Why most property investors don't get rich: Michael Yardney

Fact: most property investors never get past owning one or two properties. In my experience, the two big things most property investors fail to do are:

• Have a formulated property investment strategy; and 
• Regularly review their property portfolio’s performance.

If you don’t really know why you want to build a property portfolio or how it will one day get you out of the rat race and if you don’t really know where you are heading, how will you know which properties to buy? How will you know if you’re on track and on target?

The trouble is if you don’t know where you are going, any road can get you there, but any road can get you lost. And nowhere is this truer than property investing.

What are your goals?

How much money do you want your property portfolio to produce? How many properties will you need to achieve this?

And what type of strategy are your going to follow – capital growth, cash flow or are you just going to leave it up to luck?

Currently there are over 400,000 properties on the market in Australia. Not all of them will make good investments. In fact, most won’t.

To ensure I only buy properties that outperform the market averages I use a 4 Stranded Strategic Approach:

1. I buy a property below its intrinsic value.

2. In an area that has a long history of strong capital growth.

3. I look for a property with a twist – with something unique, special, different or scarce about the property.

4. And I buy the type of property where I can “manufacture capital growth” through refurbishment, renovation or redevelopment.

While most investors read a book or two, do a little research and then buy one of the first properties they come across, strategic investors are smarter than that. They follow a system that is rooted in the real world and has stood the test of time and changing markets.

By following my 4 Stranded Strategic Approach I minimise my risks and maximise my upside as each strand represents a way of making money from property and combining all four is a powerful way of putting the odds in my favour. If one strand lets me down, I have two or three others supporting my property’s performance.

But it doesn’t end there. I also suggest you…

Regularly review your property strategy

While most investors just buy a property and hold it for the long term, strategic investors regularly review their investment portfolio’s performance.

When I ask investors how their properties are performing they usually have no idea. They’ve just closed their eyes, crossed their fingers and hoped for the best. It makes no sense to invest in a property and then not review its performance every year or so.

Some investors avoid the tough decisions and excuse their property’s poor performance by saying things like “it will turn around eventually” or “I don’t want to make a loss, so I’ll sell it when I can cover my costs.”