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. Hanison

    Hanison Well-Known Member

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    The only thing I regret about leaving school at the beginning of year 12.
    Is that I didn't leave at the beginning of year 10.

    I only started to learn the moment I stepped out into the real world.

    None of it was how to punch a clock everyday for the next 40 years.
     
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  2. ej89

    ej89 Well-Known Member

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    My mate bought a house in Merrylands for 400k 3 yrs ago. It's valued at 800k now.
    He bought a unit in merrylands too for 180k. It's worth 400k now. I asked him why he hasn't used the equity to keep buying? He responded with 2 is enough for now I'm comfortable. How I would kill to be in his position.
     
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  3. legallyblonde

    legallyblonde Well-Known Member

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    IMO people are just looking to be comfortable... They have a few shares and an IP or two but stop and focus on lifestyle! People have an amazing ability to burn money on instant gratification!
     
  4. devank

    devank Well-Known Member

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    It all depends on the value & age but....
    Home + 2 IPs + Shares + cash left to enjoy life = Not a bad situation to be in :)
     
  5. albanga

    albanga Well-Known Member

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    I must say I only read the first few posts until this one but this to me is the absolute perfect response. I could tell you of atleast 10 friends who have bought investments because "it's what you do" with absolute no understanding of property fundamentals. They then complain about how bad investing is and don't ever do it!

    The problem is a complete lack of education and a terrible misconception that property doubles every 7 years. Property may double more like every 10 but if you cannot hold it within that time then what good does that do you? Again I have friends who have purchsed a negatively geared property when there PPOR is small and about to start a family. Then they need to offload because the repayments are killing them! Honestly that is just stupid.
     
  6. Gockie

    Gockie Life is good ☺️ Premium Member

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    Yes, the first place I bought as a PPOR the market was flat for 3 years.
    Then we bought another PPOR cause the first place was very small. The market had gone nowhere so I rented it out.

    I hadn't found SS at that stage, later (2009-2010) Sydney boomed, the place went up 100k. But I also wasnt aware of the idea of pulling out equity to fund another IP. Also for the first PPOR, I used a redraw, not an offset. That was something I didn't know was a mistake either till much later.

    I was lucky I was made redundant from Amex and got a payout worth 7 or 8 months of income. I used that as the deposit for IP #2.

    After #2, servicability to buy the third was terrible!! I couldn't get any more loans for years. :(

    If I had the servicability I would have had a unit in Lavender Bay or a house near the station in Doonside (which has doubled in value) and/or a unit in Lane Cove!

    Anyway, now I'm working with a great mortgage broker who will pull out all the stops, hopefully I can get this loan across the line for IP #4.

    The thing with property, you can add value, do something to give you better returns (yield), instant equity or both. You just have to buy right, something you can get above average returns from.

    I've done it, and to me it's easier money than the day job, but without people to learn from, its a good chance this process would be much slower to have worked out.
     
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  7. BigL

    BigL Active Member

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    Have to agree with most poeple on here. Seems like investors fall into two classes:

    Mum and dad type investors that want to be comfortable and see 1 or maybe 2 IP as a way to do that and help them be comfortable in retirement and can't see past that.

    Then investors who look to create wealth to fuel their lifestyle.

    Im aiming for the second one and if it wasn't for this forum (and SS) I probably wouldn't be on track for that. Serviceability is a massive issue and my inital property purchase was going to be a slightly negatively geared investment with high GC potential. But being on low income that would've shut me out of the market for years, till I got a better job. So I went for Cashflow positive and that has set me up for my next purchase within 12-18 months. Planning the next purchase is key and most don't seem to plan their next purchase when considering their current one.
     
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  8. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    That is SO true!

    Neg gearing/cashflow is definitely one consideration when planning, but there's more to it.

    I find that many investors initially buy @ high LVR with poorly chosen (cheap) lenders, without ever considering the impact that will have on property 3 or 4 down the track when they need to access equity from IP1. They can find themselves faced with new LMI costs to refinance, but it's the only option to access their equity for the next deposit.

    Planning ahead is key - that $10-$20k is much better off in your own pocket!
     
  9. Harro

    Harro Well-Known Member

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    Why do you need to see past being comfortable in retirement? A lot of investors have created wealth to fund their retirement.
    We are receiving $44,000 nett rental income from 2 IP's, this coupled with share dividends and fixed interest provides adequate funds in retirement for us, and, we haven't drawn any Super as yet as we are under 55.
     
  10. keithj

    keithj Well-Known Member

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    My thoughts too. The difference between comfortable in retirement, and v. comfortable is a few years of your life. Unfortunately, those few years are the prime ones.

