15 Aug Is this a time to speculate? – Bateman and Harris
If something sounds too good to be true, then it probably is. Many opportunities are speculative. If you are simply throwing money at something and hoping to get a result, you are speculating. Successful investors know when and when not to speculate according to Property Mentors Matthew Bateman and Luke Harris.
Kevin: You’ve heard me say before. Sometimes, if it sounds too good to be true, it probably is. Like many opportunities that’ll come your way, this is speculative. If you’re simply throwing money at something and hoping that you’re going to get a result, then you are speculating. You should never do it with property.
Joining me to talk about this are Luke Harris and Mathew Bateman, The Property Mentors. G’day, guys. How are you doing?
Matthew: Really good. Thanks for having us.
Kevin: Good. Define “speculation” for me.
Matthew: All right. Speculating really is when you do put some money into an investment and you really don’t know three key components to the outcome of that investment. Number one is you don’t necessarily know your result upfront. You don’t necessarily don’t know all your risk upfront. And you don’t necessarily know the timeframes that you’re dealing with upfront. So if we can minimize those three elements, we turn more of a speculative investment into a more known-outcome, known-timeframe, and known-risk investment, then we’re really probably at the better end of investing.
Kevin: Is there ever a time for speculation, like if the market is running hot? Can you take that risk?
Matthew: Some people can and do. With speculation in property, though, unfortunately there’s no one who can tell you what the property you’re about to buy or have bought is going to be worth that day, the next day, the next month, the next year, or even the next decade. So when 100% of your strategy relies on the market to do all the work for you – that is, either values go up over time or your rental goes up over time – there is a degree of speculation.
What we aim to do is have multiple strategies that allow us to time the markets but also have time in the markets to allow that appreciative nature of property historically to help with the result.
Kevin: Do you see short-term rentals as a form of speculation?
Matthew: I think, in some ways, it can be if you don’t have that as part of your long-term strategy. Like I was saying, it could be a speculation if you’re just throwing your property out there into the short-term market, hoping it will work for you. But if it’s part of a long-term plan that’s being crafted out with somebody who has had the experience in that space, then as long as you know the risks and you know what the outcome is that you’re trying to achieve, if it’s out of a long-term plan, then absolutely not.
Kevin: One of the things we are learning about the short-stay market is that it really does depend on the area, what you need to do with the property, and the amenities that are there. So unless you have all of that covered off, in a way you are speculating, aren’t you?
Matthew: Yeah, exactly.
Luke: Absolutely. To a certain extent, we’re using a company called QuickStay [? 2:36] to do the rentals for our own properties. We found that, if you’ve done your research and you understand the risk involved and the areas that you’re going into and the types of properties that you have available, then again, as part of your plan, it can be a fantastic strategy.
Matthew: If I could just in on top of that, I guess the main point we want to make about speculation versus investing is that, for the vast majority of investors, they really don’t have that plan. They don’t have that highly defined outcome that they’re actually chasing in the marketplace. So what they tend to do is make a decision – “I want to invest in property” – and then they go straight to RealEstate.com or Domain.com and they start looking at properties.
What we say is that, before you start looking at properties, perhaps as smarter way to do it is to sit down and actually decide on, upfront, what type of investing you’re going to do, what sort of returns you’re going to chase, what risk levels you’re willing to take on, and what timeframe you’re hoping to achieve all those results, because then you can get clearer in what you’re actually trying to achieve.
Kevin: It’s a very complex situation to sit down and do all that. One of the reasons why your company exists is to be able to mentor people through this. Sometimes we don’t know what we don’t know.
Luke: 100%. I think this comes down to the reasons why we started The Property Mentors in the first place. Matt and I, as property investors ourselves, were out there like everybody else, trying to get the best results we could. But the problem is that there’s so much information out there. Where do you start?
As a property investor that wants to get great results, we realized that, after many years of trying to do it ourselves and reading books and magazines and going to seminars and all the things that were out there, you really need to work with somebody who has been there and done that before.
If you’re really looking to get the results in property investing, you have to ask yourself, “Am I looking to get a small result or a big result?” If you’re looking to get a big result, it really helps to work with somebody who has already got a big result in property investing.
Kevin: Is there ever a time to speculate?
Matthew: It comes back to the plan. As a part of your plan, you might have some high-risk speculation. You might think about doing something like long-term land banking as a speculative plan and hope that planning and zoning changes come through in the time that you’re alive to be able to capitalize on that. It might be that you’re going to take a speculation on some higher-risk strategies, but it should always be a part of the longer-term plan.
As I said, there are really things that separate speculators and investors: how much of your risk you can know before you start, how much of your reward you can lock in before you start, and how much of the timeframe you can control within your investment.
Kevin: Guys, great talking to you. Thank you so much for your time, Luke Harris and Matthew Bateman from ThePropertyMentors.com.au. Thanks for your time, guys.