Episode Details

If you want to take advantage of our property markets and become financially independent, today's show is for you, because I've got 3 segments during which I share a number of concepts that will help you along the way.

First, we discuss whether property investing is an art or a science.

Spoiler alert: it's both. But you still need to listen to the balance of the show because I'm going to explain how and why they interact.

I'm also going to discuss the concept of becoming a borderless investor – investing in another state.

I know a lot of people find this difficult. I see this particularly among intelligent and analytical people because they want more control. But bear with me as I explain some of the benefits and why you should at least consider becoming a borderless investor.

Then in my mindset moment, I'm going to share a lesson that's made a difference to how I structure my life and I'm going to talk about the big rocks in the jar of your life.

Is successful property investing an art or a science?

So, Let's look at the three types of property investor.

1. The passive investor

A passive investor tends to spend little time doing any due diligence and is keen to buy one of the first properties they come across.

They aren't really interested in understanding all of the ins and outs that go along with creating a property portfolio such as finance, tax laws, compounding and so forth.

Instead, a passive investor tends to let their emotions get involved in their investment decisions, which we know can lead to disastrous results.

1. The active investor

An active investor puts in some degree of work in order to find a good investment prospect, including conducting some due diligence in the hope they can increase the likelihood of making a good and viable investment purchase.

They generally look to gain a basic understanding of the principles involved in property, finance and taxation and would look to seek professional advice for help with structuring a portfolio.

1. The analytical investor

An analytical investor is the far extreme of a passive investor.

Instead of undertaking little research and due diligence, this type of investor tends to go overboard and spend months, or even years, examining data, seeking advice and reading material in order to look for the 'ultimate' investment property.

While it may seem that an analytical investor is more likely to make successful investment decisions, it's actually not the case.

The problem with property data

There's no doubt that it's important to understand the property fundamentals and research appropriate and reliable property data, and the more extensive the data research is and the longer it goes back, the more accurate it is in forecasting future trends.

But the problem is, data is often wrong.

Unfortunately, the most commonly-reported data - median price data - is actually very unreliable.

There are three reasons:

1. Because median prices fluctuate depending on the way the property is sold. In many suburban areas, where property sold a number of years ago and vacant land has now been replaced by new homes, this data is irrelevant.
2. Similarly, new apartment or townhouse developments can skew median house prices of other local properties.
3. Gentrification and renovation changes the nature or quality of properties which again, results in the median house price for the area being incorrect.

Using median price data is risky for investment purchases and can cause costly investment mistakes.

Just because median prices go up in the area doesn't mean that value of any local property also increases.