- Financial freedom comes from owning assets: The ever-popular Michael Yardney book 'How To Grow A Multi-Million Dollar Property Portfolio in your spare time' makes it sound simple: the rich invest their money into assets that make them more money.
While property investing may be simple, it's not easy, and that's not a play on words.
We know that 50% of those getting into property investment sell up in the first five years, and 92% of those who stay in the game never get to own more than one or two properties.
So, Michael suggests taking a strategic approach to property investment and getting a good team around you because property investment is a process not an event.
He also explains that the average Australian will never get into property investment as they are stuck in the rat race because they spend all their money on living for today which means they never break free from exchanging their time for money.
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Pay yourself first: Instead of investing with whatever is left over at the end of the month (which is likely to be nothing), Michael suggests you automatically shift money into your offset or savings account as soon as you get paid, treating it with the same importance as your mortgage and any other bills.
It’s so simple it seems like it shouldn’t work, but it does.
- Debt is a tool: I still remember this lightbulb moment from reading this book years ago.
Like many people, I grew up with the idea that debt is bad, and you should avoid it at all costs.
I remember how happy my parents were when they finally paid off the mortgage on their own home.
Many property investors who’ve read 'How To Grow A Multi-Million Dollar Property Portfolio in your spare time' still aspire to be mortgage-free on their own home one day, yet are comfortable owing millions of dollars in properties against their property portfolio.
They understand the difference between good debt and bad debt, and the power of leverage.
The rich recognised that having debt is not a problem, however not being able to repay debt is a problem.
On the other hand, the poor are scared of debt because they're not financially fluent they’re not money savvy.
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- Become financially fluent: When you master money it becomes your slave so it’s important to educate yourself and become financially fluent.
Unfortunately, most Australians learn poor money habits from their family and peers, so Michael explains the importance of getting mentors and the right people around you to keep you on track.
- Residential real estate is a high-growth, relatively low-yield investment: Many people want to get into property investment because they need more cash flow, often because they're not good at managing their money.
But that's not how residential real estate works.
In his book, Michael explains the importance of capital growth because if you don't get growth from your properties, you can't build a property portfolio of sufficient size to one day give you the cash flow for financial independence.
He explains that while cash flow keeps you in the game, it’s capital growth that will get you out of the rat race.
In fact, Michael mentions the important lessons he learned from playing Monopoly with his grandchildren.
He says that no one wins Monopoly owning Old Kent Road.
However, playing Monopoly teaches you that you need cash flow to stay in the game, but everyone still wants to own the same high-end properties on the Monopoly board to win the game.
Monopoly also teaches you that you can add value to your portfolio through building houses and even mixed-use developments like hotels in your portfolio.