The 'Time' value of money!!!
Hey guys,
I'm sitting here watching 'The Price of Property' -- a Channel 4 special and it's quite funny because the repeating theme is the fact that most people who've done well weren't "smart". They just held the property for long enough.
I cannot repeat enough that the way to make money in property is to hold it. In my own portfolio my star performers are the ones that I have held the longest. Without question!
The problem has always been that so many people jump into property with unrealistic expectations of making huge profit in record time. It just doesn't happen like that. Sure -- you might pull it off once or twice in a great market but the real money is in holding over the long term.
7-10 years, not 18 months to 2 years.
I remember one of my mates back home in Australia who started investing the same time as me. He would buy and sell and take the profits. He lived a great life. My mates looked at him and thought how wealthy he was, they looked at me and asked why I didn't do what he did. He would turn up at night clubs and "shout the bar" (buy drinks for everyone), wear the best clothes and he drove a great car (normally a Porsche or something fact like that). He epitomised lifestyle -- the lifestyle that I wanted.
The difference was that I bought and held, bought some more and bought some more. I held and held some more and slowly over the next 10 years I watched my portfolio grow to the point where I could have lived his lifestyle, in fact it would have been easily done.
I met up with him about 2 years ago and realised that I had chosen the correct path, the path of delayed gratification, that delaying the gratifying pleasure of lifestyle now and putting it off until you could truly afford it 100 times over.
You see 8 years on and we both remained in property, he had continued to buy and sell and work hard to do the deals needed to maintain his lifestyle, I had bought and held and moved overseas and done, well nothing, nothing for about 6 years. and in that time my portfolio had doubled, then doubled again.
My wealth had grown out of sight, his wealth had remained well, kind of stagnant.
You see to keep the lifestyle up he had to continue to buy and sell and every time he had to buy another property it was at the higher price that the market required, so as my property increased in value he had to pay the higher market price. So a large portion of his profits were lost due to the market increasing. He was losing potential profits every time he bought a property.
8 years on and the difference was stark, he could see it and I could see it. To his credit he has changed his ways in the past two years and is working hard to build his portfolio, knowing that this will build his wealth.
That's why my first, best and most accurate advice in any market on property investment is 'Buy and Hold'.
Live with passion,
Brett Alegre-Wood