Don’t be a statistic: 5 ways to achieve long-term success in property investing

Mr Kumar cited data from the Australian Bureau of Statistics which showed there were a total of 2.3 million investors in the country in 2020, representing almost 10 per cent of the land Down Under’s total population.

“So, of that, 92 per cent of them own one or two properties only. And the reality of it is you really, unless you’ve [bought] to a really large asset class, you can’t really retire on one or two properties without doing something out of the ordinary,” he stated.

Mr Kumar underlined that without a well-thought-out strategic approach to property investment, one is likely to become just another statistic among those who own only one or two properties without achieving long-term success.

“I’m not advocating having 10 properties, 20 properties, but at least having a couple of properties and having a strong focus towards going through the glitches, ironing out the glitches of the ups and downs. The harder to hold years, the easier to hold years...

“Then work towards the debt retirement in your lifetime, in your working lifetime, rather than waiting for something magical to happen at age 67 where all of these properties somehow [magically] will start providing you with retirement income,” he explained.

Here are five ways to avoid being a statistic as a property investor, according to the experts.

1. Focus on cash flow

While it’s easy to hang up your gloves during tough economic times (e.g. high interest rate environment) and just choose to divest a property, Mr Kumar highlighted investors during the Global Financial Crisis (GFC) weathered the storm by focusing on their cash flow.

“If you look back to GFC, at that time, we were pretty much what we are in the market right now, where the cost of holding the property became harder for a short period.

[Those] that could hold on, that had bought the better properties, had managed their money preemptively. So getting the cash flow sorted before you became cash flow constrained, they were able to then go through the multiple cycles of holding onto that property, and the rents didn’t come down,” Mr Kumar explained.

2. Avoid emotional investing

Mr Waters acknowledged that while it’s easy to fall in love with property investing, staying committed to it can be an emotional rollercoaster.

He said while most investors are drawn in by a property’s growth, they can also quickly become disenchanted when facing ongoing issues, such as maintenance and repair.

“It’s interesting because you fall in love with a property and its performance, and you can quickly fall out of love with that very same property,” he said.

Another factor that can cause emotional investing, according to Mr Waters, is failing to distinguish between noise and signal in property investment.

“If you are just a person that may have an investment property, maybe a couple, and all you are fed up with – the algorithms, and what you have is just negative. And it’s going to get worse,” he said.

He warned emotional investing, driven by fear or media influences, can lead to hasty decisions.

“And so, you become saturated and just involved in your psyche with whether it’s good or bad. And that’s the crucial part of any asset class – but because we’re talking about property – is to be able to distinguish signal from noise,” he said.

With this, the experts underlined that a future-focused and strategic approach is essential to navigate the challenges and enjoy long-term success in the property market.

“I’m always in love with property. Am I always in love with the process? No. And that’s the difference, right? Because the reason why I’m in love with property is because I’ve got a finite goal that I’m working towards with my portfolio. And it’s gratifying to see that unfold,” Mr Kumar added.

3. Learn from history

Instead of fixating on short-term gains, the experts advised investors to consider historical trends and property market cycles.

They pointed out events, like the Global Financial Crisis, demonstrate the resilience of the property market and the potential for long-term growth.

The second event in history investors can draw lessons from, according to Mr Kumar, is when the country temporarily got rid of negative gearing.

In July 1985, the Hawke Labor government effectively eliminated negative gearing for prospective rental property investors, but the measure was later fully reinstated in 1987.

“People left the property investment area in droves because they’re focused more on the tax returns and the negative news the media gave and as to how much it’ll escalate in terms of holding cost. Those that held on, the rents went up, the values tripled, quadrupled on the properties, on the good-located properties.

“So, we can’t look at investing in isolation. We need to still look at it from a longer period of time and still bring it back to what you’re really trying to achieve,” Mr Kumar said.

4. Sharpen your finances

Mr Kumar advised investors to take a comprehensive look at all aspects of a property investment and align it with your long-term goals.

“You need to look at all the moving parts, look at your subscriptions, look at your properties. What is your actual holding cost as opposed to perceived holding cost, good or bad? And look at what you’re trying to achieve.”

The experts also recommended considering selling down assets or restructuring mortgages to achieve financial relief and optimise a portfolio for long-term success.

“For some people, it may mean actually selling down the asset to create that little bit of relief, one or two assets to create that little bit of relief. For others, it may be just simply restructuring all of the mortgages. This is one of the things that we don’t tend to do,” he stated.

5. Embrace a future-focused perspective

Lastly, the experts reminded investors that property markets experience cycles, and while today may present hurdles, future periods of sustained growth are likely.

Mr Kumar advised investors not to lose sight of their long-term goals whenever there is anecdotal evidence and real evidence of negative growth.

“And when they do, they’ll say, ‘Oh, the property’s not working for me. It was a dumb decision. I should not have bought this property.’ They’ve lost sight of the bigger medium term play,” he said.

To combat this, Mr Kumar recommended investors to stay focused on their bigger vision.

“Most weeks, it’s just acknowledgement to say, ‘I’m an investor, and this is what I’m trying to achieve.’ And that takes you away from all of the noise around you,” he stated.

Listen to the full conversation with Steve Waters and Victor Kumar here.