Bill Zheng helping us to reflect and plan.
Have you wondered how the majority of property investors and industry experts really felt over the last 12 months? You will see why it matters to you in just a moment.
I have been talking to property investors around the country during this period, most of them feel:
• Confused & uncertain;
• Frightened & cautious;
• Disappointed & angry;
• Unfair & betrayed;
• Discouraged & withdrawn.
Some people would argue that you shouldn’t feel that way and should stay ‘positive’ at all times regardless of what happens, but I am not sure if it is a good idea to suppress how we feel and pretend to be someone we are not.
I think it is very normal that most of us feel this way in the midst of an unprecedented global financial crisis of our life time. After all, it is our emotion that makes us human.
I have also noticed that so many things that were considered good in the past have now been considered bad despite all the good intention in the first place. In other words, what excited us yesterday is depressing us today; this combination creates enormous fear and resentment in the whole property investment industry.
To make matters worse, because we could hardly put a finger on a particular party that caused the global financial crisis that has negatively affected our investment, we almost had to take our anxiety out on the people who are the closest to us and blame the people who have probably helped us the most at the time of our decisions.
There is nothing wrong about feeling low every now and then, but the problem is that once we get addicted to it, it will take a long time, if not forever, to come out of it.
Looking back over the last 2 years, I definitely had my low moments, especially during 2007 when I was so disheartened about the whole thing that I actually stopped presenting in seminars. Eventually I had to force myself to come out of those low moments because I questioned the benefit to stay there indefinitely.
Here is my point: It is normal for us to feel sad if someone we love passes away suddenly, but staying there emotionally forever is not doing anyone any good.
The global financial market just ‘died’ on us suddenly without much of a warning; it may have also ‘killed’ many people’s hopes and dreams along the way unintentionally. People may have many regrets, and wish they had done something different or earlier, but one thing is for sure: they are definitely not alone.
During most of 2008, property investors across Australia didn’t fair too well, some couldn’t sell their properties at the right price to exit, others couldn’t refinance on a good valuation to get out of their existing mortgages provided by those defunct non-bank lenders, many developers couldn’t sell their stocks or obtain proper development finance, and you name it.
The first few months in 2009 see some relief at the low-end property market due to the first home owner grant and lower interest rates, we all know this won’t last, especially when Australia is officially included in the ‘Great Recession’ by IMF.
So now we have all had our low moments, and felt good about being low for a whileL, and
It is time to move on!
I see the autumn of 2009 having the most strategic significance for Australian property investors who are still yet to form their view going forward. Let me explain why.
The autumn of 2009 provides a temporary grace period for Australian property investors, I see that as ‘the calm before the storm’ if you will. I was talking to a visiting US property investor in Melbourne last Saturday, he was so envious about Australia and wished they were given the same opportunity to get prepared. I guess Australia is not called a lucky country for no reason, let’s not abuse that privilege.
Here are the 3 components of a strategic change you may want to consider during the autumn of 2009: reflect, re-position & re-focus.
1) Reflect.
For those who have been in the property market for a while, this is the time to look back and reflect on everything that has happened since you became a property investor. How well you will do in the future often depends largely on how well you have reflected on your past. This may include:
• Re-examine the fundamental assumptions you have taken on about properties,
finance, cash flow, equity, debt, money, freedom, wealth & happiness.
If one of the definitions of finance is ‘the science of revenue management’, would you handle your personal finances differently?
Is wealth measured by money? If yes, then what measures money? If not, then what measures wealth?
Does happiness come after or before success? What if happiness can be only defined by unhappiness, how do you set yourself up to be happy?
If freedom can only be felt relative to control, how will you achieve financial freedom?
If property values are measured by personal sacrifice rather than money, will it enhance your property investment strategies?
• Re-visit all the property transactions you have seen or executed to understand what
makes money and what doesn’t.
Do you know ‘pattern recognition’ is an innate ability of animals (human included)?
What prevents us from recognizing our own patterns of success & failure?
Is it possible that most of us tried to observe the patterns in the opposite direction hence never see the real ones?
Is it possible that we always get the pattern we want to see because we really don’t want to see anything else?
Why do some of the life patterns (success or failure) always repeat themselves without our consent?
Is it possible that we do not need to worry about the ‘whys’ and just stick to the successful pattern?
• Rekindle your original purpose why you have decided to become a property investor.
What is considered ‘a purpose’ anyway? Should you really care?
Is it possible that after many years as a property investor you have forgotten why you started in the first place?
Do you think the original reason you became a property investor still hold true to you today with a few more years wisdom that you have now gained?
Did you notice any particular period you were invincible and fearless and everything you touched turned into gold?
Did you notice any particular period you were uncertain and fearful and everything you touched turned into s#!t?
What was the main difference between the above two periods? Was that difference mainly you or external factors?
If you were to start all over again, how will you do things differently this time?
Assuming you have regained clarity on your purpose and direction, how will you ensure that you won’t be distracted from them again?
• Re-establish your own responsibility as a property investor in areas of work, asset
selection & money management.
Did you have the experience sometimes you end up doing a much better job yourself when you didn’t listen to other people?
