Why Do Most Investors Stop Purchasing After Two Properties?

Discussion in 'Investor Psychology & Mindset' started by Rixter, 20th Jun, 2015.

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  1. Charlotte30

    Charlotte30 Well-Known Member

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    As above I believe the average investor deals with perceptions rather than reality. They listen to the background noise (media, friends) and get fearful. I found generally those giving opinions had no investment property. I learnt to base my actions on my experiences and be confident in my opinion regarding the state of the market. I started off with a bad PM so that was a fast steep learning curve.
    Jenny
     
  2. WattleIdo

    WattleIdo midas touch

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    There's a lot of property investors out there right now. There's been so much more education from gurus and spuikers and everyone's an investor now - just ask the taxi driver.
    I think we're going to see an increase in the stats - keeping in mind that couples probably own multiples each.
    This is something to be wary of. Not alarmed, just aware. There'll come a time when the ones who don't like it will start to offload. There's a time for everything and everything changes.

    Also, as has been said, it's about the finances. Capital growth is great when it arrives but sometimes it's a long wait. There are other ways to relieve the costs when interest rates go up and capital growth goes down. These include renovating, paying down the loan and selling. The smart ones will have something in store when the next opportunity arrives. If all your eggs are in the property basket and you don't have much equity, where will you get your deposit from? Shares? Usually the market goes down about then too.

    Maybe most people are pretty sensible, actually.

    Don't forget to save for a rainy day. :)
     
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  3. keithj

    keithj Well-Known Member

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    I would agree. However, IMO collecting properties isn't the 'higher thinking' you should be aiming for.

    Agree with this one.
    Even with a large number of properties held for more than a cycle or 2, it's still hard to retire with a passive income. There are many better 'non-property' solutions.

    A book I've never seen mentioned here or SS is ' The 3+1 Plan' by Brett Alegre-Woods - a UK author.
    In a nutshell his strategy is -
    • your rent/mortgage is 1/3 of your income, tax/rates is another 1/3 & living expenses are the other 1/3.
    • buy & pay off your PPOR and 3 IPs before you retire (1+3)
    • each IP will pay for 1/3 of your outgoings.
    So maybe most people don't actually need more than 3 IPs.
     
  4. Rixter

    Rixter Well-Known Member

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    Property is merely a vehicle.
     
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  5. WattleIdo

    WattleIdo midas touch

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    If I had a couple more like my little 2-bedder unit, I'd give the boss the bird and go home for a nice cup of tea.
     
  6. keithj

    keithj Well-Known Member

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    I agree entirely. As I've said elsewhere....

    Owning property is an unfortunate side effect of getting access to a low risk, high leverage investment vehicle that is largely funded by someone else.
     
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  7. sash

    sash Well-Known Member

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    Nah....mate...it is all about really lazy......the mindset is to research....outsource all non-essential tasks including some of the job related tasks...working this way gives you plenty of time to research property.

    So the lazy mindset wins!!

    As for income....it keeps...comnig

     
  8. Foxy Moron

    Foxy Moron Well-Known Member

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    As others have mentioned – mindset is a major factor.
    However personal circumstances are also major factors….

    1. I would guess many, but certainly not all of the aggressive accumulators may be single, childless or have kids off their hands. Raising kids takes a lot of cash. Also spouses do not always enjoy going on the extreme debt ride that comes with growing a portfolio. Either that or the spouse doesn’t always get full disclosure perhaps!

    2. Secondly accumulators tend to grow their portfolios by having bankable cashflows – a secure job or self-employed professionals with a track record, until they can live off equity. Many small business owners with similar risk appetites have business loans to contend with, working capital needs etc that also consume a lot of dollars that might otherwise be directed toward passive investment. Their cashflow service-ability can often be unpredictable as compared to the steady wage-earner, hence IP finance not always easy to obtain.

    3. Unfortunately business owners tend to have relationships with just one of the major banks…..who educate their clients on the importance of P&I arrangements. This can be an impediment to growth. As previously noted by other members the accumulators get a finance broker as part of their team and I have learned from this forum they can gain access to a lot more favourable lending options when they go this way – certainly for passive investments.

    4. A lot of business owners actually invest in their business premises as their property investment path…for me I’d rather be in control of one $2m commercial property with me as the tenant, as opposed to owning 8 x $250k affordable houses around the country, and all that goes with that. Had I not been in a business I may well have chased down those 8 houses in Logan.

    5. Diversification. Maybe some of those folk that have just 2 IPs want to grow a share portfolio at the same time. Its often only the extreme property-centric investor who pushes for more IPs at the expense of other asset classes. Its what they know and love after all.

    My 2 cents
    PS I am looking forward to learning with this community just as I did with SS. Keep up the good banter everybody.
     
  9. devank

    devank Well-Known Member

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    In that case, getting 6 will make it easier. After one cycle, sell 3 and pay off the rest.
     
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  10. BazWami

    BazWami Member

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    For no known reason, or many specific reasons (as have been discussed) some people are in fear of success!
     
  11. Ace in the Hole

    Ace in the Hole Well-Known Member

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    I agree most with this post.

    Most of those who have 1 or 2 IP's are not actually true property investors.
    Just like if some mug has a punt on trading a few stocks, does that make them a Share Trader?

    An IP or 2 will make most people comfortable.
    Most people just want to be comfortable.
    There's your reason.
     
  12. Gockie

    Gockie Life is good ☺️ Premium Member

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    Because they think like my parents... oh no, wait, they never even got past holding 1 IP and that was only for 2-3 years max...
     
  13. Simon L

    Simon L Well-Known Member

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    In my experience, most people stop buying after 2 properties because its all it takes to impress their friends (amongst lifestyle, travel, cars etc)
     
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  14. Big Will

    Big Will Well-Known Member

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    I think this has a big part to play + the investors would use trusts.

    Another contributing factor would be the value, buying a house in Syd or Melb within 10km of CBD is worth a whole lot more than buying a property in Newcastle or Geelong.
     
  15. S.T

    S.T Well-Known Member

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    Not that hard for them to cross reference these days with rental history of property addresses and land tax.
     
  16. EK01

    EK01 Well-Known Member

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    Don't be too hard on the oldies - The fact they had a go and decided it wasn't for them is commendable - most don't even get to the start line...
     
  17. Chomp

    Chomp Well-Known Member

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    It is but people need to be aware the type of vehicle you choose can make the journey a shorter one, starting by buying an older vehicle that needs a paint job (adding value) etc.. and don't forget timing can have a huge impact as well. Buy and hold at the end of a run, say two years time in Sydney and the vehicle you chose may be a clapped out old Datsun :)
     
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  18. Sackie

    Sackie Well-Known Member

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    For me the #1 reason is that they are not fearful/sick enough of the reality upon pension time, so they are not driven enough to push through to the next ip. Whether its finance issue, deposit, fear of debt, whatever. If they were fearful enough of the financial reality of retirement, they would push on an act to get numbers 3,4, 5 etc. Fact is, most don't get past 2-3.
     
  19. Sackie

    Sackie Well-Known Member

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    don't know why you insist on continuing to bash your parents. Your success or failure has nothing to do with them.
     
  20. Gockie

    Gockie Life is good ☺️ Premium Member

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    .... it answers the question though, right?
     
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