When you're starting on your investment journey, it’s not uncommon to run into opposition from the people closest to you. Family, friends and acquaintances can become naysayers, potentially shutting down investment opportunities before they’ve had an opportunity to flourish.
Michael Beresford, director – investment services at OpenCorp, is well aware of the challenges that such ‘dream crushers’ can present for prospective investors. He gives his insights on how to combat them and enjoy the benefits of residential property investing.
YIP: First of all, why do you think people should be investing in residential property, as opposed to other forms of investment?
Michael Beresford: The main benefit is that it’s a proven long-term performer for wealth creation. It offers leverage, it’s a lower-risk asset class, and there’s always going to be demand for housing. Other investments have benefits too, of course, but they bring additional challenges. Commercial properties can have their value reassessed every 12 months, and shares acquired with gearing are subject to margin calls, which increases risk significantly in a fluctuating market.
The other reason I like property is because you can choose exactly what you buy, and how you act on it. You’re in direct control, not beholden to board members, CEOs and other senior management, who are all having strategic discussions that you’re not privy to – it’s up to you.
YIP: How important is it for prospective investors to have specific goals ahead of taking the plunge?
MB: First and foremost, investors need to understand why they’re investing and what they want to achieve with their investments. You wouldn’t jump into a taxi without telling the driver the destination, and investing in property is no different. That said, life rarely takes us on a straightforward journey from Point A to Point B, so the plan doesn’t need to be totally set in stone or inflexible.
What I’d suggest is checking in with your investment goals and revisiting them a couple of times a year. Your goals can change, as personal circumstances and what’s important to us tends to shift over time too.
“Dream crushers are often ... trying to make sure you don’t make mistakes, but people fear what they don’t understand”
YIP: You’ve spoken previously about ‘dream crushers’. How would you define a dream crusher?
MB: Over the last 15 years of helping investors, there are two common concerns I’ve come across that stop people from investing. The first is simply that they don’t know what to buy – they don’t feel they know the market landscape, and so they don’t know which property or location is going to benefit them the most. The second is not understanding the cash flow aspects of investing, specifically around risk mitigation and maximising income.
Prospective investors have already taken a step in the right direction to circumvent these issues, but it’s not uncommon for them to seek feedback from those closest to them. It’s understandable, but their nearest and dearest aren’t necessarily investors themselves, are far less well-educated about the nuances of investing, and accordingly they can give very reactive and opinionated feedback in the negative. That’s someone acting like a dream crusher. They’re often coming from a position of care, but well-intentioned isn’t the same thing as well-informed.
This isn’t to say that first-time investing isn’t scary sometimes, but if you don’t take the first step, you’ll never take the second or the third. Additionally, the people who are acting as dream crushers aren’t going to turn around in 20 years and offer you $100k a year for the rest of your life for taking their advice not to invest!
YIP: What are your suggestions for combating the negative opinions of dream crushers’?
MB: This is where property mentors can be really helpful – as sounding boards and to help keep you on track. They’ve walked the path before you and can share their own insights. Surrounding yourself with other successful people is crucial.
Additionally, dream crushers are often your closest family and friends, so you need to understand their mindset – they want the best for you; they’re trying to make sure you don’t make mistakes.
People fear what they don’t understand, and investing well is not generally well-understood. That said, if you know that they’re likely to discourage you, it might be best not to share the relevant information with them until you’ve built up a track record of success. It does get easier over time, too. Once you’ve had some success, some of the dream crushers will change their tune and may even come to you for advice!
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