Just had a call with my mentor and thought I’d share what I have been taught. His wisdom definitely helped me to clear my head.
Comments are welcome.
I asked my mentor 2 questions: 1) closure of smelter in Invercargill (which is in New Zealand) and 2) potential impact of global economy. How those 2 events may affect property values and is it now a bad time to flip properties?
In both instances, my mentor said to me that:
a) I should focus on what I can control rather than spending time worrying about things that I cannot control. In other words, do my research but don’t speculate. We are investors, not speculators. Deciding to sell our property based on speculation is not something we should ever do. In the case of Invercargill, look into what else is keeping the economy alive there? There is more than the smelter. Smelter is one piece of the entire Invercargill puzzle. Research into other aspects of the economy and see how much they contribute towards Invercargill’s economy. Once done the research, I might find “hey, the closure is unfortunate, but its not reason to mass panic”.
b) Be prepared for worst case scenario. For example, if I am about to make an offer and expect to make 60K after flipping a property, and a global economy recession is going to cause me to make only 10K instead of 60K, then can I accept this outcome? If I can still make 10K for that flip deal (during a recession), then is there anything else I can invest that makes better money than 10K? If not, then consider doing the deal. The “planned worst case scenario” ideally should be no worse than “just break even”. But let’s say if property market does go to the point that I don’t get to “break even” but instead I loose money if I flip, then I should remember that “property market will also rebound after a correction or a crash “, so even in the absolute disaster scenario, do I have the means hold onto it until the rebound comes? So rather than worrying about “how much the property value will drop” and “how long the recession will last due to the virus”, focus on “do I have a strategy to get me through the worst case scenario?”
Thanks for sharing Steve : very supportive comments from your mentor to clear the emotion out of the thinking process & creation focus on what is really important in the fundamentals – so often when emotion comes in our clarity goes.
ochorios1352 | PWC Realty
http://pwcrealty.com.au
Email Me | Phone MePositive Wealth Creation
It seems like you have a good mentor. It sounds like your strategy is flipping, so I will add that you make your money when you buy. If you can buy under market value and have a good strategy to add value then you are reducing your risk. I think to many people buy at or above market value and count on appreciation to help them when they sell.
HomeBuyerLouisiana | Home Buyer Louisiana
https://homebuyerlouisiana.comAussie entrepreneur investing in New Orleans houses
So I will add that you make your money when you buy. If you can buy under market value and have a good strategy to add value then you are reducing your risk
Actually, I do both BTL or flip depending on where I look into.
Definitely agree with “make the money in the buy” rather than “buy and hope value will increase 10% the next year”. The idea of buying below market value and add value is also to give myself buffer. This “buffer” also serves as “extra leverage”, so if market value increases by 10% the next year, then great, I have “buffer value + 10% increase” as my total leverage. Even if the market stalls the next year, I still have this “buffer value”, which can be leveraged.
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