Australian Property Speculation Vs Investing
There is no doubt that the recent commentary on the Australian cash rate has created some fear among people considering property investment as a potential strategy.
As anticipated, this has led a portion of buyers to take a position to put their investment plans on hold. We do understand the change in rates will impact the serviceability of many so just to be clear, we fully support those buyers that believe the risk is too high for their personal circumstances.
This message is for those of you who do not feel the risk is too high in your current circumstances but rather you are;
Trying to time the market,
Anticipating interest rates to decline significantly,
Waiting for some other variable to be in their favour.
Remember, regardless of any market condition or purchase decision to be made, it is your responsibility to make the right decisions for your family so the better your understanding and knowledge, the more advantageous it will be for yours and your family’s future.
Investing
Speculating
Speculating Vs Investing
How Much Is Sitting On The Fence Costing You?
The key difference between speculation and investing is the risk involved in the investment for that individual and the level to which they have attempted to mitigate those risks.
Every investment has its own inherent risks. Regarding property investment some of the risks include, such things as:
Interest rates,
Vacancy rates,
Capital growth rates,
Rental yields,
Supply & Demand,
Maintenance,
Future development,
Natural/manmade disasters,
Tenant management,
Holding costs.
The Investor
The investor understands that there are risks involved in the strategy and they seek to mitigate those risks as much as they can. They achieve this by:
Understanding why they are investing and what they are looking to achieve.
Understanding if there needs to be any compromises to achieve the right result.
Seeking council with professionals to leverage experience, resources, and knowledge.
The Speculator
Speculators do not concern themselves with understanding the risks and working on a solution to mitigate these. Instead Speculators;
Do not spend time understanding why they are investing.
Have minimal flexibility or willingness to compromise for their desired outcome.
Prefer to rely on the opinions of friends, family, the media, and celebrity professionals.
Rarely seek council from professionals with experience, knowledge, and resources.
Prefer To Be An Investor?
Switching gears from speculator to investor is all in your mind set.
Ask yourself this question – When is the last time you checked in on your superannuation performance, asset allocation and fees? Do you:
A) Have the mindset that you will ‘see what’s in there’ the day you retire and hope it’s enough?
B) Treat your superannuation like it is your money (because it is) and it has a job to do?
If you chose (A), this is the outcome of most Australians. By no means are we perfect and a large portion of working Australians are unaware they can review their super performance but to be honest, I think we have all been speculators at some stage of our lives.
You Pty Ltd
Whether it is your superannuation, an investment property, shares, or the new age investing of cryptocurrencies, consider having the mindset of running your personal finances like a company. A Director needs to make decisions that are in the best interest of the organisation. Like a Director, you need to make decisions that are in the best interest of you and your family.
You do not need to be a business owner to understand that a company relies on fundamentals to succeed. It is in fact the same things that we need for any success in any part of our life.
A goal and a purpose.
A clear sight of the big picture and a willingness to compromise if needed.
Professional guidance and a clear strategy.
Conclusion
So, what do you prefer?
To ‘speculate’ or to make informed decisions in the best interest of you and your family?
This article was not intended to give any financial advice, commentate further on the market conditions, superannuation performance, or suggest you need to invest in property.
Our intension is to simply shine a brief light on a weakness that many families suffer from which is apathy. Many may refer to apathy as the ‘She’ll be right’ mindset.
The Australian dream of owning our home is a significant step toward being financially secure both now and in retirement, however ask yourself this – Is just owning your home enough for you and your family when the pay cheques stop, and it is time to retire?
Disclaimer: The views of the author, either expressed or implied, may not represent the views of Astute Property Network Pty Ltd. Every effort is made to ensure the accuracy of the information contained within this document. The information is not intended as financial advice and does not take into account your personal financial position or needs. You should always consult your financial specialist before making any changes to your finances.