Welcome to this month’s newsletter.
I described the relationship between time, space, agreement and money in our newsletter last month. (For those who haven’t read the article titled ‘Time->Space->Agreements->Money’ from last month’s newsletter, or if you can’t remember how we create our space for different things, you can review the article first before continuing with the rest of the article).
To reiterate the key point on space: if you have the space for property, you are more likely to have lots of properties; if you have the space for money, you are more likely to have lots of money. Based on this observation, I thought we should ask ourselves a very obvious question as property investors:
Do we have space for property, or space for money, or space for both?
Since time creates space, we can look at how much time we spend on property vs. money, to determine what space we really have.
What do you think most property investors spend more time on property or money?
Before we answer this question, let’s look at the two categories of activities property investors spend their time on.
1. Activities related to properties:
- Weekend property hunting;
- Property renovation and development;
- Reading property related news and articles;
- Buying & selling properties;
- Attending property educational events.
2. Activities related to money:
- Expense tracking and control;
- Budget & financial planning;
- Cash flow monitoring and management;
- Financial policy design and implementation;
- Attending finances educational events;
- Read financial statements carefully and regularly;
- Bank accounts set up and regular inspection;
- Bank statement verification and analysis;
- Cash reserve calculation and regular update;
- Regular family financial meetings.
Depending on how much time you spend on property vs money, you can gauge whether you have a larger space for property or a larger space for money.
1. Is it possible for a property investor to have a large space for property, but only a very small space for money? In other words, is it possible for someone to have lots of properties but little money at the same time?
The answer is YES, unfortunately.
We often see property investors with great ability to acquire and develop properties, but constantly struggle with money, i.e. their cash flow is always tight, and there is not much equity in their property portfolio that doesn’t belong to the taxman.
2. Is it possible for a property investor to have a large space for money, but only a very small space for property? In other words, is it possible for someone to have lots of money but not a lot of properties?
The answer is also YES, fortunately.
We sometimes see property investors with limited property experience and only a few pretty ordinary properties, but with great cash flow and lots of equity that doesn’t belong to the taxman.
3. Is it possible for a property investor to have a large space for money and a large space for property at the same time? In other words, is it possible for someone to have lots of money and lots of properties at the same time?
The answer is also YES, although it isn’t very common.
When you see a property investor with lots of great investment properties, huge positive cash flow and lots of equity that doesn’t belong to the taxman, you know you have found such an investor.
2 Critical Points
1. You will find the space for money can affect how much money one can keep.
For example; we sometimes see people with great income capacity such as; top sportsman, business executives, specialists, top sales people etc, often end up with no more money than people with much lower income capacity. We also see people with very average income capacity end up having better financial position.
That is why you hear people say that it is much easier to make the money than to keep it them.
2. Space for money means space for your money, not space for other people’s money.
Let me explain the difference.
- A bank teller spends most of his time counting other people’s money doesn’t necessarily give him more space for his money;
- An accountant spends most of his time reading someone else’s financial statements doesn’t necessarily give him more space for his money;
- A company financial controller spends most of his time designing company budgets and measuring financial performance doesn’t necessarily give him more space for his money;
- A bookkeeper spends most of his time tracking other people’s expenses doesn’t necessarily give him more space for his money;
- A financial planner spends most of his time helping clients planning their financial resources doesn’t necessarily give him more space for his money;
All these activities may have created more space for other people’s money, but not necessarily space for your money. We often hear the stories about plumbers not fixing their own leaking taps, or accountants not doing their own tax returns, etc.
It goes to show that what we can do for others, we may not be able to do for ourselves. This phenomenon comes down to whether we are willing to confront our own issues, financially or not. It is much easier to help or fix others because it doesn’t hurt as much. It takes a lot of courage, wisdom and very often desperation, to confront our own issues.
If we can’t confront our own issues for whatever reason, helping others with similar issues can still be a good option. At least it can help us confront our own issues sooner as it can somehow make it feel safer and less painful to do so. Have you ever noticed that when we are angry with others for not doing something, deep down we know we should have done it ourselves?
Property investors ultimately would like to see more money, and property is the vehicle for them to achieve that goal. But if you only focus on increasing the space for property, and neglect to increase the space for money, you can completely miss the point of investing.
What can be a simple test for whether you have been making an effort to increase the space for money?
You can simply ask yourself: when was the last time I looked at how much money I have (in terms of cash flow and net worth).