What Clueless Noobies Overlook When They Buy Property

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If you’ve been reading GoodPlace for some time now then you’ll know that what we say here at this blog can be rather contrarian to popular beliefs when it comes to property. For example, we think that home ownership is not for everyone (sacrilegious, I know), and that anyone wanting to become rich from buying and selling property is probably misguided. We also reckon that newer innovations like crowdfunding is bad for property, and that seminars, books and DVD programs are counterproductive when it comes to investment education.

I’ve written more than 170 guides now at this point (collectively some 150,000 words – that’s probably the length of two to three books), and in some of my more controversial articles I have probably spit into the faces of more people that I could ever care for.

The truth is that I can probably generate more income sucking up to people (I need to make GoodPlace financially viable after all), but if I start making money peddling lies it will make me the biggest hypocrite to walk on the face of the earth. (For those who are wondering why I’ve not gone the Guru path then this is your answer.)

And one of those Guru lies that particularly irks me is that ‘anyone can be good at property investment‘. That statement is as deceitful as an multi-level marketing peddler at a high school reunion dinner. Like everything else, there’s a bell curve; for one legitimate property investor (like, say, those in The Mentor’s peer group), there are probably tens of thousands of wannabes who trip all over themselves reading empty calorie junk like Rich Papa Pokai Papa. The success rate is simply way, way, way too low.

 Clueless N00bz Have No Edge

Despite what you may have heard otherwise, not anyone can be good at property investment. If you accept this simple fact then you’re on your way to recovery. 🙂

I’ve talked about this in our guide about Ultimate Secret Weapon That Boosts Your Investing Superpowers By 1,736% (pardon the title, it was an inside dig at the Gurus). To be good at this game you need to have an edge. Call it anything else (competitive advantage, core competency, unfair superiority, whatever) but you need to be able to do something (that matters) that you can do better than others. That’s how you make money.

Edge comes in two forms:-

Information Edge

When you have the information edge, you know more about a property’s metrics (there’s just these three numbers) than the market (in aggregate). If you have an insight in a niche (say, luxury rentals or suburban townhouses) or a particular location (say, upcoming infrastructure development), and the prices are below what you think the fair values are, then you can beat the market and make a tidy profit.

Some data points that drive the potential of an investment include:-

Just like the stock market, property is practically swimming in numbers. However, it can be impossibly hard to source (legitimate and accurate!) data in this industry; those who have access are jealously guarding their data assets which may happen to their competitive advantage.

 Whoever who has access to the most complete set of data wins the game.

 Psychological Edge

Let’s face it – your emotions are screwing up your deals.When it comes to property (or in any other matters which involve lots of money), it’s amazingly easy to get in the heat of the moment and start making irrational mistakes. Put your emotions under check, and know how your mind is playing tricks on you without you even knowing it.

Having a psychological edge means that you can evaluate incoming deals with cold precision and rationale untainted by emotions. The Mentor used his immense psychological edge to achieve tremendous success in business and property; read more about how to cultivate this edge here:-

 Clueless N00bz Have No Exit Plan

When I was still wet behind my ears doing this startup thing, I would make plenty of laughable mistakes – like spending nights writing business plans (reality check: nobody reads business plans), insisting on potential investors to sign Non-Disclosure Agreements (reality check: nobody wants to steal your crappy idea) and wasting time and money on self-indulgent shit like company logos, fancy business cards and flashy websites (reality check: if you’re not building your product and selling it you’re wasting time). Ah, those days of naivete and willful ignorance…

One of the more powerful lessons that I learned when dealing with potential investors in my business is the importance of an exit strategy. The savvy entrepreneur appreciates the importance of a well structured exit plan or a desired “endgame“. The same is also true for property investment.

So here’s how having a structured exit strategy works in your favour:- you use it as a starting point which you can use to reverse engineer your property gameplan (if you need help developing a plan, look here or use this PDF worksheet here). Once you’ve started investing, it’s easy to stray from the path especially when you see shiny, new opportunities. Having a clear endgame will stop you from getting distracted.

Here are five most common exit plan options:-

  1. The Complete Exit: sell the entire portfolio, sail into the Aegean with Paris Hilton and bottles of Cristal
  2. The ‘Tidal Wave’ or the ‘Domino’ Strategy: leverage a property’s equity into the purchase of the next property
  3. The Cashflow Portfolio Strategy: pay off just enough debt (principal) so that the portfolio is cashflow positive
  4. The “Line Of Credit” Strategy: revalue your portfolio, and establish a line of credit with your bank; use this credit to fund your other investments
  5. The Inheritance: pass on your portfolio to to your kids / nephews / favourite charity

Again, there’s no right or wrong way to have an exit. Personally, I devote the bulk of my monies to fund my own businesses (which provide far greater returns than property, believe it or not), and as such, my property investment strategy (and the corresponding exit plan) is as plain vanilla as it gets. Be as conservative as I am or as gung ho as an 1MDB fund manager with a blank checkbook (wink wink) – the choice is yours.

About Khai Yin

When I am not writing for GoodPlace.my and helping my readers find properties though the DealMatcher service, I spend time doting on my three kids: Wenyi, Qinyi and Eian. My personal stuff, some published essays and contact details can be found at khaiyin.com

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