1. Locality, locality, locality… but it’s only half the story
Locality logic can be tempting and seems to make sense on face value. But remember, just because a suburb’s value increases on average by double-digit returns, it does not guarantee that your property will do the same. It is important to understand more about the suburb and assess local demand. I have seen many investors purchase a property that they would like to live in but in a suburb they would never move to. It’s critical that the stock or property suits the locale with all its idiosyncrasies. This detailed analysis is where property investment advice can really help.
2. Trust your emotional reaction
While love might make the world go ‘round, it can’t be the sole factor behind your investment choices. What you really need is someone (future buyer or tenant) to fall in love with the property you’ve invested in. If they are not emotionally drawn to it, they may not bid for it or make an offer or application. Now this is not free reign to unleash your penchant for leopard print on the soft furnishings, but it is vital that you understand some of the things that most purchases look for in an apartment and more importantly the little things that put them off. Details count and smart planning in this area can make a huge difference.
3. Land always appreciates more than buildings
Contrary to popular belief, there are some localities that have experienced greater growth in apartments than houses. It is important that you know the suburb and that you understand the current and future demand for housing in that suburb. When we assess a locality, we look at a number of statistics to help us determine what sort of tenant and potential buyer will be considering the suburb in the next 5, 10 and 30 years.
4. Buy the cheapest house on the best street!
This is another property investment fallacy. Remember, there may be a very good reason why that house is so cheap – because nobody wants it! Sometimes the best bargains are expensive. I’ve seen countless examples of apartment buildings around Melbourne that sold 10 to 15 years ago and at the time were considered expensive. However, they were beautifully built. They remain scarce in terms of quality and position. As a result, some of these have tripled in value over 10 years. Other apartment blocks that were a bargain at the time have literally done nothing over the same period.
As a side note to this debunked myth, I have also seen people purchase older houses in expensive streets in the hope to achieve capital growth. In a lot of these cases, the cost of maintaining the property was too much, particularly given the low rent returns for poorer quality homes. Many of these would-be investors had to sell due to the costs associated.
They generally made a loss.
5. Just give it time and you’ll see results
This old property adage seems wise and yes, sometimes a long term view and patience can be great assets to an investor. But there are some cases where people have invested with the belief that if they invest for the long term it doesn’t matter what they buy. The truth is that there are suburbs that have decreased in value over ten years. There are also examples of inner urban dwellings that have grown by as little as 5% over 10 years, despite being situated in areas that have experienced growth.
We’ve debunked some myths here but rest assured, there is property investment wisdom and advice at hand. If you would like to use an evidence-based and knowledgeable approach to investing in property, please contact us.
