When it comes to property, there are three types of investor – and only one of them is in the driver’s seat.
Before investing in any asset class or commodity (indeed, before doing anything remotely worthwhile), we need to fully grasp what we’re about and where we stand in the world. Only once you take these self-realisations on board can you really focus on the next decision and objectively measure its success or failure.
There are three types of investors:
Type 1: Defensive investor
This represents a very large group of investors (in fact, the vast majority of investors) who have been ‘played’ – and most of them for at least four decades. Some might have been played only recently. But they all share the following key characteristics:
- They speculate – which is gambling, not investing
- They’re always in the passenger seat
- They’re always looking for the easy way: ‘There’s always gotta be an angle’
Many of them spend their time thinking or saying:
- ‘We haven’t got any savings’
- ‘Holy shit, I’ve put my kids through school and uni’
- ‘I’ve bought the dream house with the missus; I’ve got the cars and the toys’
- ‘The kids have moved out and it’s my turn, I’m ready to party now’, but ‘What the hell do I do?’, ‘Who do I believe; who do I trust?’, ‘Jeez, is that all the super we’ve accumulated? That won’t do much’
These are some of the common thoughts and questions I’ve gleaned from hundreds of defensive investors.
Sadly, by trying to keep up appearances and impress people (often people they don’t even know or like) with their big homes, flashy cars, overseas holidays and, of course, having the kids in private schools – this group have squandered the opportunities that came their way. Opportunities to possibly set themselves up for a great retirement or life after work.
Type 2: Offensive investor
These are investors who have figured out the game – some of them decades ago, some of them only recently. The key characteristics of this minority group are:
- They’re in the driver’s seat; they’re in control of their own destiny
- They make the buying decision; they aren’t sold to
- They buy to maximise profits
- They never let someone else control their destiny for the entire game; they play to win, and have a dream, a vision, a plan and a strategy for their financial future
Offensive investors know that they have a very handy head-start on defensive investors, but also know they have to be diligent in the years ahead. Offensive investors know that it isn’t over until the fat lady sings.
Many of them spend their spare time planning where and when they will invest next.
It’s doesn’t matter whether you’re an established investor or just starting out, whoever is selling to you is on the offensive, and if you’re a schmuck you’ll be on the defensive.
Type 3: The ‘wannabe’ investor
The wannabe investor is not even defensive, and simply allows the seller or promoter to score a goal, often at the first meeting.
Sadly, I’ve seen people who have been all too eager to get started ended up losing their shirts in record time.
Having a bet on 23 red at the roulette table is no different to having a punt on the future value of a property. Only the numbers are bigger! Oh, and the latter is usually with a significant amount of borrowed money.
The point is: whatever you do, don’t be a wannabe investor or a defensive investor. Be on the offensive; take control of your financial education and be in the driver’s seat of your financial decisions.
Kevin Lee is the property investment expert and buyer's agent at Smart Property Adviser.
Kevin specialises in helping investors identify and acquire positive cash flow properties that generate high rental returns, enabling his clients to grow their portfolios.
Kevin's free report, How To Turn Your Negatively Geared Property Into A Positive One In 3 Steps – Without Selling, is available at www.smartpropertyadviser.com.au.