    Not many on their deathbed will be saying they were glad they spent those few extra years in the office
    instead of the beach.

    Time is the most valuable thing we have, not an extra IP or 2.
     
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  11. BigL

    BigL Active Member

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    Yeah but if you spent those few extra years saving and investing early accumulating a few more properties you could retire earlier and enjoy more of life instead of following the traditional 9-5 job till your 60+ and retire.
     
  12. HomeMinister

    HomeMinister Well-Known Member

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    one dud egg can ruin the nest sort of fear in there heads and also numerous calls from tenants and bills to fix it up. a partying and social person will go nuts if he has 3 or more IPs.

    taste of a drop is enough to reject a glass of wine
     
  13. Ace in the Hole

    Ace in the Hole Well-Known Member

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    Same boat here Sash.

    Went to a selective high school with high nerd proportions.
    I started off with some natural talent being in B class for maths, ended up in E or F by end of year 12, the lowest class.
    I guess that's what happens when you don't study and everyone else is doing tutoring and stuff memorising textbooks about things they will never need.
    My academic ranking would have been bottom 5% in my year and like your school, 90% + would have gone to uni.
    I tried to get into Uni for Fine Arts - Woodwork, and even failed at that...

    Enter the real world, pretty confident I'd be in the top 1 or 2% financially now from everybody in my year at school right about now.
     
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  14. Phantom_X

    Phantom_X Member

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    I think it's a combination of a few things. Most people view debt as bad. I was always taught this until I started my own research on wealth creation and found SS forums.

    The second part to this is that most people only think to buy with P/I loans instead of I/O loans, therefore slowing or restricting them significantly.

    One or two IP is more than most people have and a lot of people are content to stop there.

    I currently have two IP and only started my property investment journey in 2014. I'm now arranging to get IP 3-5 and I must admit it can be a little daunting. However I firmly believe it's these moments that restrict most people and this is where people who want to do something extra to research, take action and push through their fears.
     
  15. skater

    skater Well-Known Member

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    I guess you'd call me an accumulator. My comments above in red.

    When we started out we were not on a high income, we were a family with two young children. Yes, kids are expensive, but that doesn't mean that you have to stop investing. We bought properties that were cashflow positive. We couldn't afford not to, and I think this is where a lot of investors come undone. There are way too many investors that are happy to buy something with crappy yields. Well...HELLO! It's hard to buy multiple properties if each one is costing you a lot of money week in & week out.
     
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  16. the world is your oyster

    the world is your oyster Well-Known Member

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    I woudnt think you would count a ppor as a investment property
     
  17. the world is your oyster

    the world is your oyster Well-Known Member

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    I think most investors stop after two properties for the simple reason they get bad investment's that cost them more then they bring in and don't rise in value enough to tap in to more equity and just give up and don't worry about building the property portfolio as the mountain is to big for them ...my two cents worth anyhow
     
  18. DanW

    DanW Well-Known Member

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    This is interesting. We are well into the 1%, yet we do not believe in the idea of a PPOR and prefer the mobility and simplicity of renting where we feel like.

    I would say we are in the minority to be willing to buy double digit IPs yet refuse to buy a home to live in. Maybe 1% of 1% :)

    Stopping at 2 is often just a lack of vision about what is possible. Anything is possible really, it just takes focus.

    The other reason people stop is due to not having a long term view and finding it hard to get back into it after a sale.

    I remember a story that created a vision for me. I heard of an investor with 40 properties and my PM was telling me that she only needs the market to go up 1% and she's made her annual salary in capital gain. That blew my mind at the time, but it made me realise my strategy. To hold as as much as I can forever, and to buy with yields that will never allow me to come under cashflow stress.

    Long term is not enough, it's only the ultra long term that makes the huge money.
     
  19. Steven Ryan

    Steven Ryan Well-Known Member

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    Yet more evidence that academic ability does not directly correlate to financial ability.

    And as Jim Rohn said:

    "Formal education will make you a living. Self education will make you a fortune"
     
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  20. HUGH72

    HUGH72 Well-Known Member

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    Many people I work with have an ip but its generally the case that they move out of their current ppor and upgrade to a bigger house and keep their first one. A few others have holiday homes or what I would call lifestyle properties, none were purchased with investing in mind.
    I think buying heavily negatively geared properties which cost several hundred dollars a week is also a burden many are not able or willing to support. The cg Fairey only comes along every so often and a few years with none requires persistence and a longer term view which many people don't have.
     
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