Real estate is merely a wealth creation vehicle that you can use to enable you to reach your potential in all areas of your life.
I choose to operate my financial strategy using other people’s money for passive investing, (banks) This is a truly leveraged investment strategy that enables the investor to borrow money from a bank or other lender to buy investment property, shares etc. These are fixed, tangible assets which provide the opportunity for you to earn more money than you are paying out in interest to borrow it. Approximately 0.5% of the population utilise this truly leveraged model to generate significantly more wealth than they could without leverage. This model can be accessed by a large portion of the population as the start-up capital required is often relatively modest as the majority of funds are borrowed, and the tools and strategies you need to operate in this area are available to you.
When it comes to looking for real estate opportunities your focus should be to select those areas that exhibit all the right potential to experience a surge of capital growth based on an intrinsic scarcity of real estate within that location.
Whether you are investing in shares or property, there will always be individual stocks or particular geographic regions that will perform well even when the rest of the market may be depressed.
Public perception
There is always a time lag between the activities taking place in a real estate market and the public’s perception of what is taking place.
This is often because market sales data takes time to become available, but also, most people take time to come to a realisation of something. Media reports, government statistics and industry updates are released on a regular basis, but due to the herd mentality most people will not act unless they get confirmation by sensing what the rest of the herd is doing.
This herd mentality is a safety mechanism that we have used over eons to keep ourselves from standing out from the crowd and being a target. Now, this very instinct which has served to protect us in the wild, actually works against us when applied to today’s real estate investing mindset.
The reason this is the case is that we are in a competitive environment and if the herd starts stampeding in a particular direction to buy real estate because everyone is talking about the great benefits of buying there…chances are that you have missed the best opportunities. On the competitive playing field in this situation all you will be doing is bidding up prices by offering a higher price to beat potential competitor.
In fact, when it comes to investing in real estate, it is often better move against the herd and to stand out from the crowd, because that is where you will find the bargains. A herd of migrating zebra are a good analogy in that the first members of the herd to get to the succulent grazing will get their fill of the best grass and entice others to join them, but in the process of moving to the succulent grazing there are four times as many hooves as mouths that trample the grass for those coming in behind the leaders.
The key is to work using a creative mindset to pre-empt the stampede, and therefore maximise your growth potential. This is done by finding the greenest grass that has not yet caught the eye of the herd; because they are all too busy looking at their feet searching for the individual leaves, rather than looking for a fresh pasture.
The way that you can do this is to lift your awareness levels. You need to move out of the state of inertia that comes with being used to the herd mentality and actively improve your knowledge base. This program will help you achieve this, and then it is critical to tap into some of the many resources that will be available to you to gain timely information on the state of the market in your particular
area, or an area that you have targeted as having good potential. We will cover off this aspect in more depth as you progress through the Handbook.
So, by purchasing at the bottom end of the growth curve you give yourself the best opportunity to maximize your capital growth in the shortest period of time.
It is interesting to analyse the capital growth patterns which occur in any particular city, town or location. They generally follow the same trends over time, at different stages of their individual seasonal cycles.
