Look for age not properties,
I bet you all remember the joke definition of expert: “X is an unknown quantity and expert is a drip under pressure” – which means that an “expert” is an “unknown drip under pressure”.
James and I had lunch today at Hakkasan (a fabulous Michelin star Chinese restaurant) with one of our brokers and she told us the tale of a “property expert” who was now living overseas after his property company had fallen over in 2008. The story goes that he had acquired over 100 properties in a short space of time but foolishly failed to plan for rising interest, had fallen behind in payments and had not been able to maintain the portfolio. In the end, he was made bankrupt and moved overseas.
In other words, he had been a “property expert” right up until the point that his entire personal portfolio had been repossessed. To a large degree, we all fall into the trap of considering people with large property portfolios, experts, but I try to train all of my sales team to ask the further question: “how long have they had their portfolio?”
Far too often these people have built their portfolios with little or no capital, preferring to use cash backs and other shortcuts far too often and with little regard for cash flow and market cycles.
In fact, if you've been watching the news, you'll be aware that this is exactly what has happened to at least 5 “property experts“. All of these people declared themselves experts and led teams of sales people selling property on the back of their amazing ability to build a property portfolio.
Obviously I've never considered these people experts. To me, a property expert is someone who can build their portfolio, allow for cash flows, market cycles, unexpected changes in the market, increases in rates, decreases in values but most importantly hold their portfolio over the long term.
The lesson: never be impressed by someone saying they own 10, 20 or even 100 properties until you ask them how long they have held them. If they say over 10 years then by all means listen to what they have to say because let's face it the person who has held 2 properties for over 10 years is wildly more successful (and much more deserving of being called an ‘expert') than the person who has had 100 properties for only 4 years.
It's not the quantity that makes you an expert; it's the duration. After all, property investing is a long term investment.
Live with passion,