The "don't"s of wealth creation

[Monopoly]

I guess there have been many threads (including my own) on what things make a successful investor; ie. the "do"s but have you ever considered some of the "don't"s ie. the things that will actually IMPEDE (if not indeed, kill off) your chances of growing your wealth???

Albeit it is important to KNOW what works, it is equally (ummm...rethink) more important, CRUCIAL to be AWARE of what doesn't!!!

Think about where you've come from...

What did you do right???
What did you do wrong???

and now think about where you're at...

What ARE you doing right???
What ARE you doing wrong???

And if you have identified one of the latter, ie. the "wrong" bit, then ask yourself...

WHAT DO I NEED TO DO TO TURN THINGS AROUND???

 

[Rixter]

Dont get divorced. Its cheaper to keep em.
Dont take no for an answer.
Dont think small.

 

[Intrinsic_Value]

i would add one more:
dont take on excessive debt through out the cycle.
By all means take on debt when the numbers stack up, but dont keep raising the bar as the cycle progresses.

 

[Monopoly]

Dont get divorced. Its cheaper to keep em..

Unless your name is Ivana or you're an honorary member of her "don't get even, get EVERYTHING....daaarling" camp!!

Dont take no for an answer. .

Unless you're asking the question "does my bum look big in this dress??"

Dont think small.

Unless you're planning to make an offer using loose change!!

 

[Monopoly]

i would add one more:
dont take on excessive debt through out the cycle.EVER!!!
By all means take on debt when the numbers stack up, but dont keep raising the bar as the cycle progresses.

Gold star/elephant stamp for that one IV.

 

[craigb]

i think the real don't i think about are not on the list, so i could'nt vote.

 

[little_stranger]

Good idea for a poll. Minimising mistakes can be just as important as knowing what to do correctly. I see avoiding mistakes as playing good defence in the game of wealth creation.

From my own experience, the mistakes that afflicted me most initially were:
1. Unwillingness to have "a go": I could start a separate thread (perhaps I will some day!) on the opportunities I missed in not starting earlier. This is perhaps the most critical mistake of all, because as the cliché goes, if you don't have a go, the failure rate is 100%.
2. Fear: Knowledge, research came help to overcome this, because it often stems from the fear of the unknown, the "what ifs". Jan Somers has an excellent section in her books on dealing with "what ifs". The best “what if” of all is “what if you don’t?” (see above paragraph). If the answer to that question scares you, then your fear can be used positively.

Courage is not the absence of fear, but the mastery of it. Borrowing a lot of money for the first time is often intimidating, as I can attest. Once you do it, and find that the sky hasn’t fallen in, you start to wonder why you worried so much in the first place.

Once you decide to make the step to invest, then the other mistakes can kick in (all of which I hope to avoid making):
3. Being impatient/expecting too much: I see these as interwined. Many expect results without hard work, then give up. Wealth building is a long-term game.
4. Not thinking things through properly/not doing any research: Again these are connected.
5. Laziness: Wealth creation is not a “set and forget” process. You don’t get wealthy by doing little.

I’ve covered all the choices in the poll so you can guess I selected “All of the above”!

Here are some other mistakes I’ve thought of:
1. Not learning from previous mistakes: Mistakes are inevitable, but repetitions of past mistakes need not be.
2. Over-confidence: This can manifest itself in thinking you know everything, ignoring everyone's counsel (even that of other investors), selective ignorance (only absorbing views that concur with your own), not being prepared to observe and learn from the mistakes/experiences of others.
3. Not knowing yourself: How will you respond if things get tough? Will you run for the hills/make rash decisions if things temporarily move against you?
4. No buffers/fall-back: This applies not just to borrowing. See this thread on the dangers of your buffer running dry: http://www.somersoft.com/forums/showthread.php?t=23497

 

[Monopoly]

i think the real don't i think about are not on the list, so i could'nt vote.

