Property Investment & Wealth Creation Australia | The Michael Yardney Podcast

Want to become smarter? According to the latest research, you can.

Contrary to what was previously believed, your IQ is not fixed.

Most IQ tests attempt to measure two types of intelligence - crystallized and fluid.

Crystallized intelligence relies on existing skills, knowledge and experience to solve problems by accessing information from long-term memory.

Fluid intelligence, on the other hand, relies on the ability to understand relationships between various concepts to solve the problems.

It is independent of any previous knowledge, skills or experience and accesses information from short-term memory or "working memory". Researchers have concluded that this part of intelligence can be improved.

So how do you do this? That's what we're going to discuss today.

When you engage in certain mental and physical activities, the size of your axons grows, the number of dendrites multiply and you increase the number of synapses inside your brain.

When your mental and physical activities are limited, your axons shrink, reducing the number of dendrites and synapses.

WHAT ACTIVITIES GROW AXONS, DENDRITES AND SYNAPSES?

• Reading to learn
• Auditory learning
• Visual learning
• Studying (Semantic Memory)
• Learning a new language
• Utilizing a new language through repetition or absorption in a new country
• Traveling – exploring different parts of the world and different cultures (Episodic Memory)
• Learning a new skill
• Novelty
• Daily exercise
• Engaging in athletic activities
• Practicing a skill, new or old, repetitively
• Creative pursuits such as writing, painting, music, engineering, building design, invention, etc.
• Increasing your communications with others (networking, volunteering, working, social interaction, etc.)

WHAT SHRINKS AXONS, DENDRITES AND SYNAPSES?

• Absence of learning (no reading, no auditory learning and no visual learning)
• Loss of skills due to inactivity
• Isolation
• Being Homebound
• Being set in your ways – absence of novelty
• Not exercising
• No athletic activities
• Watching TV (exceptions: TV shows that teach)
• Reading Facebook, Twitter, Snapchat, etc. (exceptions: posts that teach)

If you forge daily habits that increase the size of your axons, number of dendrites and the synapses inside your brain, your IQ will grow.

Good habits, therefore, can grow your IQ throughout your entire life.

Conversely, bad habits can cause your IQ to decrease during your lifetime.

Links and Resources:

Michael Yardney

Metropole

Rich Habits Poor Habits

Michael Yardney's Mentorship Program

Some of our favourite quotes from the show:

"Interestingly, exercise is one of the actions that can increase how smart you are." – Michael Yardney

"When you're a spectator, your brain cells are not growing. In fact, they're shrinking." – Tom Corley

"The message today is your IQ is not fixed at birth, it's not related to your genetics, in fact, your habits, what you do regularly can either help you become smarter or less intelligent." – Michael Yardney

PLEASE LEAVE US A REVIEW

Reviews are hugely important to me because they help new people discover this podcast. If you enjoyed listening to this episode, please leave a review on iTunes - it's your way of passing the message forward to others and saying thank you to me. Here's how.

An insider's guide to renovating properties for profit

In today's show, we're going to give you a dose of renovating reality.

Renovation can make your property more attractive to tenants, reduce your vacancies, and minimise lost rent.

But it's important to approach renovation strategically, so that you maximize the value of your property, without spending more than you need to.

Today, we're going to talk about what works and what doesn't, and about the common mistakes that property renovators make.

Things to Keep In Mind When Renovating:

