25/11/2014
The First Law - Invest In Yourself First
People are willing to risk millions on property or any other investment, but are not prepared to spend the time and money finding out how it works.
Ask yourself these questions:
1. How much time did you spend planning your last holiday?
2. How much time did you spend consulting the manual for a new DVD/TV/video camera or other electronic plaything?
3. How much time do you spend doing the leisure activity you enjoy most?
4. How much time did you spend researching the last property you bought - real value, how much houses in the area were going for, total costs, levies, repairs, expected rental, the area, future planning in the vicinity, growth of the area, management and running of the complex/area?
The DVD cost, say R1 000-00. The property cost maybe 500 - 1000 times more - or greater.
If you get it wrong with the DVD what does it cost you? Another hour of fiddling?
If you get it wrong with the property, and say you have to sell in a hurry and everyone else has to too, so prices drop - what does it cost you?
Hundreds of thousands of Rands?
And yet (and this amazes me) - people resist doing the homework, learning the material, attending the courses, and reading the books, that will tell them how to do it right.
Stages of learning - the professional's journey:
1. When you started out, you knew very little (incompetent).
2. Worse still, you did not even know that you knew nothing (you were unconscious or unaware).
3. Then you started learning (gaining knowledge).
4. As you did so, little lights started going on (comprehension) - and you discovered all sorts of interesting things.
5. Gradually, you could start explaining what you discovered to others and even start using your knowledge in your daily life (application), to make your life easier, more profitable and more enjoyable.
6. As you started using your knowledge in this way, others saw it and started coming to you for advice (conscious competence).
7. So you felt good about it and you started looking more closely at what you were doing (analysis) and looked for new ways of improving what you were doing.
8. Surprise, surprise, you found that you were still far away from "the ultimate" and that you could go on exploring and improving forever.
9. One day, a light suddenly came on, and you discovered that what you were doing all along actually had a lot to say about something which you had always thought had absolutely nothing to do with your field (synthesis, wisdom). So you started applying your experience there as well.
10. In the meantime, you had become so good at what you were doing that when someone asked you after a particularly spectacular success, "But, how did you DO that?", you thought about it long and hard, until you realized that you couldn't actually answer the question because you had internalized it so much (evaluation and unconsciously competent).
Wealth is riches plus wisdom.
That is the journey of the professional. It doesn't come easily, it doesn't come for free and it certainly doesn't come overnight.
It is a journey of self discovery and growth. It is a journey of awareness and understanding; of questioning the status quo; of realizing that if you do not choose to educate yourself, others will by means of the advertising messages we are saturated with. (If you are interested in this journey, you may wish to visit www.hannesdreyer.co.za where I show how I turned a 79 cents investment in to more than R10 million in less than two and a half years without standing security or making use of bank loans.)
There are systems to guide you. And by following the same systems you can do it too.
A lot of it is simple, common sense, and easy to do.
For example, if you're buying a flat and the seller tells you what the levy is, a simple phone call to the managing agents can double check that figure and often give you a surprise. But it does take that bit of extra effort.
Economic booms encourage a lot of wild buying. The word 'investment' is applied very loosely. Often it means 'we expect prices to keep rising so the capital value will improve over time and maybe catch up with the overpriced figure we're asking for'.
As a property investor, is this the kind of 'investment' you're looking for? Is this advice the kind you're going to stake your money and your future on?
10 minutes of analyzing a 'great investment opportunity' told me that the developers were subsidizing the first year's repayments - to make it look like a better investment - to disguise the fact that the figures said otherwise - to those who bothered to do the calculations - and knew how!
On the other hand, quiet times in the market lead to another string of unexamined nonsense - like 'falling values' and 'doldrums' that has nothing to do with whether the investment is a good one for your purposes.
My property students know - don't listen to any of this - just look at the numbers. Do the calculations and then make your decision.
You have a huge responsibility to ensure that you know how property works and what the returns, risks and hazards are. You have to attend courses, read books and apply the principles to your daily actions.
You should fully intend to stop relying on your current job to provide your income needs. Aim to do something that you really want to do - for free if necessary, because all your income needs will be met out of your property annuity and capital realization.
This is the first mindset change you need to make - if you don't, you will never really be successful or achieve what you are capable of.
Don't confuse property investment with speculation.
If you want to speculate, go and buy some shares (or visit your local casino)!
However, if you are prepared to put in what it takes, you will be richly rewarded. The PROOF is there.
People will spend millions on paying their monthly bond instalments (like sheep) but will spend nothing to learn how to pay less or even find ways to avoid paying those bond instalments completely. Why?
They don't think. They don't ask questions. And they're too lazy to bother to learn.
The importance of the right knowledge.
We are fortunate to be living through an era of abundant information. It comes in various forms:
Data: a mass of figures, statistics, details like names, addresses, phone numbers.
Information: data organized in meaningful ways - for example, the names and addresses listed alphabetically so that you can use them.
Knowledge: knowing ways of adding value to that 'raw information' - for example, knowing that you can send letters to the people at their addresses, to inform them of something or sell something to them.
Wisdom: integrating this knowledge with an understanding of what it means and where it can lead to; the possibilities; the connections.
Information abundance is great! It has wonderful opportunities and it is very empowering. But what is still limited is your ability to select, absorb and use it.
Select, absorb, apply!
It is a fallacy to think that knowledge is power. If you do not know how to apply knowledge, it means nothing except that you are a walking encyclopaedia. Okay, that's better than rotting in front of the TV, but don't kid yourself that you are using knowledge to your advantage.
Instead of allowing yourself to drown in a deluge of information, if you can learn to decide what you need, find it easily, absorb it and apply it - then I would say you really know how to learn. You know how to make information work for you and you are investing in yourself.
How to make use of the information abundance:
First decide what knowledge you need.
Then find a way to get the knowledge, fast and easily.
Then absorb and internalize it.
Then learn how to apply it.
Then apply it - try it out.
Each step has its challenges but I would say the major ones are these:
Decide what you need to know.
Learn to use the tools well e.g. internet search engines in order to find the information you are looking for fast and easily.
Commit time and effort to absorb and internalize what you have learned.
Learn how to apply your knowledge by practising and revising the information.
Apply it by acting.
Getting the basics right is always the most important thing because everything else is built on them. So, a final word on Step One: Decide what you need.
When I say 'focus' and 'clarify' I mean, be very sure about what you are looking for.
Example: 'I am looking for property investments.
This is not a clear thought. Do an Internet search on 'property investments' and over a million sites will come up!
Clarify. Answer these questions for yourself:
1. Will this kind of an investment bring me closer to my goal?
2. What IS my goal?
3. How does this kind of investment fit into my financial plan?
4. Will it get me there quicker?
5. What can I do to improve the return?
6. How can I minimize risk and maximize income?
7. How can I 'cut through the clutter' and find real value? In terms of properties for sale as well as knowledge of this area?
Now rephrase your statement:
"I am looking for ways to learn how to invest in property so that I can create an income with minimal risk and hassle."
