Learn from the mistakes of others. You can't live long enough to make them all yourself

As @Gockie mentioned (regulars around here know all about it), I took out a 15 year fixed rate loan at 8.09% without anyone questioning my suicidal decision, stayed fixed for 3 years as my break fee quickly rocketed to $40,000 (the extra interest cost me tens of thousands more than the variable rate at the time) then paid an epic break fee when it had about halved from $40k. Not to mention for 3 years I was unable to access equity or to purchase any additional properties.

As soon as I broke the loan I picked up a further 2 properties in about 6 months.

Big opportunity cost and financial cost.

Lesson learned.

 

And now your a broker?

Or you were one before this?

Maybe you found an interest afterwards

 

I didn't even know what a broker was back then

You're right though. The silver lining is that after finding an amazing broker and learning a lot in the process of rectifying the situation, I realised the incredible, positive impact a great broker can have which inspired me become a one myself.

 

Always a positive.

One of my mates went to the bank i think Westpac from memory or Bank West. Got a pretty solid rate i think 4.99% for 3 years think its fixed aswell.

But brokers are there to be used really. Theyre are the way to go, mine has done me pretty well so far.

 

If I'd have known what an independent broker could offer (let alone it would not cost me a cent) I would not have even considered going direct.

"You don't know what you don't know".

 

This is one of my favourite quotes. Not only in common sense but also in strategic thinking. It makes you realise that you need to be prepared for uncertainties.

 

Agreed sincerely! A great broker can do much better dealfor us and tell us how many options we could have and which one might be the best we should think about.

 

I had one of my investment property done by one broker before, she did not give me guides what I should do, what I should not do, only sent me a group of lists with a comparision of varible and fixed interests rate from number of banks for me to choose from. At that time, I did not know anything, only thought it should be good to choose the bank who supplied the cheapest rate and fees with fixed interest rate, and selected 3 years fixed rate for mortgage settlement.

Now I got a new broker who is much more like a mentor to me and told me I cannot access any equity if the mortgage is on a fixed rate, from that moment, I started to know we cannot just choose the cheapest rate and fees but also need to think about our furthur strategy: keep buying or just hold the current one for a long time.

Yes, lessons learned too, now I am still waiting for the 3 year fixed rate expired date coming because I do not want to break the fixed rate contract.

 

@flyhere - hopefully a decent part of the 3 year term has passed

You are 100% correct. It is critical to think about not just this purchase, but your longer term strategy and goals and make choices that are in your best interest to reaching your destination.

I always encourage friends and clients to look at the bigger picture. It's not uncommon for people to be rate-focused (especially early on in their journey) but it's one of the least important pieces of the puzzle.

 

Hi teetotal,

Great question. Here are a few tips on mistakes I've made and if I had my time again, would have done things differently

1. Be a problem solver - if you solve problems in property investing that no one else wants to solve, then you will reap the rewards for this. For my first IP, I bought OTP at the peak of the market - it basically did nothing for 10 years. I didn't solve any problems, the rewards went to the developer and builder

2. Form a strong team - property investing is a team sport. I had some poor team members right at the start and they hindered my progress. After finding Somersoft/PropertyChat and aligning myself with the right team, my progress increased dramatically

3. Don't lose sight of the forest for the trees - don't get caught up in the small stuff. Have the end goal in mind. This will help guide where you buy, the types of properties you purchase, the strategies you use etc

4. Patience - we under estimate what can be achieved in the long term, but over estimate what can be achieved in the short time. As long as you are moving towards your goal on a daily basis, it will happen. I was impatient when I first started and patience was something I had to pick up over time.

Above all, reading this forum helped me the most so stick around and you will do very well.

Good luck!
Michael

 

@Michael_X put me onto a great book - The Slight Edge, which talks about doing small unremarkable things towards your goals every day/consistently. My biggest mistake is not being consistent towards my next purchase (and often a market has moved by the time I get myself together).

