Property investment is a great wealth creation vehicle when approached with the right mindset and with the backing of education. Today, I share the 10 critical lessons I’ve learned while assessing and investing in Australian residential real estate over the last two decades.

1. Be Patient

A property is ten times more likely to double in value If you hold it for ten years or more

2. Know the Risks

Without risk, there can be no reward. Your job is to understand the risks of investing so that you can mitigate them to the greatest extent possible. Establishing a professional support network can help you tackle those risks head on.

3. Keep Buffers

Buying a property can be easy, maintaining it takes time, commitment and support. Ensuring you have a financial buffer means you’ll be able to hold the property long enough to reap the benefits of capital growth. It also means you won’t stress as much when life throws you a curve ball.

4. Research

All property is not created equal. Property markets move in cycles and knowing when, where and what to buy is critical to success. You’ll need the ability to assess, and draw insights from, a range of qualitative and quantitative information. Or, alternatively, partner with a professional that can guide you through the process.

5. Get Real About Growth

There’s a widely held perception that if your property doesn’t double every seven to ten years, it’s a poor investment. Property is unique in that you can own a relatively large asset with a small investment (your deposit). A small amount of growth on a large asset can give you a bigger gain than a large amount of growth on a small asset. You can potentially achieve a return on investment of 10% even if you’re your property grows at an annual rate as low as 3.6%.

6. Property Markets Are Stable

Between 1970 and 2016, year-end prices in Sydney declined only four times (once every 12 years). Over the same period, prices in Melbourne declined only six times (once every eight years) and in Brisbane two times (once every 23 years).

7. Don’t Be a Speculator

A case study in speculation:

  • 2004 – 2011: Sydney prices increased only 3.5%
  • 2011 – 2017: Sydney prices increase by 97%

Had you been a speculative investor between 2004 and 2011, your experience would more than likely have been grim – with your property declining in value when accounting for inflation. Property investing is best served by a long-term strategy.

8. Procrastination Can Be Costly

Over the last decade, capital city house prices increased by $250,000. That means procrastination costed you $25,000 in additional wealth per year – more than twice what a typical household saves.

9. Buy the Right Asset

The right property for one location isn’t necessarily the right property for another. Given price growth is a function of supply and demand, assessing changes to demographic profiles and how that impacts demand gives you the best chance of securing an outperforming asset.

10. Time In

The best time to plant a tree was 20 years ago. The second-best time is today – Chinese Proverb. The best asset you have when investing is time. How many times have you heard someone say; ‘I wish I had bought then, prices were so cheap!’ or ‘I wish I’d bought two’. The reality is, prices only seem low in hindsight. Your role is to be in the market long enough to capture as many growth phases as possible.

Approach property investment as you would a business transaction. The more your decision process is governed by emotion, the more you open yourself up to risks.

Get educated, build a support team and take action.