When speaking to property investors around Australia they all tell me much the same thing - they bought their property because they want to develop some degree of financial freedom.

Some are looking to quit their jobs, others just want to have the choice of whether they work or not. Some are trying to save for their retirement while others want to leave something for their children.

Despite the great Australian dream of financial independence being alive and well, the problem is - most property investors never achieve the financial independence they strive for.

Of the 1,500,000 property investors in Australia less than 0.5% of them own more than 5 properties. And you can't really become financially independent just owning one or two properties.

On the other hand a small group of investors manage to build substantial property portfolios - we tend to see many of these as clients of Metropole.

At the same time I found that investors tend to fall into one of three main categories, which led me to try and see if one style of investing was more successful than others.

So let's look at the 3 main types of property investor. As you read on see if you can work out which category you fall into.

Firstly there is the Passive Investor who tends to spend little time looking for a property. They are not interested in understanding all of the ins and outs that go along with creating a property portfolio such as finance, tax laws, compounding and so forth. They are more likely to buy the first thing they come across rather than conducting any due diligence or consulting industry professionals for advice.

The more Active Investor puts in some degree of work in order to find a good investment prospect. They gain a basic understanding of the principles involved in property, finance and taxation. They also tend to seek professional advice with regard to the structuring of their portfolio and conduct some due diligence in the hope that they can increase the likelihood of making a viable investment purchase.

Finally there is the Analytical Investor whotends torun around for months, sometimes even years, examining every nook and cranny of our property markets, endlessly comparing values and sales, reading reams of material regarding real estate do's and don'ts and seeking advice from as many experts as possible before committing to anything. They like to conduct as much due diligence as possible and look for the 'ultimate' investment property.

If property investment was like many other things in life, then the more effort and energy you sink into property investing, the greater your rewards are likely to be. In other words, the passive investor would enjoy smaller gains than the active investor, while the analytical investor would come out on top as they were willing to do the hard yards.

In relation to property investing this is only partially true!

Many passive investors purchase their investment properties the way they would buy their home – emotionally. They tend to buy their investments near where they live, or near to where they work or close to where they want to retire or holiday – all emotional reasons.

Some live to regret their investment decisions and have difficulty holding on to their investments. In fact many beginning investors sell their properties after only a year or two. Those that can hold on usually do well, but more of that later.

The active investor usually does well if he seeks advice from a team of consultants.

What about the analytical investor? Let me share a story with you….

Last year I attended a Property Expo where I caught up with Leonard - a successful IT Engineer. He has subscribed to my newsletter for over 4 years and when I first met him about 3 years earlier he said he was going to invest in property.

When I asked him how his investments were going, he explained that he had still not made a move. Instead, he continued to research the market. Leonard is very intelligent and has a tendency to over analyse things, hence he is still waiting for the perfect property, the perfect time or the perfect set of circumstances in which to buy.

What he doesn't realise is that this will never happen.

If he had invested in a good suburb in his home town of Melbourne 3 or 4 years ago, despite that time frame being the worst 3 years in the local property market in over a decade, his property would have significantly increased in value. 
 
If he had chosen some high growth suburbs, the property's value would easily have gone up by over 25%. Instead he told me he has $500,000 sitting in the bank waiting for the 'right opportunity' to come along.

On the other hand, let's look at an example of a passive investor – let's call him Mark - who was so naïve that he bought the first property that he could get his hands on twenty years ago for $50,000.

At the time, all of his friends and family told Mark he was "crazy." He paid way too much for the house, it was a bad time to buy and it was a foolish thing to do.

Although he may not have done all of his homework, Mark still bought in a popular inner Melbourne suburb and guess what? The value of that home is now in the order of $500,000, and if he was half as smart, Mark would borrow against its increasing equity to allow him to buy more properties.

The lesson from all this is that it really doesn't matter too much if you're a passive, active or analytical investor.

As long as you are taking action and are in the market.

It doesn't really matter if you're not into running around examining every aspect of the property market. Or maybe you are and that's not such a bad thing – as long as you don't get so absorbed by the process of learning about property that you forget to actually use that knowledge and buy something!

In other words, if you have been thinking about investing in property, now is the time to act!

Buy a property now!

One that suits your investment strategy and current circumstances. If you are in it for long term capital gains – as you should be – doing something that some might consider foolish right now could be much better than waiting to do something "smart" later.

When it comes to property investment it's only what you own that is working for you. The longer you linger on the decision and don't buy; the more potential for capital growth you are losing.

Of course you should still put some thought into what you buy. You can either buy right or buy well.

Often investors who take far too long researching the market and never make a move are looking to buy well. They want to pay under market value for their investment and this becomes their sole focus.

Buying right on the other hand, is not really influenced by price and value, rather the focus is on the quality of the property you end up with. Here you need to do a little bit of research to understand which markets generally offer the best opportunities for capital growth.

I don't find this hard – I can always beat the averages.

Firstly I look for a state that is at the right stage of its property cycle – preferably in the upturn stage of the cycle. Currently all our capital cities other than Darwin and Perth are at this stage of the cycle.

I then look at suburbs in that particular state which have always out performed the averages. They are not hard to find – this data is easy to buy or in the tables at the back of many property magazines.

However I don't look for the next speculative "hot spot."

I'm an investor not a speculator.

But I do look for suburbs going through gentrification (improving in value as young people and developers move in and replace the old houses with refurbished homes or new developments.) I also look for suburbs that will benefit from the "ripple effect" as strong growth in neighbouring suburbs trickles through.

Then in those suburbs I look for the right location – the right streets that have more appeal.

And finally I look for the right property in those streets. The type of property that has enduring appeal. One that will always be in strong demand by owner occupiers as well as tenants. Because this will ensure I have found a property that will outperform the markets.

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