Ever found yourself sitting in front of a pile of Newcastle Monopoly money on games night after taking your competitors to the cleaners and wondered: “If it’s this easy, why aren’t I a millionaire in real life?”
It’s a somewhat valid point, right? After all, Monopoly is based on real-world concepts of money, real estate and trading, so why shouldn’t you be able to hone your financial skills by repetitively passing GO?
While the Monopoly board may represent a crystallised world view when it comes to money and property, there are nevertheless some great lessons to look out for when playing, and to consider acting on long after the Newcastle Monopoly board is packed away for the weekend.
Learn the rules, know the rules.
As we mentioned in our previous piece on Newcastle Monopoly, there are definite advantages to playing the game with a really good understanding of the rules. And the rules within rules. For example, by knowing the properties on the board that statistically get landed on the most, you can buy cleverly and give yourself the best chance of winning. In the world of banking and real estate, the same thing applies. For example, if you know the requirements of a particular savings account in order to earn bonus interest each month, you can play by the rules and make the maximum possible return on your investment.
It really is about location
This continues to prove true time and time again in both the world of real estate and on the Monopoly board. While playing Monopoly, it won’t do you any good to go blindly buying every property you land on. You’ll soon be broke and won’t get to see any return on any of your property buys. It pays to think about where you’re buying on the board and use what you know to your advantage, and try to buy complete colour sets to get the most bang for your buck.
Similarly, with real estate, whether buying a property to live in or as an investment – get as much data as you can about the location to help you make an informed choice. Look at property value trends in the area, the potential rental yield and capital growth. Take a look at the surrounding suburb – is there access to essential amenities and services, or is access at least planned for the future? Look for schools, shopping, healthcare and transport before you commit to buying.
Expensive doesn't always mean best
It’s common for novice Monopoly players to want to own the ‘blue-chip’ properties, and to fixate on this. You know the ones – Park Lane and Mayfair on traditional Monopoly, and Nobby’s Beach and ANZAC Walk on our Novocastrian version.
The thought process is – these properties have the biggest rental payouts, so they’re the most important to own. This is short-sighted though - by focussing too much of your attention on one property or group of properties rather than overall cash flow, you may find your fellow players (and real estate investors) are able to snap up the majority of properties around you, which are just as capable of earning money. | Greater Bank
In real-world terms as well – focussing on a blue-chip property may come with prestige and satisfaction once you finally get around to buying it, but these sort of properties are usually also expensive to maintain.
Cash on hand
Seems a little too obvious, but this one is really key in both taking out a game of Monopoly and managing your real-world finances. Because of the elimination nature of the game of Monopoly, all you have to do to win is be the last one with money on hand, right? So, think about it – if you just swagger around the board buying up properties at random, when it comes time to start paying your financial obligations, you’ll soon run out of cash. This, in turn, will mean you’ll have to start selling assets at a discount. And once this starts happening, it’s literally a matter of time until your game is over.
So, when we think about this in terms of real-world finances, what lessons can we draw? Well, for one it highlights the need to make sure that when entering into long term debts like home loans and personal loans, you’re confident in your ongoing ability to make repayments. No one wants to find themselves in a situation where they fall into arrears and risk defaulting on a loan due to poor cash flow.
Secondly, this proves the old adage of putting money aside ‘for a rainy day’. Let’s face it – while many of us may try to grow our savings with this in mind, most of us would be looking ahead and envisaging a positive outcome at the end of our savings journey – like a car, or a holiday, or a wedding. Few of us would think of the defensive aspect of saving, but when that rainy day comes, and you’ve got money there when you need it, it can feel as if you’ve won the lottery.
Generating passive income
We’re guessing no-one’s ever been excited by the prospect of buying the four railroads on the Monopoly board. They’re not sexy at all – they’re boring in fact. But, if the goal of Monopoly is simply to be the last one standing, with money in hand, then cash flow should be key to your game strategy. By owning all four railroads, at 200 Monopoly dollars apiece, you can collect 200 in rent or a 25% return. Not too shabby, huh?
Applying this to the real world, any time you can put your money to work to earn you interest income passively can be advantageous. Whether using something as simple as a Savings Account or Term Deposit, or investing in your future through your Superannuation or the stock market, look for investment opportunities that can generate a growing cash flow.
Everything is negotiable
As you get towards the pointy end of a game of Monopoly, and all the properties on the board are spoken for, you may find yourself needing to negotiate with a fellow player to gain an advantage. For example, you may own two of the three properties in a colour set, and wish to own the third to secure a Monopoly. What you’ll probably find though, is that your fellow player will be aware of their leverage, and will try and drive a hard bargain. Using your interpersonal skills here will be key, as you try and convince your fellow player that trading with you will be advantageous to them, and they’ll be better off with a property, or properties you can offer in return.
The same thing applies to the real world. Regardless of whether you’re negotiating with creditors, or real estate agents and the sellers they represent, being able to negotiate well can mean the difference between getting what you want, and missing out.
Patience is a virtue
Being patient is especially difficult early on in a game of Monopoly, when your fellow players seem to be buying up properties left, right and centre. You want to get in on the action, right? Cool your jets!
Going into a game with a set strategy, and having the patience to stick to it can prove wise. Remember, the way to win at Monopoly isn’t to buy the most properties – it’s to be the last one standing with cash. So, why rush into exhausting all your initial cash by buying up properties? It’s important you know when to buy and when to pass. | Greater Bank
Having said this, when it comes to real estate, buying because you’re impatient and keen to just get into the market can prove unwise. Acting on impulse and buying on emotion usually means your purchase decision isn’t 100% thought through. Just like on the Monopoly board – exercise patience and stick to your strategy.
Price increases with competition
So, it turns out that if you land on a property playing Monopoly and choose not to buy it, the property is then meant to immediately go to auction. The auction is conducted by the banker, and the property in question is then sold to the highest bidder, which can often mean properties sell for much more than the initial asking price. (Don’t believe us? It’s in the rules…)
The thinking behind this is to speed the game up – getting all properties sold quicker, and draining players’ initial cash reserves, so we don’t all end up spending hours at a time hunched around a Monopoly board. Be honest – have you been playing Monopoly wrong your whole life?
The bottom line here is that the more people want something, the demand increases, and the price increases accordingly. The same exact concept is something we’re all too familiar with in the world of real-world real estate. When a property market is riding high, fewer homes will be sold via private treaty, as sellers know they have the opportunity of getting a higher sale price by going to auction.
Ask for rent!
Another one that might send you clamouring through the Monopoly rule-book is the fact that you actually have to ask fellow players for rent if they land on your property. If you’re a distracted landlord, and you miss a roll of the dice because you’re checking your phone, you could end up out of pocket. And once the turn has passed, there is no going back and reclaiming lost rent.
When we transplant this into the real world, property investors perhaps don’t need to be so vigilant as to contact each tenant and ask for rent, but it pays to be attentive as a landlord. Whether you’re managing properties & tenants yourself or through a property manager, keep your finger on the pulse and make sure your tenants are meeting their commitments.
Luck or just opportunity?
Sure, there are some people that will still tell you (usually after you’ve just bankrupted them) that Monopoly is a game of chance, and that the roll of the dice has too much sway. Look, while this may be true in the sense that there is some element of chance to gameplay, there can be no doubting that the right strategy can set you up for success. What’s potentially more influential than luck is the ability to recognise opportunity and make your own luck. In a game of Monopoly and in real life, it’s vital that you can identify why you may have fallen behind or gotten ahead, and recognise the trend so that next time you can come out on top.