• Avoid over-capitalising.Start with establishing a post renovation market appraisal on the property. Allow for purchase price and any associated costs, interest, marketing or selling fees and a healthy buffer and deduct that from the post Reno market appraisal. What's left is the budget, inclusive of profit for the renovation. As a rule, keeping the renovation budget to 10% of the market value of the home is about
• Allow a contingency amount. Once a budget is established, allow a contingency based on your experience level and extent of the renovation works. Allow a little more if structural works or there's planning/building approvals required and a little less if the works are purely cosmetic. Remember, renovating is full of variables that not allowed for could quickly make your project unfeasible.
• Tailor the renovation for the target market. Becoming an expert in the area by attending property inspections of similar properties, discussing the expectations of the tenants with local real estate agents will help determine the scope of works for your renovation. By knowing what the market expects, you can tailor the works to suit that market and therefore not spend on things that may not bring a return on your dollars.
• First impressions matter. Natural light, fresh paint, new floor coverings and window furnishings go a long way towards transforming a tired old property into something that will be sort after. Often, it's the little things that can make or break a successful renovation. Neutral colours allow tenants to create their own identity with their belongings. Dominant colours and textures tend to close in the wall and makes spaces feel smaller than they are.
• Kitchens and bathrooms sell properties. Beware diluting your dollar by doing half the job. When assessing the scope of works for your renovation, keep in mind that the two big ticket items, the kitchen and bathroom generally come a package deal. If you renovate the kitchen but leave the original tired and rundown bathroom, it will devalue the kitchen, and vice versa. If the budget doesn't allow for both them, it may be worth deferring renovation works until the budget is healthier or consider undertaking a smaller refurbishment to include repainting, floor coverings and window furniture or air-conditioning to improve the first impression and the feel of the property.
• Avoid DIY. Unless you're a skilled tradesperson, don't get lured into to misconception that you'll save money by doing the work yourself. TV shows like the block glamorise and simplify the renovation process. In most cases, it will cost you the same or more but always take you longer if you're doing the work yourself, therefore resulting in poor finishes, delayed completion dates and unnecessary holding costs due to the extended completion times.
• Remove the emotion. Adding value to an investment property or a flipper should be run like a business. There's no room for latest fad in design and you shouldn't be trying to make the cover of Belle magazine, that's for your own home. The purpose of renovating investment properties should always be about maximising both the rental return and capital value of that property.
• Get a good team around you. Renovation involves coordinating various tradespeople all of which are managing a whole lot of other 'jobs' at the same time. Discuss your schedule and plan for the renovation and seek their assistance and advice. Remember, they're the experts. They've done it before and probably seem the mistakes others have made. By getting close to your trades, you'll avoid falling into the same trap.
• Stretch. You normally get only one chance per property – do it right and don't skimp

Links and Resources:

Michael Yardney

Metropole

Greg Hankinson - Director Metropole Constructions

Some renovation case studies

2018 Property Renovations and Development Workshop

Some of our favourite quotes from the show:

"Over the years I've found that renovating is full of variables. Things crop up that you didn't foresee, and it suddenly makes what looked like it was going to be a great project not profitable." – Michael Yardney

"It's not what you like; it's actually what the target market would like." – Michael Yardney

"You're not going to get two dollars back for every dollar you spend, despite what some of the magazines and some of the seminars will tell you." – Michael Yardney

PLEASE LEAVE US A REVIEW

Reviews are hugely important to me because they help new people discover this podcast. If you enjoyed listening to this episode, please leave a review on iTunes - it's your way of passing the message forward to others and saying thank you to me.

Here's how.

What is currently the most desirable location in Sydney?

The answer may surprise you.

Areas like the eastern suburbs of Sydney or the lower north shore may immediately spring to mind. And yes, they have been and will continue to be desirable due to their affluence.

However, there is no doubt that the underestimated location in question, which has long been the underdog, is now dominating livability studies due its cultural amenities, transport options and great value.

Have you figured it out yet?

Well, it is none other than the inner west of Sydney.

The inner west is emerging as one of the most sought-after local government areas in Sydney.

From Dulwich Hill to Newtown, Leichardt to Balmain, the metropolitan area directly west of Sydney CBD is now starting to shine as the 'Europe' of Sydney.

Domain suggests that "the unassuming inner west may once have been overshadowed by the flashy eastern suburbs, the bohemian inner city and the blue-ribbon lower north shore.

But in recent years, this cluster of neighbourhoods stretching due west of the CBD has emerged as Sydney's liveliest and most livable precinct – and, for many prospective buyers, it's now their top pick."

So, what makes the inner west so desirable?

Let's run through a few pointers.

