Property investment can appear to be a minefield, with investors either making huge windfalls or crashing and burning… depending on what you read in the news.
Ignore the news because in reality successful investment is methodical and almost boring. Good investors devise a repeatable, controllable process and rarely deviate from it. They have clearly defined what they are working towards and stick to the path.
Many successful investors, even if they don’t know it, use S.M.A.R.T goals, which means their goals are:
- Time bound
What is a S.M.A.R.T goal? Lets illustrate that with an example of what it isn’t.
“I want to be able to give up working someday”…. ummm, this matches none of our criteria for a S.M.A.R.T goal! How do you measure “someday”.
“I want to be able to retire at 55″…. OK, we have a deadline but not much else to go on.
“I want to have $50,000 in passive income to retire on by the time I turn 55″…. Getting better, we have a specific goal and a deadline. The goal is also measurable, so 3/5. But if you spend $60,000 per year you still can’t retire (unless you plan to cut your spending, hint hint!) and what if you are 54 years old and have no passive income – the goal may not be achievable.
“I want to invest in property to build up a passive income of $50,000 per year over the next 20 years, by which time I will be mortgage free in my own home and able to retire on that amount.” Boom, $50,000 is specific and measurable, it is probably achievable to do this over 20 years due to the miracle of cumulative gains, we have a deadline and we know we will be able to retire on that amount.
Why is it important to distill your goals? It does two key things for you
- You gain clarity on what actions to take to move towards your goal
- You gain peace of mind from ignoring distractions that would deviate you from your chosen path
When somebody asks me how to property my first response is to ask why they want to do so, what I’m really looking to see is how clear and S.M.A.R.T are their investing goals. Once those are clear in your mind the “what”, “how”, “where” and “when” components of property investment are far easier to work out.