Another mistake I made was choosing the incorrect time to sell an apartment due to not monitoring the market movements. I had decided that I wasn't going to hold a 1 beddie forever but I also didn't monitor the market so when I came to sell, the apartment craze had started, reducing my price. I now have a small tracking spreadsheet for the rental and purchase prices of the suburbs where I own. Pricefinder and RP Data etc also do this tracking; I find the sales history in PF has a longer history picture than the rental price history (which usually only graphs a year of rental history). Obviously if you're buyng for a long term hold then this periodic monitoring isn't needed

 

Great Insights @Michael_X
1. When you say to be a problem solver, do you refer it to making easy choices & comparing to choosing complex problematic strategies where the problem solving is required but rewards might be higher as well ??
2. That I need to do soon. But my concern is that i have only started the journey and at this stage may not be able to afford to spend extra $$ on the team. Instead i do read the forums here regularly.
3. This is my cup of tea. Eaassssyyyyyyy
4. Another part of my personality that i can rely on, hopefully.

Cheers,
teetotal

Thanks @Mac Fields. I like the fact that you monitor the suburbs your properties are in. Definitely something i can do as well. Thanks for the tip

 

@teetotal, I'm willing to bet Michael was referring to adding value (e.g. renovating) and/or snagging opportunities that deter most buyers, for example:

A "less than perfect" B&P report will scare off most buyers but is a massive negotiating tool – you can you can often buy well under value by referencing the report and the costs of "solving the problems", then put some work in to repair/renovate, and reap big rewards as a result.

The friends and clients of mine who have been solving problems are consistently producing massive results...and have had little competition getting in to the deals as most potential buyers have put them in the "too hard" basket and walked away.

 

Hi @teetotal,

Yes, the bigger the problem you solve the bigger the reward. Why developers can do well, is they have solved a very complex problem. The problem you decide to take on should reflect your experience, your budget etc. So it could be as simple as the examples below

1. New paint and carpet, can have a big affect on a property
2. Moving on bad tenants. I've purchased properties with grubby tenants, moved them on. Cleaned the house and got a nice increase in rent
3. Adding bedrooms where possible to increase rent and value. Can be as simple as some gyprock plus a door.

Any time you can solve a problem, you will add value and gain from this in return. If you buy something where all the problems have been solved for you, eg OTP - the only way you will make money is from the market, which you don't control.

Personally as an investor, I want to control as much as I can and not leave things to chance.

Good luck!
Michael

 

This isn't actually true - you can definitely access equity while on a fixed rate, you just have to structure it correctly so the fixed rate is not broken. No need to wait until your fixed term is up.

 

@teetotal As a newbie investor myself, can I encourage you not to skimp on finding a good team? I've found it crucial as we start our journey to surround myself with people of a similar mindset, and we would not be in the position we are today had it not been for our amazing team.

On the flip side, one member of our team didn't have the same mindset as us and it has been quite a difficult and discouraging experience. When there is so much on the line, you just don't need the negativity and someone doubting all your decisions. Needless to say, we will probably be looking for someone else!

Also, finding a good team doesn't necessarily mean more $$$. We have found great people to work with and as of yet it hasn't cost us a cent more than it would if we had gone with other people.

Even if it did cost you a bit more $$$, remember what @Michael_X said - don't lose sight of the forest for the trees. A few extra $$$ now on the right team can add up to a large amount of $$ gained later, and a lot of headaches saved!

 

If you haven't already read this read this thread it is well worth it What advice would you give yourself 10 years ago that you know now? - Somersoft Property Investment Forums it is basically a replica of what you are asking I found it a few months ago and it taught me a huge amount in a very small amount of time

 

Dont be afraid to spend money on professionals!!!!!!!! I have always had the mentality of "I will do it to save some money or I'll do some research and do it myself". Combine that with education and you cannot fail.

It's only recently I've let go of this mentality and the ROI is almost always guaranteed and for far less of your time and effort. To think I was going to spend $1000 on paint and paint my entire house when instead I found a painter who did it for $2,500 so cost to me was $1,500. It would have taken me about 100 hours and the finish nowhere near as good costing me money on the sale

I think being uneducated and Going it alone (when you don't know much) is the biggest mistake anyone can make. I have about 10 friends who own IP's with both of these, guess who just sold for a loss or who is stuck holding lemons?

 

well noted !! Thanks for the insights

 

Speaking of brokers, I made an offer on a property in about 1990 which was in paddington sydney. I went to NAB who knocked me back for a loan because I was casual. I just gave up there and then thinking it was impossible. It took me about 2 more years before I bought my first property and now I think back to that apartment and what it could have been worth now - probably 5 times growth by now. If only I had not taken no for an answer and went to a broker instead!