That's fair enough craigb, it's way past this ol' bird's bedtime and probably a tad optimistic of me to think I could remember them all (I'm running on almost empty here). But hey, don't let that stop you....I'd really love to read your checklist of don'ts, that is if you're willing to play share bears??!!

Seriously though...

There are LOTS of "don't"s, some obviously more detrimental than others, best to be avoided if you are serious about building wealth.

Over the years I've met and even had the priviledge of doing business with some pretty high flyers, and yet even among these sorts of giants in the corporate world, found that one of the most commonly made mistakes, is the misconception that as long as you do all the right things money will just materialize out of thin air!! If only that were true!!

Really??? Why are people so surprised to find that even when they DO all the "do"s, ***bleep*** still happens??? Derrr.....

Maybe the dreaded "she'll be right mate" attitude is okay down at the pub consoling your best mate who copped grief from their crabby boss for not closing that elusive deal, but borrowning money beyond your serviceability means isn't and should never be taken with the same nonchalance...that's just LUDICROUS!! Yet people do it, everyday!!

 

[Bargain Hunter]

DO get STARTED. Analysis paralysis is the scourge of investing.

DON'T be afraid of making mistakes. We have made some bad decisions not just in property however I believe you have to make your own mistakes sometimes in order to learn the lesson.

DON'T gamble the farm. Invest only what you can afford. NOTE: Just because you are approved for a $600k loan doesn't mean you have to borrow the full amount for your first investment. Be comfortable with your risk and have a good nights sleep (why am I posting at 3:15am???)

BELIEVE you can be a successful investor, whatever your idea of success might be.

DON'T sweat the small stuff. You will have issues with lenders, PM's, tenants and even the Tribunal. They may even introduce new taxes and it will all seem so unfair. All these things will help you learn what matters and what doesn't when it comes to property investing. Things that would have sent me into a spin 10 years ago don't raise an eyebrow now.

Regards

Andrew

 

[RumpledElf]

Dont think small.

What's wrong with thinking small?

I can sit around and think big as much as I want but that just means nothing will EVER happen (other than me thinking about it). Small, on the other hand, is most doable. If you do small enough times you'll eventually get to big.

 

[our obsession]

Think about where you've come from...

What did you do right???

-Have this mind and mindset I possess and nuture.

-Continue to learn and research.

-Have great resilience.

-Do it.





What did you do wrong???

To answer this is kind of difficult, any of my errors are part of the learning process, and I think they are have been rather insignificant wrongs-if any..if there are notsorights, I set out to rectify and correct, think through "whatever"..I am sure if given opportunity over again, there is nothing to change.

It is what it is and I feel I've maximised to the hilt.

I'm happy to admit wrongs, where any, but at the moment I'm looking and thinking and just realising what a great accomplishment-it's onward-upward--->


and now think about where you're at...

What ARE you doing right???

I am going strong, found and created the cleverest deals, I'm buying well and taking advantage of the land I got at great value and building my little heart out---->I'm having fun.

The other IP's are ticking over, bringing in great returns, I have terrific tenants, an incredible team from PM's to Mortgage Broker-Team Obsession is purring....it's an amazing feeling, to come from **** out of pants, nothing in the way of assets to creating your own financial independence. It's a great sense of pride.

I would encourage anyone to have a crack at it, it's so much fun.


What ARE you doing wrong???

I just don't have anything I would tinker with, obviously there will be things I will choose as less than optimum, but that's just a matter of rectifying, getting more creative or recognising and fixing it... my choices and decisions have been effective.

So far it's all working well..

And if you have identified one of the latter, ie. the "wrong" bit, then ask yourself...

WHAT DO I NEED TO DO TO TURN THINGS AROUND???

Exactly, if I was faced with that, I'm confident I am big enough, and silly enough to turn it around, make smarter choices and accept responsibility...Buck stops with me. No sweat..

I ticked I am into it, doing it...

 

[skater]

What's wrong with thinking small?

