“What makes for a perfect environment for investors wanting to grow and secure wealth?”
Media continue to deliberately confuse most with sensational headlines, you would think the economic sky is falling! If you revisit recent headlines, they went from property bubble bursting to better than ever forecast growth … yet people believe a journalist who is selling advertising space through sensationalism, over what is actually happening on the ground??
My mentors and my life long experience in property has taught me to analyse, think and research differently to the mainstream. I understand that I could either be one of the masses and get average results, or I can achieve the results I want by following those before me who are achieving the results which they keep getting.
Take any successful individual or family and emulate what they do in their successes, and you will notice that they don’t follow the herd. They do not look at the real estate numbers, the daily statistics, the journalist’s articles. They are successful because of what they look for in an investment and they match the investment to suit their goals and objectives for it.
Successful investors are strategic and have methodology, they avoid trying to buy low or sell high, they look for property signals which make investment sense, an approach which is vital to their continued success.
Careful who you choose to listen to
How may “property guru’s” make outrageous forecasts and keep getting it wrong? When they do, you will notice that almost no successful investor sells out of their investment portfolio, on the back of the “guru’s educated forecast” ?
Your own inner voice may be this very guru and you are choosing to listen to your inner voice rather than market fundamentals – why?
What to look for in the Australian Residential Property Market
What does a successful investor look for when investing, includes understanding that the planned population growth for Australia will continue to strengthen the property markets in general. Firmly standby that one cannot lump all property into one basket, there is no one-property market in Australia, but many property markets. Be aware that very few properties lend themselves to being Investment Grade property.
Successful investors are aware of this and are highly well-versed or rely on industry professionals to help them with their strategies in sourcing ‘best fit’ properties to match these investors requirements.
Sound market fundamentals required to underpin your investment
Successful investors are aware that a planned population growth is increasing pressure on supply of new dwellings for owners and renters. And that different property markets are thus in different property cycles, due to the rise in demand and also infrastructure investment.
Infrastructure investment, a successful investor knows, is vital to their decision making. The investment will alter the nature of that location forever, giving an investor a fair-advantage. The power and influence infrastructure investment has on property values is significant and will positively alter the nature of that area for ever, creating a legacy for generations to come. Whilst driving property values higher into the future.
History around the world clearly demonstrates that where a government invests, they want a return on their investment and create new jobs. Government then invite industry in to invest, who also want a return on investment and create new jobs.
New jobs naturally attract population growth for employment and lifestyle purposes and population growth places strong pressure for the supply of new dwellings to own or rent. Can you see the investment potential in this?
Jobs, population growth and the economy
Population growth into this location places incredible and a growing pressure on the supply of new dwellings to own or rent (as mentioned earlier) and under this environment, no where in the world have the values of property nor the rental yields of property gone down.
The rise in rental demand is also growing on the back of affordability to buy where people want to live. And also on the rise of new immigrants coming into Australia for a new life but are unable to afford to buy where they want to live and so become a renter. Successful investors understand this and look for opportunity in locations which include these and other required property investment fundamentals to underpin and drive their investments.
Why do successful investors ignore property statistics?
Real estate statistics come from historical data only, by the time the market has received new statistics, things have already evolved in that area and you are too late or would have missed out on vital growth. This is why current and future market fundamentals are a true thermometer for future growth.
Companies which sell historical data to ‘want to be investors’, who have been incorrectly educated to see what was previously sold for what $’s are coining it selling you these statistics at your own expense. So why do people continue to buy this data when the area they are focused on, is not going to be what it was when this data was released?
Australia is evolving and will continue to do so, meaning how will past data accurately give you a forecast on future values, which fail to take into consideration current and future market fundamentals? They cannot, it is not possible.
An astute investor will look forwards to what will underpin and drive the market in the future and invest on where that location could get to.
Your thinking may not be aligned with this but a successful investor knows this too well and continues to make successful investments, based on what a location will evolve into analysing population growth, infrastructure investment, future employment opportunities, future economic prospects, rise in demand and other required fundamentals to underpin and drive their investments, devoid of any emotion.
