Lack of clarity in investing objectives and goals creates a situation where the investor doesn’t know where to buy, what to buy, when to buy, and when to sell. All these mean less property investment profit in the short and long term.
If you don’t know what you’re looking for and what your investing purpose is in the first place, how will you ever know which property to buy when there are tens of thousands of properties in the market at any time!
By matching your strategy to your investing objectives and matching your strategy to your desired profit, you are on your track to maximize your profit.
Big 4 Questions – Maximise Your Property Investment Profit
Therefore, the root of most property investing mistakes (and therefore losing property investment profit) is a lack of clarity about why the person is investing in the first place. To obtain clarity, you need to answer the following 4 questions:
- WHY are you investing in the first place?
- WHAT is the purpose of your investing? What are you trying to achieve?
- HOW are you going to achieve your property goals?
- WHEN do you plan to have achieved your goals?
WHY are you investing in the first place?
Because I want my money to work for me rather than me working for money. As Robert Kiyosaki always says, the rich don’t work for money.
WHAT is the purpose of your investing? What are you trying to achieve?
- Increasing my wealth and becoming financially and socially free.
- Reducing the necessity to work and creating more free time to spend with family and on my passions.
HOW are you planning to achieve your investment goals?
Phase 1: Offensive and defensive equity-building strategies + Converting business cashflow to assets.
Phase 2: Passive cash flow-building strategies.
WHEN do you plan to have achieved your goals?
By my 40th birthday.
Strategy Vs Investing Purpose
Indeed, as you can see, providing comprehensive answers to the aforementioned questions is of paramount importance. This process furnishes you with a distinct investing trajectory, especially when you incorporate context into your investing goals and intentions.
For instance, when my objective is to work less and create more free time, there is no point for me to purchase a negatively geared property as doing so would force me to work longer to fund the negative cashflow.
In this case, I have to work for my investing property rather than my investing property working for me, which is exactly against my objective. And I don’t want that!
To also get more clarity on your strategy, ask yourself the below questions before investing in the property market and assess your strategy and objectives against what you have already purchased:
Is there any correlation between your purpose and what you have already purchased?
What are you trying to achieve by investing in the property market?
Are you trying to reduce your tax or do you have a strategy to make the most money in the shortest time?
What are you after? Cashflow income or capital appreciation?
When are you going to achieve your desired profit?
Are you going to be an active investor or a passive investor?
The answer to the last question, in particular, is very important.
Active Vs Passive Investors
Active investors proactively seek ways to maximise their profit, but passive investors prefer a “buy and forget” type of investment. In other words, active investors “create” their profits, while passive investors “wait and pray” for a profit.
For instance, if active investors decide to use an automatic capital growth strategy, they aim to buy at the right time and at the right price by having a clear strategy and a due diligence system.
So, an active investor with a solid understanding of the market and the right strategy can gain $100k profit in 1 year, while passive investors might gain the same amount in 5-10 years because they lack clarity and don’t invest with a clear strategy, timeframe, and a desired profit in the first place.
Therefore, it’s not really all about “time in the market,” but “timing the market” is also critical. Having a clear strategy and objective and knowing when to buy (and sell) can maximize the profit in the shortest period.
And you need to know that creating wealth, especially in a downturn market, requires a solid due diligence system and a powerful strategy.
In addition, active investors maximize their profit by “creating their profit.” They invest in properties that enable them to take advantage of automatic market growth while also adding value to the property by developing, subdividing, renovating, or, in general, solving a problem.
This is called manufactured growth, which helps investors gain more profit as they enjoy market capital growth and manufactured growth simultaneously.
And in order to become a sophisticated active investor, you need to have a clear strategy and understand what to buy, where to buy, when to buy/sell, and how to buy/sell.
Recipe For Success
The secret of building a successful investing portfolio and maximising profit is 80% planning and 20% action.
Successful investors have a system in place that enables them to use the right strategy to find the right property with the right price while targeting the right people.
The opposite approach is to ‘go out there’ and buy a property without having clarity on why we are buying, what we are buying, when we are buying (in a market crash or in a market peak), and how we are buying.
Investing with a lack of clarity places significant restrictions on your full potential and also your borrowing capacity. Lack of clarity can also result in buying in the wrong structure, which impacts investors’ tax outcomes and creates unnecessary risks.
Also, remember that if an investor doesn’t have clear and convincing reasons for investing, he/she soon faces a motivational crisis that can be avoided by having a clear and strategic investing plan.
Let’s spend some time to review our investing purposes and strategies to confirm that they will take us to where we have in mind in the shortest time and with the minimum risks…
All the best
Amir Sehat
Disclaimer: Information provided in this article/website is of a general nature and is not intended to influence readers’ decisions about investing or financial products. Readers should always seek their own professional advice that takes into account their personal circumstances before making any financial decisions.