I can sit around and think big as much as I want but that just means nothing will EVER happen (other than me thinking about it). Small, on the other hand, is most doable. If you do small enough times you'll eventually get to big.

I kind of agree. Sometimes just starting is the best you can do and not everyone can start with the end in mind. Just getting out there and finding something of value in the price range you can afford is a good start.

Build on that and gain confidence, then slowly but surely you can make bigger steps.

 

[willair]

I guess there have been many threads (including my own) on what things make a successful investor; ie. the "do"s but have you ever considered some of the "don't"s ie. the things that will actually IMPEDE (if not indeed, kill off) your chances of growing your wealth???

Albeit it is important to KNOW what works, it is equally (ummm...rethink) more important, CRUCIAL to be AWARE of what doesn't!!!

Think about where you've come from...

What did you do right???
What did you do wrong???

and now think about where you're at...

What ARE you doing right???
What ARE you doing wrong???

And if you have identified one of the latter, ie. the "wrong" bit, then ask yourself...

WHAT DO I NEED TO DO TO TURN THINGS AROUND???

Some good questions there Monopoly,i started with very little about 4k in the early 1980's,,meet my wife about 20 years ago,then just went into removal homes in the small country towns,while having the main base in the city,so not much has gone wrong,for me about ten years ago that was the level i was happy with,so i don't think i want to turn anything around,someone told me a long time ago in this site"Success is a state of mind"even if you look like you only have 20 cents in your back pocket when you go for a walk.willair.
willair..

 

[Rixter]

What's wrong with thinking small?

I can sit around and think big as much as I want but that just means nothing will EVER happen (other than me thinking about it). Small, on the other hand, is most doable. If you do small enough times you'll eventually get to big.

Doh, do I need to spell it out Big picture - dont think small.

Onya Rump

 

[Aaron Sice]

AOTA.

also, i might add, you need to KNOW that you're on the right path, not just think you are. have conviction in what you're doing and follow it through.

 

[MJK]

I would say,

" When you have achieved a good level...move towards less risk"

I was reading once that many investors have achieved enough to retire but dont rcognise the fact and keep going for more believing that they are only almost there.

I could have retired in 2007 but GFC has put me back about 5 years or so.

A lot of hard work eroded.

MJK

 

[steveadl]

What's wrong with thinking small?

I can sit around and think big as much as I want but that just means nothing will EVER happen (other than me thinking about it). Small, on the other hand, is most doable. If you do small enough times you'll eventually get to big.

There's nothing wrong with thinking small, as long as you don't plan on being 'big' in the larger picture of investing. I believe thinking small is a huge limiting factor for many investors out there.

It's not so much about the size of the investments themselves (that's always going to be proportionate to the station they're at), obviously you're not going to be thinking about buying Westpac House when you only have 2 residential properties. But to get bigger you need to think outside the box and perhaps push, or at the very least explore your comfort zones.

Say you have 2 investors, both own their own PPOR worth $300k for the point of the example.

Investor 1 wants to put some money into the sharemarket, so they save up and plonk $20k in.

Investor 2 thinks bigger, and with the same $20k cash for the market, he also borrows another $20k from the bank against his house , then plonks that into the market and opens a margin loan at a conservative say 40% and has a total exposure to the market of $67k. Now think bigger scale and do the same with $100k cash, or better yet to do it with $0 of your own cash using only borrowed funds.

Investor 1 wants to buy an investment property. So he saves and saves and 2/3yrs later has enough for a deposit for a $300k property.

Investor 2 isn't interested in saving for a deposit and buys it straight away using his PPOR as collateral. By the time Investor 1 is buying his 1st property, Investor 2 is up to property number 2/3.

Now obviously you may look at the above and think some of it is obvious - but that's because you are to some degree already thinking big.

Substitute the above with guys who own houses only, one keeps buying houses, the other starts buying factories. Again, different thinking and to progress to those higher levels - different mindsets, asset classes etc.