Did you find yourself continue to act on other people’s advice against your own judgment despite the fact that they are wrong more often than you in the past?
Did you see the above two combination also happen to your family and friends? Does it make any sense to you? If not, what do you think people are afraid of?
What do you think will happen to a friend of yours if he is the only person to blame for anything bad ever happened in his life? Do you think he can handle that? If not, would you make a recommendation for anyone else to take the blame on his behalf?
Did you ever blame gravity when you fall over to the ground? Did you ever take credit for gravity when you stand on the ground? Is there a relationship between taking credit and taking blame?
Do you like what you do for living at the moment? If not, what makes you keep doing it?
Are you happy with the properties you have got? If not, what makes you keep them?
Are you happy with your cash flow today? If not, what stops you from changing it?
Are there any blind spots that make things difficult for you to change your environment?
• Re-gain emotional control by accepting the past with no blame and making peace
within yourself.
Did you notice that some people get so caught up with some past problems or misfortune that they just don’t have any energy or interest for the future and what needs to be done today?
Did you notice that the people or events we blame or resent the most usually end up becoming the most important thing in our life because they are constantly in your mind?
Have you had the experience that thinking about the fear is worse than physically going through it because you can fear the fear a hundred times in your head and still not be sure how it will be like when it actually happens?
Did you notice that sometimes the easiest way to forgive and accept ourselves for our stupidity or mistakes is to forgive and accept others who have done the similar things to us?
2) Re-position.
Even without the changes from the external environment, while we grow wiser and our resources change each year, it makes sense to re-position ourselves to anticipate what is ahead of us.
With the radical changes happening right now in our external environment, it makes even more sense to do so.
• Re-position your leverage level on properties.
Is your current leverage level sustainable over the next 5 years if finance becomes even more difficult and property values fall?
What is an acceptable leverage for you as an Australian property investor for the next 5 years?
• Re-set your minimum cash reserves.
Are you still dependent on unused equity or Line of Credit from your properties? What if your lenders decided to freeze them like US?
Is your cash reserve sufficient to handle the situation where your mortgage interest rates are forced to increase 5% or more from the current level within 1 year due to external pressure on Australian Dollars?
What if your mortgage gets recalled by the lenders due to negative equity or over exposure, how can you minimize this possibility?
How do you calculate your minimum cash reserves?
• Re-establish better income status.
If you are currently a low-doc or no-doc borrower, how do you cope if lenders and insurance companies only accept full-doc loans in Australia for the next 5 years?
Have you done the numbers on whether you should change from self-employed to PAYG in the current economic and financing environment?
Lending conditions change daily, when was the last time you had a review on your borrowing capacity?
• Re-work your cash flow with contingency.
When was the last time you review your family or business expenses item by item? You may be surprised to see savings everywhere.
What if your work income or investment income drop significantly or stop for a while, are you able to hold on financially for at least 5 years?
Are you still betting on investment or business opportunities that may reduce your cash flow during recession?
• Refine your rules and policies on future property investment.
What are some of the old property formulas you may consider abandon after seeing the dramatic changes in the market?
What are some of the property activities you should stay away for a while?
What new policies should you include as your property system moving forward?
Have you identified some ways to make money from properties if the value stays flat for many years to come?
• Re-define your circle of friends and influence.
Will you put yourself in a group of fearful and inactive people for the next 5 years?
What will you do if most of your friends and family have gone hiding?
Who do you plan to spend more time with? People who are making things happen or people who are waiting for things to happen?
How do you continue to do well financially without upsetting other people during difficult times?
3) Re-focus.
There is little doubt that the world is going into the most severe recession since World War II. Prime Minister Kevin Rudd just announced last Sunday that it is ‘virtually impossible’ to avoid in Australia.
So it is time to fasten your seat belt and keep your focus on the road ahead if you haven’t already done so.
• Focus is not just important during recession, it almost becomes a necessity for
survival.
If you are swimming against the current, wouldn’t you need to put all your energy together?
If you believe the fittest and the best have a better chance to survive and thrive in difficult times, how do you increase your chances?
• Focus is usually given to what is urgent.
How do things get to become urgent even if they are not important?
Would you prefer a doctor to cure your urgent illness or a doctor who prevents you from getting ill?
How do you shield other people from taking away your focus?
• You can only focus on something by not focusing on other things.
What is your not-to-do list? Why is it becoming more important than the to-do list during recession?
Most people know that they can’t be good at many things at the same time, but why can’t they stop trying?
• Focus is more important than diversification, especially if you still need to produce
the money.
What will be the most suitable property strategy to focus on for the next 5 years and how do you focus on it without distraction?
What income are you going to focus on producing? What income are you not going to focus on?
Do you say ‘NO’ more often to opportunities that are not part of what your core business?
• Focus also means ‘know the numbers and stay close’.
Do you know the number of your monthly income & expenses? Is there any room to improve on them?
Do you know who is doing what in your business or investment activities?
Are you close to action or sitting remotely from your computer or just reading newspaper?
and, in his YIP articles and email bulletins, albeit a few months later.
