I spent the evening listening to Terry Ryder speak at his Keys To Successful Property Investment. The information was gold. I have distilled the key points into the twelve tips to successful property investment.
1. Don’t believe what you read about property prices
90% newspaper articles are regurgitated press releases that are published without research. Press releases are written by businesses and developers and published by struggling newspaper owners who put their commercial interests first. They are riddled with misinformation and negativity designed to sell newspapers which are not the basis of sound decisions.
2. Whose figures do you believe?
The media reports price data as fact but often figures from one major data source are contradicted by figures from another. We are not talking about one or two percent. The example below of Sydney capital growth reports from 4 major sources shows a 13.4% difference between the highest (Core Logic) and the lowest (ABS).
|AUSTRALIAN CAPITAL CITY GROWTH IN HOUSE PRICES (%) AS AT JAN 2017|
|Capital City||SQM||ABS||DOMAIN||CORE LOGIC|
**Depending on which set of figures you believe, either the boom is still raging or it is largely over.
In fact, the RBA ditched Core Logic as a data source in April/May 2016 stating that its figures were overstated. https://www.abc.net.au/news/2016-08-05/reserve-bank-ditches-corelogic-home-price-data/7695642
3. Auction clearance rates are misleading
They are usually inflated by 10 to 15% because they rely on agents reporting their results, they are hardly going to be jumping at the opportunity to report a declining market.
4. Ask the right questions
A common one is: “Is it a good time to buy?”
The better question to ask is: ”where is it a good time to buy?”
Australia is made up of a many of markets and it’s always a good time to buy somewhere.
5. South Australia’s economic ranking has moved up from 6 to 4, its highest in a long time if ever.
All the media can talk about is the Holden plant closing ignoring the positive things going on including the opening of the biggest hospital in the southern hemisphere.
6. Avoid apartments in the Brisbane CBD
There is a massive oversupply of new apartments. This is most certainly going to worsen as there is still a steady stream of new developments yet come online.
Most lenders have Brisbane’s inner CBD suburbs on their black list for apartments.
You will however still find news paper headlines quoting Brisbane’s sizzling CBD apartment market.
Like this one:
The sales of these properties are driven by the enormous commissions, an irresistible incentive for unscrupulous buyers agents and financial planners.
He quoted the example of a 61 year old woman who was being pushed by a Sydney financial planner to buy an off-the-plan unit in Brisbane. A mistake in property investing is a problem at any age but at 61 it can be a tragedy.
7. Hot or Not?
8. Q: What area in Australia has grown the fastest?
A: According to Terry’s research of the Valuer General’s land values across the country, in recent years prices have grown the fastest in suburbs within 30 minutes of Badgerys creek.
9. Be clear about your investment goal, it will inform where you should buy
A common goal for investors is freedom. Ironically, many lose their freedom through bad choices.
10. Plan for success – 75% people who invest , fail. (Source ATO)
11. Treat investing as a business, not a hobby
A successful investor’s first investment is quality data and advisors so they buy in the right place at the right time for better than average growth.
Hobby investors generally make their decisions based on unreliable information from the media , the water cooler, the bar-b-que and poorly informed buyers agents.
This often results in buying in the wrong place or at the wrong time.
12. Break away from the herd
You make your money on the property when you buy. Most people buy in the wrong place or at the wrong time by following the herd.
Terry quoted several mining town disasters. One in particular stood out, a young woman who bought not one but 19 properties in Moranbah at its peak when prices were around $750,000. They are now worth about $100,000.
For me, Terry was definitely preaching to the converted. As a renovator, I make it my business to know one area intimately (a 5km radius of home) this is essential when flipping.
As an investor, I engage the best in the business.
I don’t have the time, energy or skills of a property market analyst who spends all day, every day pouring over property data.
The cost pales into insignificance.
Many hobby investors will spend $500,000 on a property but not $50 on a report or $500 on an independent valuation or $5000 on expert advice.
Buying in an area that grows 8% instead of 3% will mean a difference of $25,000 per year.
My last buy and hold purchase has grown $200,000 per year in the 2 years we have owned it.
Makes penny pinching seem a little silly, doesn’t it.