A lot of it may come down to risk aversion, but with the right safe guards in place, the two examples above are not that much riskier than each other, and the returns for investor 2 can be exponential especially when compared to his relatively small but still higher risk profile. The asset % gains may be just as good for investor 1, but because he didn't think bigger - the end game won't be anywhere near comparable in scale.

 

[MJK]

In a boom invester 2 will do better than invester 1

In a downward market invester 1 will do better than invester 2

You've got to make a call about which way the tide is moving.

I would say timing is important as well as scale. When the timing is good pump it when not so sure go slowly.

Some would say you cant time the market though!!

MJK

 

[steveadl]

In a boom invester 2 will do better than invester 1

In a downward market invester 1 will do better than invester 2

You've got to make a call about which way the tide is moving.

I would say timing is important as well as scale. When the timing is good pump it when not so sure go slowly.

Some would say you cant time the market though!!

MJK

Absolutely, leverage will always hurt more in a bad market. But I'm not trying to say who'll perform better over the short term, just using it as an example of how to think bigger. Each of the investors above assumed it was good time to get into the asset class. Yes a bad market can always bite you in the butt, but that's the fun of the investing world.

Long term, the guys who think bigger will generally (yes we also see examples of the guys that crash and burn) get bigger. There's a guy out there flying a small crop duster over some fields, then there's the guy(s) who started Regional Express Airlines.

 

[MichaelW]

Don't:

- Buy just anything. Make sure it has potential to value add or a special factor that makes it more likely to succeed as an investment. Every property is different, you're not just buying the market.

- Think too much. Analysis paralysis will ensue. There is so much market commentary today that is so readily available and also so conflicting that you can seriously overthink this asset class. Go back to the basics, document your strategy and buy within your means something you can hold through the cycles that will no doubt ensue someday.

- Think too little. But make sure you at least do your property selection due diligence. Not all properties are created equal and market timing can accelerate your wealth creation. Keep a broad perspective on the market so you know which suburbs represent good value and have good prospects, then sink your efforts into individual house selection. Once you've selected your suburb, stop reading media about macro economic factors, they're just noise now.

- Listen to Steven Keen. Well, maybe just a little bit so you know when the herd will be running scared.

- Look for the perfect approach. Too many experts, too many approaches. The perfect approach for you is the one that works based on your skill set, time, energy and experience. Start simple buy buying well in a suburb with good potential. Don't try and be a Dazz, Rixter, Nathan on day 1. Those guys (and gals not listed) have a lot of experience behind them. Their strategy is THEIR strategy and may not work for you. And their strategy is a product of their experience. Experience counts more than anything towards success in this game.

- Get put off by not having the perfect approach. Make a start, today is better than tomorrow and yesterday would have been better than today.

- Tell your friends/family/colleagues what you're up to. Come talk to the good folk here on Somersoft with similar ideals and aspirations. The more you talk to the herd the more chance there is you'll be talked out of your dream. Surround yourself with like-minded successful people and listen to their guidance to inform your strategy. Don't ask Uncle Ned who worked 7am-7pm all his life and now lives off the pension how he'd go about building a multi-million dollar portfolio. Ask Somersoft.

- Listen to anything I say. What do I know, I'm just another anonymous voice in the ethernet. Do your own due diligence and make your own mind up. Sure, cast your net wide, but at the end of the day you will need to own your own decisions when taking your own actions.

- Give up. If you can't own your own decisions then you'll never be able to own up to your own mistakes and make better decisions next time. And if you can't do that then there might not be a next time. Wealth is a factor of willingness x effort x failure x resilience. Obstacles exist to test just how much you want something. Be true to your hopes and aspirations and be ready to take the good with the bad. The road to wealth is paved with heartache and loss along the way.

- Forget the important things in life. No matter how focussed and driven you are on this property journey, you won't get there without the support and involvement of your loved ones. Don't forget to spend 2hrs on your loved ones for every 1hr you devote to property. What point is financial success if you get to that end only to look back and discover there's noone left to share it with.

Cheers,
Michael