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Property done properly: know your potholes from your pots of gold as millionaire investors reveal their top five portfolio mistakes

June 13, 2014Article by Ray Withers

Our slogan at Property Frontiers is “property done properly.” Over the years I have been asked: so how do you do property properly? My answer might vary in the details, but the essence remains the same each time – by making as few mistakes as possible and, preferably, none at all.

Of course, the way we often learn is from making mistakes. When it comes to investing our money, however, mistakes can turn out to be costly. This is where an agent such as Property Frontiers steps in, as we’ve already navigated the markets and can more easily recognise the potholes from the pots of gold.

Alternatively, you can learn from the mistakes of others. Step forward the millionaire investors who were recently surveyed by deVere Group to reveal their top five investment mistakes. The global group, which has more than 80,000 clients worldwide in the UK, USA, South Africa, Hong Kong, Japan, the UAE, Indonesia and Thailand, surveyed 880 high-net clients with assets of more than £1 million each.

Mistake number one: lack of diversity

The number one mistake at 23 per cent, was failing to adequately diversify their portfolio. Of course, if you have millions of pounds worth of capital to invest it is easier to create a varied portfolio. That said, it’s not impossible to diversify your portfolio on a budget. Alternative finance options such as non status developer finance, along with buy back options, flipping and remortgaging can help give your portfolio the injection of diversity it needs.

Mistake number two: no plan

The number two mistake is one of my own personal bugbears – investing without a plan. A significant 22 per cent admitted to investing without a long term plan. The need for a masterplan is my number one golden rule, as covered in my recent three golden property investment rules blog.

It is absolutely essential you know what you want to achieve from your investments and in what timescale. Are you after income now, longer term growth, or both? How much capital do you have to invest? Can you get finance or free up capital from elsewhere? Asking yourself these questions will help you tailor the types of property, from category and price through to performance, to suit your own individual needs. Remember, investing without a plan is not investment at all, it is gambling.

Mistake number three: emotional decisions

The next big mistake is acting on emotion. 20 per cent cited making decisions as a massive error. Yes, most decisions in life are emotional to some degree, but investments should always be assessed with a clear, logical mindset. It is fine to get excited about an opportunity and you should feel pleased with yourself when signing an excellent deal, but make sure your excitement doesn’t blind you to the facts and figures.

Mistake number four: failing to review a portfolio

Big fat mistake number four is the failure to review a portfolio. 16 per cent of those surveyed admitted to falling foul of complacency. We all know the importance of due diligence when assessing a deal, but it is easy to forget the ongoing maintenance. By that I mean to check back and make sure your portfolio is running smoothly and everything is performing as it should. It is a little like looking after a car – you still have to put fuel in and give it an MOT every now and again. Even the best portfolios can go off target over time, so they need to be reviewed and rebalanced to ensure they are doing what you want them to.

Mistake number five: placing too much focus on returns

The number five top mistake is, perhaps a little surprisingly, putting too much emphasis on returns. Hang on … aren’t returns supposed to be a good thing? Well yes, but concentrating too heavily on historical data as opposed to looking at future projections, can work against you. The future investment situation is likely to be different from time-aged averages and past averages might have little bearing on the returns you will actually receive.

Avoid costly errors the Property Frontiers way

Further mistakes cited include impatience, investing near the top of the market, adhering to recommendations from acquaintances and paying unnecessary tax on investments.

Nigel Green, deVere’s founder and chief executive, tells us: “Mistakes investing can and do occur – it is how they are best avoided, or at least mitigated, that is the key to success. Learning lessons from people like those we polled, who have overcome these common investment mistakes to go on to accumulate significant wealth in the longer term, is a way to reduce costly errors.”

Get in touch on +44 1865 202 700 to find out how we at Property Frontiers can help you avoid the top five investing mistakes and do property properly for a diverse portfolio which performs as you want it to.

Author

Ray Withers

Ray has over 17 years’ experience in the international property market and bought his own first international property investment back in 2002. Aside from running Property Frontiers, Ray has been involved in residential, hotel, student and commercial property investment and development in both the UK and overseas and co-wrote "Where to Buy Property Abroad - An Investor's Guide". As Founder and Trustee of the Frontiers Foundation, Ray is directly involved with many of its projects to ensure they have a direct and tangible impact in individual communities across the globe. He is passionate about property, travelling, scouting out new opportunities and finding time to spend with his young family.
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