• Love it or hate it, the inner west has the reputation of being the most liberal, socialist, green, intellectual part of Sydney. Accordingly, the area has become increasingly gentrified over the past decade.
• The inner west shares the livability and similar cultural amenities to affluent areas like the Eastern Suburbs and Lower north shore but at a much more affordable price point making it fantastic value for owner occupiers and investors alike. First home buyers are also finding that their money stretches further in the inner west.
• The inner west is one of the oldest areas of Sydney with the architecture ranging from art deco apartments, terraced houses and small mansions that reflect its development in the Victorian and Federation periods. This adds to the inner wests appeal and scarcity value. The region's unique housing attributes are also helping it pull ahead of the pack. Much of the terraced housing stock in suburbs such as Newtown and Annandale dates back to the 1860s and has become coveted by affluent buyers seeking historic charm coupled with low-maintenance living."
• It is one of the few local government areas that has access to Bus, ferry, light rail, train and cycle paths. Transport infrastructure within the inner west has never been stronger with locals seeing the benefit as Sydney's population continues to swell.

"There's a lot to be said for excellent public transport, no matter your income level. The buses are excellent. The light rail gently wends its way from Dulwich Hill to the city. The Inner West train line connects even more suburbs. And people in Rozelle and Balmain can catch the ferry. All that choice is very attractive."

The inner west has certainly proven to be an investment grade area that is both strong in having wealth building rates of growth but also stable, in that due to its local economic growth drivers will not fluctuate in value as much as the outer suburbs of Sydney.

Success Is Easy, But So Is Neglect

Jim Rohn suggests that when giving the choice of "easy to" and "easy not to" that you don't neglect to do the simple, basic, "easy"; but potentially life-changing activities and disciplines

Pros and Cons of Rentvesting in Sydney

Pros:

• You can enter the property market sooner
• You can live the lifestyle you want in your dream home without waiting
• You'll be able to start building wealth sooner
• You can save for your dream home while you rent
• You have more flexibility to change your living situation if your circumstances change
• You have the freedom to move around if you're not ready to settle down in one spot
• You can take a tax deduction on the interest payments on your investment property loan
• If you want to live in an area that isn't a great spot for investment, you can live in one area and invest in another

Cons:

• Buying an investment property before buying your own home may seem counter-intuitive
• Rent money is often considered "dead money", and this can be a sticking point for some people
• You may eventually have to move out of a rental home that you've formed an emotional connection to
• You're limited in how much you can renovate or upgrade a rental home

Links and Resources:

Michael Yardney

Metropole

Ahmad Imam – Director Metropole Property Strategists - Sydney

Rich Habits Poor Habits

Michael Yardney's Mentorship Program

Some of our favourite quotes from the show:

"The way one lives in Sydney has evolved, so more people are happy and expecting to live in apartments in Sydney, as they would in any other major metropolis in the world." – Michael Yardney

"One of the things I want to point out is that it's always been harder for first-time buyers, and study after study has shown it's really not harder today than it was 40-50 years ago." – Michael Yardney

"Rentvesting won't be the ideal strategy for every investor, but if you're just starting out or if you're prepared to think outside the box and do things differently to get ahead, then becoming a landlord and a renter may just be the right way forward for you." – Michael Yardney

PLEASE LEAVE US A REVIEW

Reviews are hugely important to me because they help new people discover this podcast. If you enjoyed listening to this episode, please leave a review on iTunes - it's your way of passing the message forward to others and saying thank you to me.

Listen in as I chat with property development expert Bryce Yardney and we discuss:

• Why more investors are keen to get started in property renovations or property development.
• The importance of learning from trusted educators and mentors rather than the new breed of "get rich quick educators."
• The four different levels of property development available to investors
• The benefits of becoming a property developer
• The big risks involved in property development at this stage of the cycle.
• What is required to fund a property development project.

I also walk through my 8 stages of the property development process

1. Pre Purchase
2. Concept stage
3. Purchase
4. Town planning
5. Working Drawing and documentation
6. Pre Construction Stage
7. Construction
8. Completion

Links:

My Property Renovations and Development Workshop

Have you ever wondered how property professionals do their research?

If you're interested in finding properties that will outperform the market, this episode is for you.

