In today’s bonus episode, Bryce & Ben explore some of the mistakes property investors make due to FOMO! 

FOMO = Fear of Missing Out, and as you will find out, is extremely detrimental when it comes to investing. 

FOMO can push investors into impulsive decisions…but on the other hand being overly cautious can also lead to missed opportunities. Finding the right balance—acting confidently but after thorough research—is key to success in a hot property market. 

Tune in to find out what mistakes #6 to #8 are…and start making smarter and more confident property decisions! 

For the full episode, tune in here: Episode 330 | Top 10 FOMO Mistakes Investors Make 

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Don’t Give in to FOMO When It Comes to Property Investing!

For the full list of FOMO Mistakes (#1 to #10) investors tend to make in a hot property market, fill in the form below and we’ll send you the report right away 😉 

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If You Enjoyed TPC Gold | 3 FOMO Mistakes Property Investors Make, You Might Also Like:

• Ep 210 | How to Recover from Making Every Mistake Possible in the Investing Game – Chat with John Hartill 
• Ep 347 | “Whatever You Do, DON’T Do What I Did!” – Listener Shares His Big Wake-Up Call – Chat with Scott 
• Ep 368 | Got Stung by a Spruiker: Restarting After Ten Years of Property Mistakes – Chat with Michael 

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Transcript

Bryce Holdaway
Number six is you buy without a finance strategy in place and the differentiator here is a borrowing capacity and a finance strategy. They’re two different things. We’ve said that property is a game of finance; not just a game of bricks and mortar. And if you don’t have a finance strategy in place, don’t buy just for FOMO reasons. It is such a significant part of it that you cannot skip here at all, Ben.  

Ben Kingsley
No, Bryce, I can give you some examples around rentvesting versus owner-occupier, right? So in a very simple context, if you get rent on top of your income, that constitutes the overall income that you’ve got coming in and that allows you to borrow more, right? So ultimately, if you’re ever buying for owner-occupier purposes, you might be able to borrow say half a million dollars. But if you go and buy an investment property, you can actually borrow $650,000 or $700,000 based on the fact that you’ve got this rental income coming in. Now the banks do some throttling or reduced assumptions on the percentage of rent that you’re going to receive down to 70% or in some cases 80% of the rent that’s going to be received. So this is all part of the decision making that you’re doing around what strategy, right? So that’s one simple example of being able to borrow more.  

Others could be if you’re on a yield strategy or an income strategy, you might buy two lower valued properties because you need some cash cows. And with those lower borrowing properties, you’ll got a 5% or 6% yield as opposed to a 2% or 2.5% yield on what we would consider scarce capital growth assets. So it is about combining those ideas and then working out where your borrowings can allow you to go. And that strategy and structure around lending. It’s not just a simple: I’ve gone on to a website and I’ve looked at a borrowing calculator and it says I can borrow X. The other part of that story for us is about shopping your lending. We have countless examples where some lender A will basically allow you to borrow a higher amount which based on our modellings can also work from a cash flow point of view. So it’s still responsible, but other banks and lenders and credit unions and all that might be really conservative. And there might be a $200,000 or a $100,000 difference in terms of the allowance of borrowing power. All of those things are considerations that need due diligence and due consideration.  

So I think from that point of view, that’s all we’re trying to highlight here is if you don’t do that preparation work, you don’t know what you don’t know. We also talk about offsets and the benefits of those types of things. We’ve done that plenty of times through other episodes. So you can just get a sense of if you don’t have a strategy, a finance strategy that’s well formed, you could be missing out on opportunity cost.  

Bryce Holdaway
Exactly. Even 80% versus 90%; all those sorts of things. So mistake number six is you buy without a finance strategy in place. Mistake number seven: you underestimate what it actually takes to play in the big leagues in a hot market. Now, this was so big that we did three episodes on it. But, because they lead onto the next one, which we could probably combine, which is number eight: you’re too impulsive or you’re too cautious. But if you don’t know how to play in a hot market, you’re going to get burnt in some way, which is really important. So we’re going to go on a learning curve that’s steep and expensive. 

Ben Kingsley
Yeah, you’re gonna need to understand the strategies to win in playing in a hot market. And as you said, we did those three episodes covering that just recently.  

Bryce Holdaway
So check that out, folks. So number eight, you’re too impulsive or too cautious. So this probably counts to the FOMO discussion that we’re having, but it is there. There (are) two ends of the spectrum here…that you’re just so gung-ho versus you’re too analytical and you don’t get in. But the idea that you just rush the process…getting through, getting through, getting through just to get into the market. And then it’s in the postmortem where you look back and see how well you’ve done during that rush. And that’s where you can uncover some of the mistakes that you’ve made.  

Ben Kingsley
Yeah, again, it’s just about levelheadedness. And you may need to lose before you win. Those people who try, you know, who are too competitive and try to win before they absolutely understand the market could be paying too much. They could be paying overs and they’ve got nothing to potentially benchmark that against.  

So we’ve talked about this Bryce, I mean, we talk about it often, but we were having a conversation earlier this week where I said there’s a strong correlation between the returns that you get and the effort that you put in. And when we sit down and we do a lot of seller hold reviews on existing portfolios for our clients. And we ask a simple question is: okay, which property do you think is underperforming and you want to sell? It’s this one here. Well, tell us the backstory on that property. Well, it isn’t really much. We were told for tax reasons we needed to buy a property. Here’s that story. Or, you know, we went and saw someone and they said, buy that or the other classic one as well. We know the area, we felt familiar with it…so we bought the house across the street in the same suburb and it hasn’t done anything. Or we bought an apartment because we wanted a place for our kids to go to university later on. That’s a classic one for me. You know, it’s like, and it’s just done nothing. So there’s all of these just little examples of not a lot of thinking; not a lot of strategy around that particular thing and it’s just impulsive or just: I just wanted to get it out of the way.  

Or the classic one is too cautious. I’ve actually been trying to buy a property for the last seven years. And I listened to all of the naysayers and the doomsdayers. And so they’ve put me into a fear of not doing anything. And now that everything is absolutely moving, I then have the confidence to move with the rest of the sheep to get into the market. So you know, there is some mindset work that needs to go on here. And there’s also some opportunity to outsource some of that knowledge to a professional. But if you’re not going to do that, you’re going to absolutely have to put the hard yards in, in my opinion, to get to a confidence level to know what you’re doing and you’re not paying too much.  

Bryce Holdaway
Yeah, I mean, you could think you’re paying market price, but the asset or the land is inferior. You know, or you could be buying stuff that’s not the norm for the suburb or is too small for the suburb, but in the FOMO-induced hysteria that’s out there, you just go, well, you know, isn’t the game just to get my name on the title? It’s well, it’s not until the dust settles…water finds its own level again. And you realize that you’ve made decisions that aren’t in the best interests of what you’re trying to do. Folks, it happens a lot. It’s exuberance. It’s just this…whatever it takes to get into the market. And it’s just not okay if you’re playing this for the long go.  

Ben Kingsley
It’s an awesome segue into number nine, Bryce.  

Bryce Holdaway
Go for it.