I have become rather addicted to tower defence games over the last couple of weeks and having saved the earth from aliens, monsters and other creeps (you’re welcome) I couldn’t help but notice that there is a huge similarity between tower defence and property investing.
I have said in earlier posts that the purpose of property investing is for money, not to grow a huge collection of houses. Some people become so obsessed with adding properties to their portfolio, they forget about the ones they already have.
Put simply in a game of tower defence, you should start the game with a few of the cheapest towers placed in strategic positions. In property this would be residential property, probably a cheaper house in an average area.
Every time you spend money on a tower, it takes time to rebuild your kitty, just like in real life, therefore it makes sense to buy the tower which is going to refill your kitty as quickly as possible, allowing you to purchase your next tower/property.
There comes a point in the game where rather than adding more towers you would be better off upgrading the towers you already have. I.e. renovating your current properties, subdividing, adding minor dwellings/sleep outs, doing everything you can to get the most amount of money out of the property as you can.
What you will then start to find is that your now upgraded, strategically placed cheap towers will be able to hold off the creeps with very little effort, allowing you to start building up your funds in order to purchase the bigger more powerful towers (commercial property). Once you have the powerful towers placed, the next stage is to upgrade them until they are the best they can be. In property investing, once you have your residential properties maxed out, you should start looking at commercial property for your residual income. Upgrading your towers, relates to paying down the debt on the commercial properties until you can own them debt free, giving you the highest pay out.
As anyone who has played the game knows is that simply having 30 or 40 basic towers will not win you the game. The same is true for property, just simply having 30 or 40 basic residential properties will not give you financial freedom and the money you have in those properties are not giving you the best return you could get.
Who knew that playing computer games would help you understand the dynamics of property investing? Well, I’m going to turn the computer off now and go play tower defence in real life.