What snowboarding taught me about Property Investing
Recently I took a trip to the Australian snow fields. Rather than spending the whole time at the resorts, a couple of mates and I decided to head into the Australian back country for a week of pristine snowboarding. While many people overseas (and probably at home too) laugh at the idea of snow in Australia, I can assure you a trip like this isn’t easy. Knowing where you’re going, carrying all of the food and gear you need for a week in extreme cold, monitoring weather and snow conditions and enduring night after night in a tent so cold that your water bottle freezes solid next to your head requires a great deal of planning, preparation and some luck to ensure you get through it unscathed.
While I had a great time on the trip and we did make it out successfully (thanks in part to the amazing NSW Police Search and Rescue team), I couldn’t help but reflect on the similarities between a trip like this and the planning and preparation involved in property investment.
The planning phase.
While out on this trip, I had the privilege of meeting the team willing to put their lives at risk to rescue those who get in trouble while out exploring our incredible Kosciuszko national park. While chatting with them, it became clear that so many of their rescues occur because of people going out under prepared. Often without much forethought or experience, people will set out to hike Mt Kosciuszko or one of the other peaks around the area. The weather looks clear in the morning and so they set off with little gear and food, expecting to achieve their plan with little trouble.
Amazingly, this is often how people approach the purchase of their first investment property as well. They may have a vague objective in mind. An idea that they want to be able to retire comfortably one day, but without a clearly defined path to follow. They then see that the property market is rising and so quickly try to gather their supplies and rush into a purchase before they miss out on the opportunity.
Unfortunately, the weather doesn't stay good for long in the mountains. Storms come through quickly and catch the unexpecting and inexperienced out. Even for those well prepared, injury, sickness or gear failure can cause things to go bad, turning a pleasant day out into a life threatening situation very quickly.
Just as weather and snow conditions are cyclical in the mountains, so too is the Australian property market. Cycles of boom, downturn, stagnation, and upturn are a historical reality. For those caught out in the mountains, fortunately there is a dedicated group of people willing to risk their lives to try to help you get out of trouble. For investors though, while the result may not be life threatening, the results can be similar. Good times don’t last forever, and as the property markets shifts away from boom times, unprepared investors can quickly find themselves holding onto a property that is taking away their money each month rather than adding to it, or holding onto something that they can no longer afford. Potentially worse are those properties where the damage isn’t quite so obvious. An underperforming asset, particularly purchased over market value may not cause immediate discomfort, however also may not see any real gains, leaving the investor unaware that their dream of comfortable retirement isn’t actually getting any closer.
Ultimately, whether navigating the Australian backcountry or investing in real estate, starting out without a clear goal or a well-thought-out plan is a high-risk gamble. While a handful may get lucky and emerge unscathed, the majority risk getting lost, over-exposed, and facing serious consequences. In property, these consequences aren't life-threatening, but they can be financially devastating which is why the most successful investors have a clear destination in mind and a detailed plan to get there. They have stress-tested their finances, researched their chosen location thoroughly, and have a contingency plan in place for unforeseen challenges. This disciplined, data-driven approach is the only way to ensure your investment journey is a purposeful and profitable one, leading you safely to your goal of building long-term wealth.