The most research many property investors do is finding a property that they already like, then looking for information that confirms their biases. However, sophisticated investors take a more strategic approach.

Today, Kate Forbes, National Director of Property Strategy at Metropole, gives us a detailed picture of how the professionals at Metropole do their research.

Metropole's top down approach

This starts with examining the macro factors affecting our property markets and drills down to the micro level.

• Start by looking at the big picture – the macro-economic environment.
• Look for the right state in which to invest – one that will outperform the Australian market averages because of its economic growth and population growth.
• Within that state, look for the suburbs that will outperform with regards to capital growth. It's all about demographics. These suburbs tend to be areas where more owner-occupiers want to live because of lifestyle choices and where the locals can afford to and will be prepared to pay a premium to live because they have higher disposable incomes.
• Look for the right location within that suburb. Some livable streets will always outperform others and in those streets, some properties will always be more desirable than others.
• Then within that location look for the right property. And finally, only buy at...
• The right price, but I'm not suggesting a "cheap" property – there will always be cheap properties around in secondary locations. I mean the right property at a good price.

6 Stranded Strategic Approach

Only buy a property:

• That would appeal to owner occupiers. Not because you plan to sell the property, but because owner occupiers will buy similar properties pushing up local real estate values. This will be particularly important in the future as the percentage of investors in the market is likely to diminish
• That is below intrinsic value – that's why you should avoid new and off-the-plan properties which come at a premium price.
• With a high land to asset ratio – that doesn't necessarily mean a large block of land, but one where the land component makes up a significant part of the asset value.
• That is in an area that has a long history of strong capital growth and that will continue to outperform the averages because of the demographics in the area as mentioned above.
• That has a twist – something unique, or special, different or scarce about the property, and finally;
• Where you can manufacture capital growth through refurbishment, renovations or redevelopment rather than waiting for the market to do the heavy lifting as we're heading into a period of lower capital growth.

By following my 6 Stranded Strategic Approach, you minimise your risks and maximise your upside. Each strand represents a way of making money from property and combining all six is a powerful way of putting the odds in your favour. If one strand lets you down, they have two or three others supporting their property's performance.

When you look at it this way, buying a property strategically takes a lot of time, effort, research and something most investors never attain – perspective.

What I mean by this is you can gain a lot of knowledge over the Internet or by reading books or magazines but what you can't gain is experience. It takes many years to develop the perspective to understand what makes an investment grade property.

Links and Resources:

Michael Yardney

Metropole

Rich Habits Poor Habits

Michael Yardney's Mentorship Program

Kate Forbes

Some reading:

• Your Essential Guide to Property Research
• 5 Important Research Topics for Property Investment Success

Some of our favourite quotes from the show:

"We're not looking for properties that are affordable to everybody, we're looking for areas where people have got a high disposable income and can afford to, but more importantly are prepared to, pay a premium." – Michael Yardney

"If you buy a property to which you can add value through renovations or refurbishments, that will allow you to add some capital growth." – Michael Yardney

"Understanding the neighborhood is not the same as understanding the market. You may understand where the shops are and where the school zones are, but that's very different to understanding the depth of the market." – Michael Yardney

PLEASE LEAVE US A REVIEW

Reviews are hugely important to me because they help new people discover this podcast. If you enjoyed listening to this episode, please leave a review on iTunes – it's your way of passing the message forward to others and saying thank you to me. Here's how.

What's the secret to success? What does success mean to you?

Is it money, fame, travel, relationships, or the freedom to do what you want when you want?

Different people think of success in different ways, but most people are after success in some form.

In today's episode, I'll be chatting to entrepreneur Dale Beaumont, as he shares the seven secrets to success he's learned from working closely with many, many successful people.

Dale Beaumont is a technology entrepreneur, a speaker, and an author. He began his first business at the age of 19 and has been building businesses ever since. One of his companies has become a multi-million-dollar enterprise, which has allowed him to become an investor and philanthropist. He has already mentored many people and is hoping to help one million entrepreneurs around the world with his app Bizversity.

