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The biggest killer of wealth - analysis paralysis

Posted by Paul Wilson

All too often we get caught up in every-day reports of how the Australian property market is performing – predicting the next boom, revealing property hot spots for the best returns, and trying to anticipate when the confidence ‘bubble’ will burst.


Many of these mainstream reports can contradict each other depending on who’s commenting, and what their take on the current market is.


To put it all back into perspective, the latest Knight Frank Global House Price Index confirms that Australia has one of the most profitable property markets in the world.


We ranked seventh out of 54 different countries in terms of house price growth in the past 12 months – so ignore all the pessimistic media reports because in reality, if you own real estate in Australia, you’ve clearly made a sound investment.


While the index found that house price growth had slowed throughout the world for the first three months of 2014, this is the first time since 2008 that no single country tracked by the index recorded an annual price fall of more than 10 per cent.


Australia recorded price growth of 10.9 per cent for the year, a percentage that put us, the United States and Iceland alongside several emerging markets in the top ten rankings for annual price growth.


It’s good news for investors who have a token on the monopoly board, but for those who are ‘just waiting for the right time’, it comes as an unwelcome reminder of what they’re missing out on.


Excuses, excuses, excuses

If your excuse is that renting is the cheaper option, prepare to be defeated because according to RP Data, nearly 700 suburbs in Australia are now cheaper to buy than rent – there goes that argument. The only time I think rent money is completely dead money is if you’re not investing. Rent can be very effective at capping your bad debt at just the rent, however if you’re doing this and not leveraging into wealth creation then you are missing out on a big wealth creation opportunity

The cost difference between buying and renting in Australia has fallen significantly and rental rates are rising, up 3.2% over the past year for houses and 2.8% higher for units across the capital cities.

So with endless real estate opportunity in a top performing Nation, our very own backyard, why are so many ‘wana-be-investors’ holding off from the buy?

Two words: Analysis Paralysis

The symptoms

Put simply, Analysis Paralysis puts you in a position where the cost of decision analysis exceeds the benefits that could have been gained by enacting the decision, minor or major.

If the following symptoms sound familiar, you might be suffering from Analysis Paralysis:

-       You read every piece of property media and feel overwhelmed when you find conflicting trends

-       You’ve saved for a deposit but you haven’t touched a loan application

-       You’ve inspected countless properties and auctions, just to get a feel for it

-       You’ve been waiting for the ‘right time’ for over two years

In my experience with clients who suffered from Analysis Paralysis, I can confirm that the most common repercussion of the syndrome is the feeling of regret.

No money could buy back the time they spent overanalysing every aspect of their (non-existent) investment journey.


Real life example

Just the other day, one of my clients named Anthony sat in my office telling me he’d let the past 10 years of opportunity slip past him. Now single in his mid-40s, with no children and earning a six figure income, he can’t help but feel regret. Anthony purchased two properties in his own neighbourhood, one in 2007 and the other in 2009, on his own without any consultation or investment strategy.

The capital growth has been low and the income is only just servicing the debts, and while the properties are not costing him anything to hold, there has certainly been an opportunity cost due to the lack of action and focus for building his portfolio.

Over the past 10 years, even if Anthony had followed some of our most conservative investing opportunities he would have a serious amount of equity and his wealth creation position would be strong.

I often say that procrastination is one of the biggest killers of wealth and this is certainly true in Anthony’s case. If he had engaged our help sooner he would have had more momentum, purpose and focus which would have resulted in the necessary activity needed to generate the success he intended to achieve.


Just do it

If we can learn anything from Knight Frank’s latest report, Anthony or Nike, it’s that you have to make a start if you want to reap the benefits.

With the right support and education on property and investment, you can start your investment journey off on the right foot.

Being in the top ten countries for solid price growth should give you enough confidence to take that next step, but if it’s not, talk to me about how you can gain some momentum in order to achieve your real estate investing goals.


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