The Power of Thinking Long-Term in Property Investment

What’s your financial time horizon?

If you think about it, the average Australian has a very short financial time frame.

Often they live week to week and wonder how they’re going to get through financially till the next pay packet.

Then there are some Aussies who think about the months or the years ahead.

But, successful investors and business people think in decades.

The Magic of Decades Over Months

In the fast-paced world of property investments, it’s often easy to get caught up in the immediate challenges and setbacks.

The fluctuating market, the occasional bad tenant, the slight miscalculation in property value; increased government interference – these hurdles can be incredibly discouraging when we’re observing them through a microscope.

However, the true property maestro understands the art of zooming out and perceiving the bigger picture.

Once you adopt the habit of thinking in decades rather than months, everything becomes easier…

1. Mistakes Get Erased

Every property investor, myself included, will attest to the mistakes they’ve made over their career.

Maybe you’ve overpaid for a property, maybe you got too emotionally involved, or perhaps the renovation costs ended up much higher than anticipated.

Or maybe you’ve had the “tenant from hell.”

These hurdles can be incredibly discouraging when we’re observing them through a microscope, but as you expand your timeframe to a decade or more, they become mere bumps in the road.

They fade, both in memory and in their financial impact.

Mistakes, though unpleasant, are often our best teachers.

Learn from them, but don’t let them overshadow the broader journey.

2. Debt Gets Eroded

One of the constants of long-term property investment is the role of inflation.

The government and the RBA will do whatever it takes to create a level of inflation of around 2-3%. They have to: it’s one of the main ways they decrease their own debt.

So over time, inflation’s subtle effects mean your mortgage balance shrinks compared to your income and the value of your asset… even if you haven’t paid off a significant chunk of your mortgage.

While the numbers might not change, what they represent in the grand economic landscape does.

So if you own good property don’t worry about all the fuss in the media about inflation.

Instead of dreading inflation, embrace it as a silent ally.

When I bought my first investment property in the early 1970s it cost $18,000 and I went halves with my parents because I couldn’t afford to buy a property on my own.

We took out a $16,000 mortgage over 30 years having no idea how we were going to pay it off.

Interestingly we were excited because we got $12 a week in rent at the time.

Look what inflation has done to those figures.

I still own the same property today, having built two townhouses on it, with a combined value of close to $4 million, and the rent today is over $2,000 a week.

Look what time and inflation have done for me.

3. Market Timing Becomes Less Critical

We know the property market is cyclical, experiencing its peaks and troughs.

Sure we experience occasional downturns, like the 9% drop in property values in 2022 after most of our markets reached new peaks after the boom of 2020-21.

While no one wants to buy at the market’s peak, thinking in decades offers a liberating perspective.

Minor market fluctuations shouldn’t deter your investment strategy.

Over a decade, any short-term losses are often compensated by significant property price appreciation, debt reduction, and consistent rental income.

The bottom line

Time, as they say, waits for no one. But for property investors, time can be an ally.

Ten years will pass, regardless of our choices.

So, as investors, the question is whether we capitalize on this inevitable progression or get bogged down by short-term challenges.

The key is to embrace a long-term mindset.

See beyond the immediate hurdles and understand that with patience and persistence, the property landscape is one of vast opportunity.

Zoom out, think long, and let time work in your favour.

About Michael Yardney
Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He’s once again been voted Australia’s leading property investment adviser and one of Australia’s 50 most influential Thought Leaders. His opinions are regularly featured in the media.