Dale's 7 Essential Characteristics of Highly Successful People:

1. Desire: You really have to want to achieve and be willing to do whatever it takes.
2. Determination and resilience: Your success journey won't be easy. There will be challenges, roadblocks, and failures. You need the determination and resilience to be able to push through those challenges even when things look like they aren't going to work out.
3. Be an action-taker: It's not enough to seek out good advice and training – you need to act on it. Don't get so hung up on thinking about how to achieve success that you never end up taking action.
4. Self-education: Formal education is important and has its place, but the education you receive outside of formal education that can make the difference to your success.
5. Likeability: You can't achieve success alone. You need a team. And the team that will work best for you is a team that actually likes you. It's important to treat people well and earn their trust.
6. Systemization: It's important to use your hours in the most efficient way.
7. Focus: You only get paid for the projects that you complete. It's important to develop the focus that you need to see things through to the end.

Links and Resources:

Michael Yardney

Metropole

Rich Habits Poor Habits

Michael Yardney's Mentorship Program

Dale Beaumont

Bizversity

Some of our favourite quotes from the show:

"One of the common traits I've found of all successful people is they do have coaches, they do have mentors, they do have advisors, and they're actually prepared to pay for them." –Michael Yardney

"We all want a better life. We all want more success, whether it's in business, in property, or in relationships. But the question is, how far are you prepared to go?" – Michael Yardney

"We tend to get bored with doing things the same way and look for shortcuts or other ways, so I've actually found systems in my business being a very great way of making sure that people just do it right, including myself." – Dale Beaumont

This stage of the property cycle isn't as much fun as the last couple of years when things were booming – is it?

Many investors are having difficulty getting financing to start their portfolio or grow it.

And capital gains aren't assured, so where do you buy?

By the end of this show, you'll have more clarity about what's ahead and where to buy.

Top Tips for getting finance in the changing landscape

• Seek professional advice
• Be prepared to justify and articulate your expenses
• Consider principle and interest loans rather than just interest-only loans
• Interest-only loans can have benefits as well
• Set up an offset account
• Choose the right investment-grade properties
• Make sure that you have financial buffers in place
• Being turned down is sometimes for the best – regulations exist for good reasons
• Avoid misreporting or misinformation and be prepared for heightened scrutiny
• Have your properties re-valued regularly
• Have a property strategy, an ownership structure strategy, and a finance strategy in place. Treat your property investment like a business.

3 Success tips

• To succeed in business or investment, you need to model successful people. Find people who have achieved what you want to achieve and follow what they do.
• Most people overestimate what they can do in 12 months and underestimate what they can do in 10 years. It takes time to gain traction.
• Most people are not successful. Identify the wrong strategies that most people are using and do the opposite.

Not all land is created equal

• Overall, the inner and middle ring suburbs of big capital cities are the best places to invest.
• Most of the jobs are in capital cities, so that's where migrants want to live. It only makes sense to invest in areas where people who want to live.
• Properties closer to the CBD and closer to water increased in value faster than those further from the CBD and further from water.
• Suburbs with better infrastructure, shopping and amenities tend to be close to the CBD and the water. That's where the wealthy want to and can afford to live, and they'll pay a premium to do it.

Links and Resources:

2018 Property Renovations and Development Workshop

Michael Yardney

Metropole

Michael Yardney's Mentorship Program

Intuitive Finance

Some of our favourite quotes from the show:

"So one of the things you should do when you go to your finance strategist or the banks is to actually understand what your income and expenses are, have your tax returns done, have all your paperwork ready, because they're looking at it much more carefully." – Michael Yardney

"Going to the bank and asking for the biggest loan you can at the lowest interest rate possible isn't a finance strategy. You'll buy a property, and then you're going to get stuck. – Michael Yardney

"If you've got your ladder against the wrong wall, every step you take will get you a step further away from where you want to go." – Michael Yardney

Never miss an episode and keep up with all the good things going on at the Michael Yardney podcast by subscribing on iTunes.

You can also subscribe to MichaelYardneyPodcast.com to keep up with the latest information including bonus material that comes out between the podcasts.

