5 common mistakes investors make when buying interstate | Michael Yardney's Mentorship Program https://michaelyardney.com.au Learn the science of getting wealthy Thu, 12 Nov 2015 02:33:14 +0000 en-US hourly 1 https://wordpress.org/?v=6.1.1 5 common mistakes investors make when buying interstate https://michaelyardney.com.au/5-common-mistakes-investors-make-when-buying-interstate/ Thu, 12 Nov 2015 02:17:31 +0000 http://michaelyardney.com.au/?p=5447 Did you know that investing interstate is something that few Australians do? I can understand the reluctance. For most people, handing over several hundred thousand dollars for an investment property is a psychological challenge in itself. No matter how much...

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Did you know that investing interstate is something that few Australians do?

I can understand the reluctance.

For most people, handing over several hundred thousand dollars for an investment property is a psychological challenge in itself.

No matter how much research you do, there is always the risk that the property you invest in won’t perform.

Add an interstate location to the mix – meaning you’re not able to see, visit and drive by your shiny new asset whenever you like – and it can create enough ‘fear of the unknown’ to stop investors from taking any action at all.

The Big Mistake

It leads to a common and very costly mistake that many landlords make: only investing in their own backyard.

They do this because it’s in their comfort zone, but currently, there are many regions in Australia where doing this makes extremely poor financial sense.

Most people are aware that Brisbane is a property market in a new growth phase, for instance.

Smart and experienced investors from interstate have no problem turning their attention to Brisbane, with the expectation that sectors of the market will outperform the average over the next year.

Many more investors will miss out, however – held back by their own fears and inhibitions.

Others still will be spurred on to take massive action, but without the benefit of experience or local market knowledge behind them, they’ll invest in the wrong areas or wrong property types.

How can you make sure you’re not one of them?

Don’t fall into the trap of making the following mistakes, common of inexperienced investors:

Buying off the plan:

There are too many of these properties coming on to the market in Brisbane, which means there is no ‘scarcity’ value and no supply pressure to underpin price growth.

This market is dominated by investors, which will do you no favours when it comes time to rent your property out.

Ultimately, you wind up paying a premium and will have minimal capital growth and rental growth.

Buying in outer suburban areas:

This includes new house and land packages in master-planned communities.

They may seem like they have all the right ‘bells and whistles’, but when you invest, you have to be mindful of the essential fundamentals that drive price growth.

These outer-suburban segments of the market have underperformed historically, and are likely to continue to do so in the future.

Buying sight unseen:

It’s incredible what you can achieve, and the unsightly features you can avoid showcasing, when you’re using a good camera and exploit the right camera angles.

I’ve heard horror stories of people who have bought sight unseen thinking their investment property had an incredible view (it did – but only from the toilet) or who didn’t realise huge powerlines dominated the streetscape, because they relied on agent photos only.

Moral of the story: don’t risk purchasing site unseen unless you have a trusted representative review the property on your behalf.

Buying from property marketers:

I’m not saying all property marketers are trying to scam you – but, there are a fair chunk of rogue operators out there who add a significant premium to the property’s sale price to account for their own commission.

There’s only one person making a decent profit from this transaction – and it isn’t the investor.

There are far safer, easier, smarter ways to invest in property than this.

Buying under advice from out-of-town advisors:
These people don’t have the perspective and depth of experience that one needs to understand what a good property is – and what isn’t – and why one side of the street is worth more than the other, or why one particular street in a suburb is worth considerably more than other.Most importantly, don’t use interstate buyers agents who fly up, see a few properties, make an offer and fly out again.

You need to rely ‘on the ground’ experience to ensure you minimise the risks.

Buying property interstate can be a savvy and financially rewarding way to grow your property portfolio.

As with every investment you consider, you need to evaluate whether the opportunities on offer align your goals and your investment strategy, rather than jumping into a market because it’s generating positive headlines.

Thinking of investing Interstate?

If you’re looking for independent property investment advice, no one can help you quite like the independent property investment strategists at Metropole.

Remember the multi award winning team of property investment strategists at Metropole have no properties to sell, so their advice is unbiased.

Whether you are a beginner or a seasoned property investor, we would love to help you formulate an investment strategy or do a review of your existing portfolio, and help you take your property investment to the next level.

Please click here to organise a time for a chat.

Or call us on 1300 20 30 30.

When you attend our offices in Melbourne, Sydney or Brisbane you will receive a free copy of my latest 2 x DVD program Building Wealth through Property Investment in the new Economy valued at $49.

By Shannon Davis

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What are going to be the property “hotspots” in 2016? https://michaelyardney.com.au/what-are-going-to-be-the-property-hotspots-in-2016/ Thu, 12 Nov 2015 02:05:32 +0000 http://michaelyardney.com.au/?p=5444 I had a call recently from a journalist from one of the major daily news sites asking me for my predictions on the property hot spots for 2016. Apparently an article that he wrote 2 years ago predicting the hotspots...

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I had a call recently from a journalist from one of the major daily news sites asking me for my predictions on the property hot spots for 2016.

Apparently an article that he wrote 2 years ago predicting the hotspots for the coming year was one of the most popular on their website, and now coming to the tail end of the year it seemed opportune to write one for 2016 and for me to update my opinion.

While I love giving my opinions to the media, I hate being asked for “hotspots” because that’s not how I work.

Rather than looking for the next hotspot or the next big growth area, which a few months later will be proven wrong, I prefer to use a strategic approach to finding investments that will outperform the averages over the medium to long-term.

