MOTIVATION | BIGGEST INVESTMENT MISTAKES
Successful investors reveal:
My biggest mistakes
and lessons learned
One of the surest ways to succeed is by learning from others. Knowing what to avoid from
their mistakes, and what to adopt from the lessons they learned, will help you succeed
yourself. To this end, we quizzed Australia’s most notable and successful investors, who
have shared the mistakes they made and lessons they learned from their investments
Elaine Chase
Property investment
coach at Positive
Real Estate – owns 12
properties worth $5.7m
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Mistakes
Choosing high-yielding
properties over capital
growth properties. Highyielding properties are normally in undesirable areas or
regional/mining towns where capital growth is minimal or
even non-existent.
Lessons
Rich Harvey
Target properties that people will want to live in when you
sell. They have to be in desirable areas and need to have
something special about them, like city views etc. This will
always give you the most capital growth as people buy with
emotion when it comes to their PPORs.
CEO and buyer’s agent
www.propertybuyer.com.au
David Shaw
My biggest mistakes and lessons learned
Over the years, I have made
and seen the following
mistakes in relation to
investment property
purchases:
Director, WSC Group
• Buying an investment property with a pool was
a mistake – the extra rent does not cover the
maintenance.
• Procrastination has also cost me a lot of money –
analysis paralysis in a rising market can mean you miss
the boat.
• Investing with a developer in a mezzanine fund
without sufficient security was one of the biggest
mistakes I made early on in my investing career. I did
not understand the risks at the time or have the proper
strings attached with documentation. I lost the lot but it
taught me to double check valuations, security docs, and
the character of people you deal with.
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Mistakes
•
•
•
•
• Buying overpriced
property.
Investing in mining towns.
Investing in development projects.
Buying commercial properties, particularly in
regional areas.
Buying too many properties.
MOTIVATION | BIGGEST INVESTMENT MISTAKES
Lessons
• Make sure you get a bank valuation on every property
you purchase.
• Don’t buy in mining areas as they are too dependent on
the mining industry’s success.
• Don’t go into projects with partners who have less
money than you.
• Commercial properties, especially in regional areas,
can be extremely risky and unreliable as a solid
investment.
• Buy within your budget and allow yourself a $20,000
buffer per property, as cash flow is essential when
developing multiple investments.
Andrew Crossley
Author, investor –
owns 12 properties
worth $4.3m
• Don’t get blinded by the price. Stick with the
fundamentals.
• Avoid getting emotional and being influenced by the
exuberance of others.
Tyron Hyde
Director, Washington
Brown
Mistake
• My number one mistake
has been selling property. We
recently did a depreciation
schedule on a property that I
used to own 10 years ago. The
person I sold it to back then
just re-sold it for more $500,000 over what I achieved.
Lessons
Mistakes:
• Trusting a spruiker/
property marketing
company and not
undertaking enough of my
own research.
• Not starting my investment journey at a younger age.
• Not getting a property inspection done on a couple of
my newly built properties.
Lessons:
• Always do your own due diligence.
• Start as soon as you can.
• Never blindly trust the job the builder has done.
• Don’t believe the hype. Property prices don’t always go
up. That’s one of the most often touted lies. Sure, if you’re
not forced to sell in a downturn then you can always hang
on and claw your way back, but that isn’t the case for
everyone.
• The banks will lend you more for an off-the-plan property
investment than they will for Woolworths or BHP Shares,
for instance.
So, if you can gear into a property with a 5% deposit, remember,
all it takes is for that property to go up 5% for you to double
your money, but if it goes down by 5% you’ve already lost your
equity. This excludes all exit and entry costs, which would
make the situation worse. Sadly, this is where most investors
don’t do the maths.
Darius Darisman
Michael Tiemens
Investor – owns
5 properties worth
$3.85m
Small property
developer
Mistakes
• Getting too comfortable
with the buying process and
ending up buying property
unsighted.
• Buying properties
outside of a 15km radius of the city.
• Buying two cheap properties in an ‘all right’ suburb
rather than buying one property in a blue-chip
suburb.
• Getting caught up in the hype and buying at boom time,
paying a premium price due to the competition.
Lessons
• Be fastidious with your research and avoid cutting
corners.
• Buy closer to capital cities.
