, life is in a constant state of flux so it’s essential to learn to think well ahead of the here and now and be ready to adapt when required.

Here are some of my thoughts on the importance of maintaining a long-term mindset – particular for first- time investors.

How we change

Young investors are a great example on the importance of thinking about the future.

If you were an early starter, then you probably bought your first asset in your 20s.

This is a great time of life. You are happily discovering your place in the world and all the fun and opportunity it offers. You are exploring travel options (in non-pandemic years of course), making career decisions, trying out potential partners and enjoying independence.

You also have few responsibilities, and your mindset is often one of being bulletproof. There’s still plenty of time to make – and then recover from – life’s early mistakes.

So, you’ll speculate a little when investing – not too much because you probably won’t have access to a large amount of borrowed funds. But if things go bad, what’s the worst that could happen?

But to be a successful investors, you must graduate beyond this mindset. You can’t continue to invest like a 20-year-old into your 30s, 40s and beyond.

The dangers of remaining an immature investor

There are two primary reason why you need to adopt the lifetime investor mindset – even while purchasing your very first asset.

Number one – buying the wrong asset at the wrong time can deliver damaging financial outcomes. For example, if you acquire a property with high capital growth potential while in your 20s, but have a low income, there could be trouble brewing. High capital growth potential is often traded off by low rental return. This means you need to tip in more of your own income to service the loan, maintain the property and continue to pay all fees and charges. Now, if you’re on a low income, and can’t take care of these commitments, guess what? The financier has the right to reposes the home and sell it in order to pay back your debt.

In short, it’s no good holding an asset with long term growth potential if you can’t afford to retain it over several property price cycles.

Number two – there’s a huge opportunity cost if you buy the wrong asset in a lousy location, particularly at a young age. You will probably still see it rise in value over your lifetime, but you could have lost out on hundreds of thousands of extra dollars in the process. Don’t squander the opportunity delivered by youth which gives you plenty of time in the market to make serious dough.

Here’s an example of opportunity cost. Say you don’t do any research and purchase a $500,000 home in a low-growth suburb delivering average capital growth of two per cent per annum. In 15 years, that asset, after compounded gains, will be worth around $673,000. Not bad for just holding and waiting.

Take that same $500,000 and thoughtfully place it in an area that delivers a modest four per cent a year. Over that same 15-year period, the property grows in value to $900,500.

Find a great 6 per cent a year location and the asset grows to a whopping $1.2 million.

As you can see, a bad decision early in your journey can have expensive long-term impacts.

Keeping your eye on the long game

So how do we maintain the long-term investor outlook and maximise our investment outcomes.

First up you must plot your strategy. Start with the end in minds, determine when you want to retire and on how much.

Also – plot your likely life’s journey. Factor in important elements such as marriage, kids, career changes, promotions and travel. Spotting these changes well in advance allows you to buffer in the lean times and profit boost when you’re flush with cash.

Next – be prepared to pivot. Having a long-term mindset doesn’t mean becoming stuck in your ways. You need to recognise when the path is changing and make decisions based on the best available information.

This is where sage advice from an experienced property investment advisor comes in. They can help layout a scheme to secure a wealthy retirement and guide you through the pitfalls and challenges throughout your investment journey.

Always review any property location research and investment analysis data, with a professional, QPIA (PIPA Member) qualified & accredited ASPIRE Property Advisor Network Advisor. Never rely on glossy sales brochures or property marketing information, ensuring a property is right for your strategy. Property Investing is about BUYING a property that matches your goals and aligns with your investment strategy, never be SOLD an investment.

Visit www.aspirenetwork.com.au or call our office to be connected with a Property Investment Advisor on 1300 710 933.

2 views0 comments
bottom of page