Interestingly before I replied to the journalist I had a look at the original article online and was fascinated to see some of the predictions others had made and how those suburbs – the so-called next “hotspots” – have actually performed over the last year or two.

“Interesting” is a good choice of word, in fact a generous choice of word for how some of those suburbs have underperformed.

Many of the outer suburbs and regional towns just didn’t gain the traction the hot spotters were hoping.

Just like many of the mining town “hotspots” that were the flavor of the month a few years ago have left the landscape littered with investors who lost money.

Places like Port Headland, Moranbah, Mandurah, Cairns and Gladstone

So what will drive our property markets next year?

The impacts of wild volatility in the Australian Dollar, overseas economic issues, a flood of foreign buyers, APRA tightening the screws on investor lending and the long period of low and stable interest rates may all appear obvious in the rear view mirror, but what lies ahead is inherently difficult to judge…perhaps impossible.

However likely factors affecting our property markets over the next year include:

  1. The Australian economy, which is slowing. How this pans out and how the RBA responds with interest rates will clearly be a major impact on our property markets.
  2. APRA’s regulations targeting investor and now owner occupiers will slow demand, especially from new investors and home buyers who were “marginal” in their ability to service loans. And investors with large property portfolios who are rent reliant for serviceability will find it harder to get loans.
  3. Population growth will continue albeit at a lower rate, and head for our 4 big capital cities, but particularly Melbourne and Sydney where the growth in service industries is creating the most jobs.
  4. Interest rates are likely to remain low next year and may even drop further if our economy falters.
  5. Business confidence is rising as we seem to have a stable government at both the Federal and State levels.
  6. Consumer confidence has been rising since Malcolm Turnbull was elected Prime Minister but this remains fickle.
  7. Job growth and steady unemployment rates will lead to increasing consumer confidence.

This combination of factors means that 2016 won’t be as good for house price growth as 2015 was.

But that doesn’t mean a property crash is on the way either.

Nationwide price falls are unlikely before the RBA raised interest rates, which probably wouldn’t happen until 2017.

However, decreasing affordability, changing sentiment and oversupply in several sectors such as CBD and off the plan apartments will create a volatile mix that will fragment and slow our property markets – moving some from a seller’s to a buyer’s market.

This is already evident with falling auction clearance rates particularly in the Sydney property market.

As always demographics will drive our markets

Let me explain…

As Australia’s economy bumbles along I can see little wages growth over the next year or two, but I do see interest rates rising sometime in 2017 and both these factors will affect some suburbs more than others.

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What I mean by this is that rising rates are likely to affect suburbs that are more interest-rate sensitive like blue-collar areas, regional locations and first-time buyer locations.

On the other hand, property values are likely to increase in the more affluent, gentrifying middle ring suburbs of our major capital cities where the locals’ income is less dependent on CPI rises in wages and where rising interest rates are less likely to have an impact on disposable incomes.

So my top picks for suburbs that will outperform would include suburbs where people have higher disposable incomes and are able to, and prepared to, pay a premium to live there the because of the amenities in the area.

Property price growth in Sydney will likely slow to around 5% over the year ahead and Melbourne prices should grow a little more than this (+7%).

Prices will fall a little more in Perth and Darwin as the mining boom continues to unwind, while Hobart and b are likely to see continued moderate property growth, but the Brisbane property market should start to pick up further as it plays catch up rising around 7% over the year.

And I can’t really see a reason for regional or mining town real estate to have much capital growth.

There is no influx of new people moving to these regions little to strengthen their economies and investors are no longer buying up big in these regions.

2016 will be good time to clean up your house

While I still see some good opportunities in selected property markets, I recognise that strategic property selection will be critical as capital growth will not be as strong next year as it was this year.

I also see 2016 as a window of opportunity for those with underperforming properties in their portfolio to divest themselves of their lemons, because the odds are they will continue to disappoint.

The best way to uncover an underperforming asset before it eats too far into your bottom line is to annually review your portfolio and ask yourself some hard questions:

  1. Is this property performing like I expected it to?
  2. Is this property outperforming the market?
  3. If this property were on the market today, would I buy it again?
  4. Is there anything I could do to improve my property, so that it generates a more attractive return on my investment?
  5. Is this property likely to outperform the market averages for the next decade or more?

Sure property is a long-term investment, but occasionally the right thing to do is to cut your losses and sell up so you can buy a better property.

And don’t wait for your local market to get better, because the gap between the value of the property you own and the top performers will only get wider.

However, if your property is tenanted, consider selling it at or near the end of its lease term to widen the appeal of your property by making it attractive to both owner-occupiers and investors.

What will you do in 2016?

If you’re looking for independent property investment advice to help you become financially independent, no one can help you quite like the independent property investment strategists at Metropole.

We’ll help you cut through the clutter of mixed property messages.

Remember the multi-award winning team of property investment strategists at Metropole have no properties on the market to sell, so their advice is unbiased.

Whether you are a beginner or a seasoned property investor, we would love to help you formulate an investment strategy or do a review of your existing portfolio, and help you take your property investment to the next level.

Please click here to organise a time for a chat. OR CALL US ON 1300 20 30 30.

When you attend our offices in Melbourne, Sydney or Brisbane you will receive a free copy of my latest 2 x DVD program Building Wealth through Property Investment in the new Economy valued at $49.

The post What are going to be the property “hotspots” in 2016? first appeared on Michael Yardney's Mentorship Program.

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