Will your child be rich or poor?

If you're a parent or a grandparent or planning to become one, this show is for you.

I believe it's our job to teach our children good money habits.

And even if you're not planning to become a parent, Tom Corley and I will be discussing some important money lessons in this Rich Habits Poor habits podcast.

So let's talk about children….

Science shows that by the age of nine we have learned most of our habits.

These habits come from our parents. We mirror our parents thinking, habits, and emotions.

The beauty of rich habits is that you only need one or two of them to transform your life.

Habits like reading and exercising will change your future.

But emulating bad habits can force you into a situation where you have to eke out a living.

It gets even worse.

Sadly, 74% of children raised in a poor household had grades below a B and 34% had grades below a C.

Why?

Wealthy, successful parents teach their children certain success habits that give their children an edge in life.

These Rich Habits, which give them this edge in life, begins to manifest itself in the classroom and continues into the workplace, where such children become working adults who receive higher pay, bigger raises and larger bonuses during their working career.

As a consequence, they accumulate more wealth in life.

Will your child be Rich or Poor?

Every student wants to be successful and thinks they will be successful, but none have been taught by their parents or their school system how to be financially successful in life.

Not only are there no courses on basic financial success principles but there are no structured courses teaching basic financial literacy.

We are raising our children to be financially illiterate and to fail in life.

We don't have a wealth gap in this country we have a parent gap.

We don't have income inequality, we have parent inequality.

Parents and our schools need to work together to instill good daily success habits.

They need to be teaching children specific Rich Habits that lead to success.

Examples of Rich Habits:

• Limit TV, social media, video games and cell phone use to no more than one hour a day.
• Require that children read one non-fiction book a week and write a one-page summary of what they learned for their parents to review.
• Require children to aerobically exercise 20 – 30 minutes a day.
• Limit junk food to no more than 300 calories a day.
• Teach children to dream and to pursue their dreams. Have them write a script of their ideal, future life.
• Require that children set monthly, annual and long-term goals.
• Require working age children to work or volunteer at least ten hours a week.
• Require that children save at least 25% of their earnings or the monetary gifts they receive.
• Teach children the importance of calling family, friends, teachers, coaches, etc., on their birthday
• Teach children the importance of calling family, friends, teachers, coaches, etc. when anything good or bad happens in their lives. Examples include births, deaths, awards, illnesses, etc.
• Teach children to send thank you cards to individuals who helped them in any way. Reassure children that mistakes are good and not bad. Children need to understand that the very foundation of success is built upon the lessons we learn from our mistakes.
• Discipline children when they lose their temper, so they understand the consequence of not controlling this very costly emotion. Anger is the costliest emotion. It gets people fired, divorced and destroys relationships.
• Teach children that the pursuit of financial success is a good thing.
• Children need to learn how to manage money. Open up a checking account or savings account for children and force them to use their savings to buy the things they want. This teaches children that they are not entitled to anything. It teaches them that they have to work for the things they want in life, like cell phones, computers, fashionable clothes, video games, etc.
• Require children to participate in at least one non-sports-related extracurricular group at school or outside of school.
• Parents and children need to set aside at least an hour a day to talk to one another. Not on Facebook, not on the cell phone, but face to face. The only quality time is quantity time.
• Teach children how to manage their time. Teach them how to create a daily "to do" list. They can put their "to-do" list on their bedroom door, so parents can check it each day.

OBVIOUSLY, IT IS NOT POSSIBLE TO FOLLOW EVERY RICH HABIT RECOMMENDATION LISTED ABOVE.

All it takes is one or two Rich Habits to completely transform a life.

The reading habit, on its own, can set your children up for career success.

The savings habit, on its own, can set your children up to be financially independent.

The exercise habit, on its own, can set your children up for a long, healthy life.

The happy birthday or life event calls, on their own, can set your children up to forge strong relationships.

Pick just two habits to teach you kids and stay on top of them for six months.

After six months the habits should stick.