Mistakes
• Flying blind with your
architectural drawings. I’m
a big believer in having any
building plans cross-checked
by another professional,
either a quantifier or
estimator, particularly if you’re not skilled in reading
detailed plans. I once used an architect based in the city to
design a project for the outer suburbs. You guessed it: I got
a design that was suited to the city and that cost more to
build but didn’t fetch a greater end sale price.
• Setting unrealistic timeframes. It’s easy for an
early-start investor to set ambitious deadlines, but the
reality is the project is going to take longer than first
anticipated. I had a project that blew out timewise
while another one was starting, and it was simply
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MOTIVATION | BIGGEST INVESTMENT MISTAKES
because I set an unrealistic timeframe to complete.
• Pulling the trigger on a deal without a detailed financial
feasibility study. Particularly when starting out, this can
be a common mistake made simply because of the time
and work involved in putting together all of the unknown
numbers.
Lessons
• Do your homework. Be specific from the start, and
if you’ve already chosen a builder prior to having the
project designed, make sure they are a big part of the
planning and design process.
• Scheduling trades, unexpected issues, and running back
and forth from Bunnings can all add to the time blowouts,
especially if you’re managing this on your weekends
and after hours. Surround yourself with people who
have completed similar deals and can guide you through
pragmatically.
• When faced with a hot sellers’ market, investors are
pushed even more to make quicker decisions. You’re
far better off leaning out of the market for a while and
focusing on firming up your strategy, getting crystal clear
on the numbers and then pouncing on the right project.
Steady, aim and fire.
Miriam Keen
Owns 3 properties
worth $1.33 million
in a town that was cheap and I was a poor university student
who wanted a rental property. Determined to get onto the
property ladder, I ended up purchasing a 1950s three-bedroom
weatherboard house on a quarter-acre section for $99,000 back
in 2006 with a $15,000 deposit that was my life savings.
It rented for $155/week and I figured it would have scope
for renovation and subdivision potential in the years to follow.
The mortgage was locked in at a five-year interest rate of 7.55%
(at the time the cheapest available), and the loan on a 15-year
term with minimum P&I payments of $344/fortnight. The
town itself was once a thriving community with abundant
job opportunities through the local forestry and mill works,
peaking in production in the 1970s.
Over time, though, through downscaling and restructures
in operations, this major town employer cut jobs, which in turn
forced workers to relocate to other towns to seek work. With
the lack of job opportunities, the population has gradually
dwindled to almost half of what it was in the late ’70s and
continues to decline year-on-year.
There is no population growth to create demand for housing,
therefore capital growth has been non-existent, if not negative,
“Before purchasing
this property I failed to
research capital
growth drivers”
Mistakes
My biggest mistake was
being ‘suckered in’ by a slick
property spruiker. Both
my first and third property
purchases made purely from
my own research have so far
proven a major success. However, with my second purchase, I
stupidly trusted the wrong person and their so-called ‘research’
instead of conducting my own due diligence.
Consequence: Bank valuation two years later shows a loss
of over $65k – not to mention time and opportunity costs!
Lessons
Always conduct your own due diligence!
Evan McLennan
Investor – owns
6 properties across
NSW, Qld, SA and NZ
and there is currently an oversupply of rental properties on the
market. Before purchasing this property I failed to research
capital growth drivers, vacancy rates, population trends,
and any local planning regarding infrastructure and future
developments.
I have noticed that as the population decreases the council
rates are really increasing to cover the cost of fewer ratepayers
in the area. But to all negatives there is always a silver lining.
Nine years on I am still the owner of this property and it is
currently tenanted for $150/week.
Being a regional centre it does show a plausible rental
yield, which covers the mortgage repayments and most of
the property’s expenses. The local council is doing its best
to regentrify the town and slowly there are looking to be
improvements.
Without any growth in equity to redraw, I have had to save
the next house deposit in its entirety, and it was some years
after this first purchase that I was able to buy again.
But now, not quite 10 years since my first property purchase,
I am up to property number six, with a portfolio spread across
NSW, Queensland, SA and New Zealand, and I’m not looking at
stopping there!
Mistakes
Buying because it’s cheap.
Price is not the reason to buy.
I purchased my first rental
property back in NZ when I
was 21 simply because it was
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Lessons
While I would never rule out investing in an industrydependent town, this first property purchase has taught me the
importance of diversifying one’s portfolio and not having all
one’s eggs in the same basket.