Why Do Most Investors Stop Purchasing After Two Properties?

Good observation, this is spot on with people I know.

 

Rix,

Updated figures released next year with Census will be very interesting indeed!
Any thoughts on what movement we will see in total numbers and number of properties per person etc?

 

I'd say:

• limited knowledge/awareness around investing in general, access to networks
  
• compounded by certain beliefs around property and investment that are impacted by the media, e.g. bubbles, bad luck stories
• lack of motivation
• change in family/personal circumstances such as illness, career change, a new baby etc
• goals have changed since their investments started
  
  Interesting to know that it'll take 5 IP's to be in the "1%"

 

Few people I know kept their first PPOR after upgrading/moving. They would all belong to the 1st group. Even few in the 2nd group.

 

That's the biggie Terry. Once some investors get a few under their belts they look to different entities especially if they are able to reset their land tax liability.

 

Quoted for truth.

If I hadn't discovered a brilliant broker on Somersoft (Rolf Latham), I would have been stuck with a PPOR and zip else.

Being able to obtain finance as you need it as you build your portfolio is critical.

The recent APRA changes have shaken things up a bit for those getting started (especially on lower incomes) which makes structuring things right that much more important for those who aren't equity rich and/or earning high incomes.

If success is 80% mindset and 20% action, property investment is 80% finance structure and 20% everything else.

 

That will be an interesting stat. If its anything like like past reports, basically the same.

 

Most mum and dad investors I know have stopped due to horror tenant stories, some of their experience, most hearing from others. Why buy more properties in case we get a/nother bad tenant?

 

Very true beachgirl but as Rolf has said above its just an excuse not to keep investing or due to the fact they haven't done all they could to minimise those risks..

 

Who hoo!

Just saying I love that Rolf has come onto the new forum!
Thanks for joining, you are someone I would miss the most from SS. I think you never fail to give excellent advice.

 

A lot of people seem to stop when life gets in the way. The majority of 'normal' people who have 1 or 2 investment properties probably don't think of themselves as investors and might not particularly want to buy more, not that they can't.

 

Some interesting thoughts here - I'd see it as two or three key reasons:

1. Fear of debt and banks. I guess this applies to one of life's most common barriers to success/achievement - fear.

2. Property tends to be a lumpy asset and more difficult to transact/diversify. This only deepens the fear of debt. Own two properties in Sydney and you may be in over a mill in debt. A lot of people translate that to their household income, which is easily 10x the figure (and thats a scary thought for those not educated on the finance side of things and view properties as bricks and mortar).

3. Lack of interest.

 

Definitely fear of debt, you need to pay off debt as soon as possible and live debt free!
Lack of interest which leads to lack of information, knowledge and etc
Surrounded with wrong people, not aware of possibilities and so on...

One of my friends purchased investment property as something that needed to be done, set up P&I loan and happy with achievement that one day that will be paid off... I asked her to do interest only, to visit somersoft, to think about all the opportunities out there, but no, she's done with that as property investing is not something she wants to do and that's it! By the way, she does have loan on PPOR and still doesn't wana change loan terms because its just too complicated and both will eventually be paid off. I try not to feel heart broken when she talks about it

 

1 or 2 properties give enough Negative Gearing. So they stop

 

Risk, stress, better opportunities elsewhere. I had 3 for a while, was not comfortable with it so sold 1. Prefer not to have too many eggs in one basket, 1 or 2 enough for me. In a property crash the average person with 3 or more would be clobbered, those with 1 or 2 better chance of survival and even to purchase when the market is down. I suppose you have to believe a crash is possible/likely to have this attitude though, otherwise borrowing to the moon makes sense.

 

funny that, one of our friends was told to get one by their accountant to save tax!
they sold it 7 years later as it was costing them too much & had very little CG

most other non SS/PC people i know have done the above to 'save tax' or have come together in their 30's and one or both has a ppor that they change to IP and buy/rent a new place the can both call theirs.
consensus at work is that IP's are a big hassle (all those nasty tenants!) and cost too much

 

Another reason people go P&I on investment properties and pay it off as quickly as possible is because the property is never registered as an IP and they never pay tax on the net proceeds. Its a tax free investment and the ATO cannot detect this, unlike shares where the ATO hooks into the Chess system.

 

Definitely finance, also motivation

 

My Mum is a great example of this. She inherited a property and now makes great money on it, along with great equity. I asked her a few months ago "Why don't you buy another one?" Her answer was simple according to her... "I don't want to deal with bad tenants".