Links and Resources:

Michael Yardney

Metropole

Rich Habits Poor Habits

Michael Yardney's Mentorship Program

Some of our favourite quotes from the show:

"You can change your habits anytime throughout your life no matter what your age." – Michael Yardney

"In my mind, the lottery, or gambling, is a tax for people who can't do maths." – Michael Yardney

"I believe it's important to teach your children that it's OK to dream, it's OK to dream big, it's OK to be successful, and allow them to set themselves goals and understand how to pursue them." – Michael Yardney

Never miss an episode and keep up with all the good things going on at the Michael Yardney podcast by subscribing on iTunes.

You can also subscribe to MichaelYardneyPodcast.com to keep up with the latest information including bonus material that comes out between the podcasts.

Are you where you want to be financially? If not, what's holding you back? That's what we're going to talk about in today's show.

If you're like most Australians, you're probably not where you expected to be financially. Even if you're doing well, understanding behavioural finance can help you do better.

We make thousands of decisions every day.

We usually make these decisions with almost no thought and this can lead to predictable errors in certain circumstances.

• Confirmation Bias: The tendency to search for information that confirms your view of the world and ignore what doesn't fit. Confirmation bias also prevents us from looking objectively at an investment we've already made. Once we've bought a property we look for information to confirm that we've made a good investment while as the same time ignoring information that may indicate the investment may be a questionable one.
• Anchoring Bias: The tendency to use anchors or reference points to make decisions and evaluations, even though sometimes these lead us astray. The first number you see, especially when it's a price that comes up in negotiation, colours any that come after it. A high anchor influences you to spend more than you normally would. Whether we like it or not, our minds keep referring back to that initial number, and perceive any subsequent offers as being a discount or a deal, even if they're objectively still too high.
• Awareness Bias: There's a chance that even if your investments are not doing so well, you may not even recognise it. it's been shown the poorest performers in all arenas of life are the least aware of their own incompetence. Lacking the capacity to realise how badly a task is performing is known as the Dunning-Kruger effect.
• Positivity Bias: Many people view residential real estate positively, considering it an asset class through which they can grow their wealth – and they continue to do view it in this light, even if their investments fail to prosper. Positivity bias can stand in the way of an investor taking action to rectify the situation.
• Negativity Bias: Just as some investors can be overly positive this is the tendency to put more emphasis on negative experiences rather than positive ones. People with this bias feel that 'bad is stronger than good' and will perceive threats more than opportunities in a given situation.
• Status Quo Bias: This describes our tendency to stick with what we know, whether or not it's the best course of action. Psychologists call this "loss aversion" and it explains why so many Australians are willing to stick their money in a plain old bank account earning minimal interest, rather than taking the "perceived risk" of a property investment.
• Survivorship Bias: The misconception here is that you should focus on the successful if you wish to become successful, while the truth is that when failure becomes invisible, the difference between failure and success may also become invisible. The trick when looking for advice is to not only learn what to do, but also look for what not to do.
• Bandwagon Bias: This is the psychological phenomenon whereby people do something primarily because other people are doing it. This tendency of people to align their beliefs and behaviours with those of a group is also called "herd mentality."
• Restraint Bias: Following on from bandwagon bias, restraint bias is the tendency for people to overestimate their ability to control impulsive behavior. Psychologists say the very people who think they are most restrained are also most likely to be impulsive.
• The Ostrich Effect: When an ostrich is scared, the bird supposedly buries its head in the sand to stay ignorant of the approaching threat. While we simply don't have the neck length to literally stick our heads in the sand, people often deliberately look away from their money problems.
• Choice-Supportive Bias: This is the tendency to prefer the things you own (even if they have flaws) over the things you don't, because you made "rational" choices when you bought them. You may be convinced the investment you've just made is great because you spend so much time, research and emotion in selecting it. You rationalize your past choices to protect your sense of self.
• Clustering Illusion: This is the tendency to see patterns in random events. This selective thinking can lead to wrong conclusions when faced with the multitude of mixed messages we receive about the property market.
• Curse of Knowledge: You suffer from the curse of knowledge when you know things that other people don't and you've forgotten what it's like to not have this knowledge. Highly intelligent people often have difficulty asking for help or taking advice because they think they should be able to work things out for themselves.
• Overconfidence: One of the worst things that can happen to an investor is to get it right the first time they buy a property. This often happens when you invest during a property boom because you tend to think you're smarter than you are. The best defense against this is to continue to ask questions and be skeptical of your preconceptions.
• Procrastination: Of course, we all procrastinate at times, but in the arena of property investment those who sat on the sidelines over the last few years waiting for the investment horizon to look clearer, have missed out on some fantastic opportunities.
• Hyperbolic Discounting: This is the tendency for people to prefer smaller payoffs now over larger payoffs later, leading one to largely disregard the future when it requires sacrifices in the present.
• Hindsight Bias: This is the tendency for people to overestimate their ability to have predicted an outcome that could not possibly have been predicted. hindsight bias matters because it gets in the way of learning from our experiences because if you feel like you knew it all along, it means you won't stop to examine why something really happened. Hindsight bias can also make us overconfident in how certain we are about our own judgments.
• Illusion of Control: Illusion of control is the tendency for human beings to believe they can control or at least influence outcomes that they demonstrably have no influence over. In property it's the concept that you think you've got all your risks covered. In my mind risk is what is left after you've thought of all the things that can go wrong.
• Information Bias: This is the tendency to seek information when it does not affect action. More information is not always better. Indeed, with less information, people can often make more accurate assessments because too much can lead to analysis paralysis.
• Post-Purchase Rationalization: This is what happens when we buy something that turns out not to be up to standard. Yet, we want to believe that we didn't waste our resources, so we try to rationalize the purchase. This happens much more often with impulse buys than with carefully planned investment decisions.
• Skill Bias: There is so much information and education available to investors that many people feel they are qualified to make significant financial decisions, despite the fact that they have no experience to back them up. This can lead to unfortunate shortsighted decisions, which can be very costly if the properties fail to perform as you'd planned.
• Personal History Bias: Research shows that the way you feel about a topic is generally pervasive and was most likely shaped by events experienced in your youth. These influences will show in the risks they are willing to take and the investments that appeal to them.
• Bias Bias: This is probably the most important bias of them all – the belief that you are less biased than you really are. If you listened to the whole show without realising I'm talking about you, you're suffering from bias bias.