Identifying the future potential of a given location, with these required fundamentals, ahead of time, will reap future financial rewards from your informed investment decision today into Investment Grade property.
Australia’s massive investment into infrastructure, our growing export market, new job creation and employment growth, will continue to soundly underpin the economy. Whether we grow by 1% or 2.5% the economy is still growing, is it not?
Identify with the power of infrastructure investment and the legacy it will create and leave for generations to come, this is what you are investing into. If the homework and due diligence has been done on your behalf by government and also industry before they make that massive investment, surely their due diligence becomes your de-risked due diligence?
Tourism continues to increase, think about it, the higher the immigration into Australia the more family and friends will come to visit plus natural ongoing tourism, which also drives our economy. Tourists come here and spend their dollars boosting our economy. In 2019, Australia expected 10 million overseas visitors spending close to $130bn an increase from 2018 figures of 8.5m tourists who spend $107.4bn … further boosting our growing economy (as per Tourism Australia figures).
Interest rates are at historical lows and our banking system remains in healthy shape, both further supporting the Australian economy.
Every economy has its negatives too and that may be a low wage growth, inflation, increased energy costs, slow down in supporting retail bricks and mortar etc. We can choose to focus on what the media want you to subscribe to, or we can look for the reasons why we should want to invest
Be a realist, successful people always make money through educated and calculated risk mitigation. Choose carefully what you want to focus on and if that does not align with your goals, focus on what will achieve your goals.
How do successful investors choose a location?
The success of any investment is that it should meet your requirements and objectives for that investment, this is vital to an astute investor. No matter what the asset class of that investment is. Match the investment vehicle to the goal and purpose for it.
Being aware of this, successful investors when choosing a location for their investment property, is no different. They do not have a need to make a comfortable decision of investing in their own back yard or next door because they ‘know’ the area. An astute investor will seek out a location which will underpin and drive their investment, and make a challenged decision in doing so.
Median house prices mean nothing to them as median values are an over generalisation of a wider property market, and not an accurate thermometer for an informed investment decision. Remember Australia has many property markets and that very few properties lend themselves to being investment grade.
If you are still of the belief that median house prices are an accurate thermometer for a location, ask yourself “how disproportionately high levels of sales activity, in the higher end of the property market, have an accurate reflection in the property market in which you want to invest in?”
And as discussed above, historical data is not an accurate reflection of future results, choose carefully who and what you want to listen to and read.
A successful investor will avoid the hype of short term market drivers such as mining towns where values rise sharply, oversupply takes place and values plummet. Their focus is on long term drivers which continue to demonstrate the potential to support their investment decision now and into the future.
Type of Investment & Dwelling ?
Some ‘highly informed and influential property advisors’ will reprimand an informed and educated decision you are going to make and if they are believable and influential enough, they will be manipulative and steer you towards their own beliefs.
Why we are sharing this with you is that their strategy (which they obviously and wholeheartedly believe in themselves, as this is only what they know) may not be suited to your circumstances. Does this mean you are investing wrongly? No, it just means you have chosen a different strategy and type of dwelling, where the numbers which drive and underpin your investment, will help you on your journey securing and growing your own financial independence.
If your budget today, and into the foreseeable short term, does not allow you to get into your first prize and you elect to wait until you can ‘afford’ first prize’ your decision is fraught with dangers which may include : when you can afford to invest in that strategy, the values have now risen and either your budget does not allow you to secure that opportunity, or you will have missed out on growth and other investment benefits or both.
Where investing in what is now ‘first prize to you’ and thus not the right investment from the advisors perspective, at least you are in the market with an investment and your dollars are working for you more so than if you are not in the market and having to wait it out until you can get into what they want you to invest into. This does not mean that you invest for the sake of investing either!
