A tale of magic internet money and bricks and mortar

I'm not in any danger of being mistaken for an accomplished crypto-investor. Sure, I have a bit here and there however a couple of years ago Bitcoin seemed like magic internet-money as my brother @tarazkp so inventively called it in a chat with me a little while ago, and I really had no idea about it. Now, since my involvement in steem I hold several different crypto's and know more than I did before about it, but not as much as I'll know in the future.

Having said that, I am certainly no stranger to investment and have commercial and residential property, precious metals, fiat, investment funds and other investments which all just tick over in the back ground, under my watchful eye. Yay for me.

A while back I ran into a guy, a friend acquaintance of sorts who I had not seen for over six months. We ended up having a drink at the pub and during the ensuing conversation he told me he had just bought a property [residential] as an investment. Legit right? [Well, maybe, maybe not. Time will tell.]

The last time I saw him he was investigating Bitcoin as a possible investment as he had a reasonable sum of money to throw down. That was around early 2018 I guess.

Over our beer at the pub he told me he spent over 12 months researching it and around April this year had decided it was a complete scam and that he'd bought a property instead. His extensive research into Bitcoin, and crypto in general, had investigated every single detail he could find, he'd turned over every rock and looked at every single bit of information he could find. But he bought property. OK, that's his choice of course and I hope it works out.

Curious, I asked how long he'd spent researching the property as a suitable investment. I work in the property industry and have do so for many years so was professionally curious.

His answer? "Three weeks." That's right folks, an entire three weeks.

I managed to keep the wave of incredulity from rippling across my face and asked about the ROI and other details. He was excited to tell me about the 4.5% ROI...But after more conversation in emerged that that figure was incorrect as it ha hadn't included any of the costs the property would incur annually: Council rates, land tax, property management fees, maintenance, strata and community-strata fees and levies, advertising, insurances, vacancy, accounting, tenant damage, equipment failures and so on. Even purchase closing-costs need to be factored: Stamp duty and conveyancing for instance. The 4.5% is much lower when these costs are factored in. Yes, there's tax deductibility but the figure he quoted me as getting was obviously incorrect. Maybe not a great investment.

I'm not against property as I have some myself. It's just the way he went about it that left me feeling disconcerted on his behalf. I walked away wondering at the logic of spending so long researching one investment option then jumping headlong into another after seeing a handful of properties and not even speaking to anyone for information and professional advice. [He had told me he had simply found it fell in love with it and bought it. - Idiot! Never buy investments with emotion.]

Knowing where to invest in property can be difficult. Investors have loads of information available to them however understanding that information and determining which areas best suit an investors' current, and future needs, is not always so easy.

A good place to start is with trusted advisers. Don't have any? Well get some! Your accountant and financial planner will help to determine your future goals and how best to set up your portfolio to maximise benefit. You may then involve your finance broker, quantity surveyor and real estate agent as well. It's not difficult to do and the benefit is measurable...As are the negatives of not researching properly. Trusted advisers can help with other investments also, not just property.

There is a surprising amount of information available through online portals and magazines, both online and printed, that can assist in gathering the information required for decision making. Evaluating this information across all sources is key in assisting investors to make valid and informed decisions about their investments and in mitigating risk. The most asked question by property-investors is about potential yield and eventual capital growth a property may produce however understanding all aspects of the potential property investment is critical and understanding the factors that drive yield and growth is not always easy. What may seem like a great property investment by the numbers may fail to stack-up if there's council plans to build a cemetery next door in 3 years time for instance.

Things like income tax matters, depreciation, land tax, property condition, surrounding infrastructure, rentability, potential tenant-options and future development potential are very important to consider along with return on investment, risk and contingency. Of course weighing up the numbers has to factor in also and all outgoings must be included in financial deliberations. All outgoings, plus contingency costs.

My acquaintance isn't the first, and certainly won't be the last, to jump [unprepared] into an investment property or investment in general. It seems this fellow felt thorough research was not required when he purchased his $400,000 property using a bank mortgage he'll repay for the next 28 years plus his own cash. I wonder if his $50,000 chunk of money could have been better invested.

Around April 12th Bitcoin was about $7,480AUD. Fast forward to August 11th and it's about $15,669. I don't need to do the math to demonstrate the ROI that guy would have gained in those few brief months. $50,000AUD would have bought somewhere around 7 Bitcoin in April and sold for $104,700 four months later. OK, so I sort of did some math...I'm not good at it though so if I'm wrong blame the school system.

Anyway, Bitcoin, crypto in general, isn't for everyone and in my opinion neither is investing in general. Buying a house and renting it out doesn't make a person an investor, it simply makes a person someone with a rental property. Investors research thoroughly, determine risk and benefit, build in contingencies, risk-mitigation strategies and involve trusted advisors as well. They also have some clue around projected ROI based on all factors. Or at least, they should do these things!

So, whether magic-internet-money is the target investment or commercial/residential property, metals, gems, stocks and bonds, vehicles, annuities, options, funds, ICO's, future's, insurances and the many other forms of investment is the target one thing should be common...Research.

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Design and create your ideal life, don't live it by default
Discord: @galenkp#9209 🇦🇺

Note: - This blog has been adapted for use here from one I wrote on my professional online business page. Some passages may read the same and some not.