Links and Resources:

Michael Yardney

Metropole

Rich Habits Poor Habits

Michael Yardney's Mentorship Program

Some of our favourite quotes from the show:

"So, the first step to make better investment decisions is to become aware that we're currently making bad decisions." – Michael Yardney

"When we make decisions that are biased, what we're doing is trading off some version of the right decision for a comfortable decision today." – Michael Yardney

"The truth is that when failure becomes invisible, the difference between failure and success may also become invisible." – Michael Yardney

Never miss an episode and keep up with all the good things going on at the Michael Yardney podcast by subscribing on iTunes.

You can also subscribe to MichaelYardneyPodcast.com to keep up with the latest information including bonus material that comes out between the podcasts.

This week I explain How to Profit from Renovations in the current property markets.

Listen as I discuss:

• My 8 step process for profiting from renovations.
• 5 tips for successful renovations
• Why renovations make sense in today's property market
• The one thing that many renovations courses teach that is patently incorrect.

I explain the 4 big benefits of renovations: -

1. Increasing the rental return and therefore yield of your investment property
2. Increasing the aesthetic appeal of the property and thereby attracting a wider tenant pool and often a better-quality tenant.
3. Increasing your depreciation allowances.
4. "Manufacturing" capital growth thereby increasing the overall value of your property, even in a flat market.

I also walk through my 8 Step renovation process

1. Why – what is your reason
2. Preparation - finance & structures
3. Where? Research target areas–due location diligence
4. What - Find a property with value add potential – due diligence analyze
5. Purchase – at "wholesale"
6. Plan & Budget – consider your target market and end values
7. The renovation process – create a higher and better use
8. Post Renovation – my preferred strategy is lease, refinance and repeat

Watch out next week for the second of this 2 part series where I discuss the 9 Step Property Development Process

Links:

My Property Renovations and Development Workshop