Because very few properties are investment grade, match the investment to your goals, in line with your budget, whilst ensuring that the numbers which drive and underpin your investment are working hard for you. These numbers are vital to the success of this investment and your next and next investments, underestimate them at your peril. Are you aware of what all the numbers are and how to calculate them?
In saying this, they type of dwelling should be one that will ensure that these numbers are working hard in your favor. If not, to merely squeeze a property into a budget will be detrimental rather than advantageous. Does this make sense?
Investment Property Strategy
When planning your investment, keep foremost in mind that this investment is the foundation for your next and next ones. It will either slow down your abilities to grow wealth or enhance them. Meaning it is vital that you get this investment correct from the outset. Yes or yes?
Identify and Understand what your purpose for your investment is, what you want it to achieve, why and how. Then match the investment vehicle to this, devoid of emotion.
Determine your investment budget and borrowing capacity, whilst avoiding squeezing the investment into a budget for the sake of investing.
Match the investment vehicle to your goals in line with your capacity to invest, where the numbers which are driving and underpinning your investment are working as hard and as efficiently for you.
Learn “what you don’t know you don’t know”. Know and understand all the numbers, they are vital to the failure or success of your investment! Property is a 7 – 10 year investment strategy where the correct numbers will significantly compound your returns on investment when you get it right!
Allow yourself to be challenged, remove emotion which tends to cloud an astute investment decision.
Work with an informed professional whom you get to know, like and trust, who has your interests at heart at all times.
Avoid making a comfortable and easy investment decision, they are never as sound as making a tough investment decision outside of your comfort zone.
If you are in accumulation phase of growing wealth secure an investment which will take advantage of compounding returns. Align it to achieving capital growth over higher rental income.
If you are in pension phase, align your investment portfolio to generate an ongoing yield which you are able to financially benefit from.
Avoid chasing higher rental yield over capital growth in accumulation phase, as when you go to the bank for your next loan for your next investment property, they look for equity and discount rental yields.
If you are unable to borrow for your next one when you feel you are ready for it, you will lose out on compounding capital growth, rental yield and tax deductions by not having that next investment. Also when you are then able to get your next loan at a time in the future, the value of the property you would have invested into has gone up, which is detrimental to your overall financial planning.
In my 13 years as a professional in this industry, it is sadly incredible how many peoples whose paths I have crossed, have made ill informed investment decisions, invested in their comfort zones, had and still have no clue about the numbers of their investment, invested in the wrong type of property, followed bad advice and chose to listen to the wrong people, used emotion when investing or didn’t invest when they had everything on hand to invest, except their own personal commitment!
This saddens me when there is help at hand. When if they know why they are choosing to think the way that they are thinking, which continues to give them the results they keep getting, when having information on hand to allow them to come to informed and educated decisions … they deliberately choose to fail. Why?
Property Investment Summary
In closing, 10 years may seem a long time but in reality it flies by. Where were you just 10 years ago in 2010 when Australia was almost an entirely different country and Julia Gillard challenged Kevin Rudd … doesn’t feel so long ago does it?
But if you had invested in an Investment Grade residential property and your investment doubled in value, growing by 7.2% compounded over the past decade; you could have gotten back your initial 10% deposit through depreciation and tax savings + achieved thousands of $’s in positive cash flow + your investment asset could have been worth around $500,000 in equity alone. Think about it if having gotten back your initial 10% deposit, the investment (aside from the loan) would have been ‘free’ in your hands!
Yet people still continue to create excuses and say “No!” ???
In Australia, the time to invest remains now as we are going through a long term strategy of deliberate population growth, massive infrastructure investment, in an environment where supply of dwellings to own or rent is below a rising demand (where infrastructure is being built). Meaning all the stars are aligned and your potential to have your money working harder for you than you are for your money, is realistic.
Be mindful, invest in Investment Grade property in order to have your $’s working that much harder and efficiently for you, on your wonderful journey towards your own financial independence, where you can make many positive impacts on this journey helping your family, friends, colleagues, charities, mother earth or what ever your life passions are.
The only ingredient missing is your own personal commitment to yourself!