Updated: Jan 13
When you start looking for your investment property, you are always inclined towards the findings from all the property experts, newspapers, magazines and investors talking about the hotspot of the property market. As a starter, you feel more assured that you are looking at the location, which is deemed as a hotspot and safe to invest in, and you start following the experts.
It's easily understandable the inclination that amateurs have towards these spots as someone has already invested there and the perceived safety that comes along. The thinking is that as investors are already there, the numbers should be stacking up nicely. All you have to do is arrange for your finances and be part of the 'safe' bet on these hotspots. And if you act quick enough, you become a proud property investor. Voila!
Is this you? If yes, then did you look closely and go through the details and study the 'hotspot' more? You might find that these 'hotspots' are generally inflated spots. You might find that there has already been so much progress in the area, and there are numerous development projects in advance. A perceived 'hotspot' might not be a real hotspot any more. Heard that 'the early bird catches the worm'.
Successful investors do not follow the herd. They count on the underlying fundamentals instead. They focus on finding their perfect location by doing the research. Having said that it is good to be well-read and see what others are doing or claiming. It would be best if you put energy in analysing demography, infrastructure projects, vacancy rates, owner-occupiers to investors split, supply and demand, growth triggers, etc.
For example, in 2014, I was advised to buy a home and land package in Rockhampton, a claimed 'hotspot' then. Instead, I chose to spend almost four months in my research for my fourth property in my portfolio, in Goulburn. Now, I look back and can only smile after looking at the drastic difference in the respective performances. While median house prices in Rockhampton has dropped by -27.8%, Goulburn house median increased by +42.3% since then. Not to mention that with the help of the local agents, I was able to buy the property almost 15%+ cheaper in value pushing the ROI much higher for my investment. As the adage goes in the property investing, we make money when we buy not when we sell. I am just glad that I didn't followed the 'hotspot' advise and choose to be an independent research scholar.
Undoubtedly, you will be spending a lot of time in doing this research, but if you follow the correct methodology, it will never fail you in the long run. It is a very demanding process, and I will advise you to not to take shortcuts. It is easy to become a property investor. But as ABS Statistics tells us, more than 90% of the property investors end up holding only 1 or 2 properties. And only less than 1% acquire six or more properties. This stats tell us that there is a difference between successful investing and not so successful speculating. The research is the difference between the success and the failure. If you have done the right research and followed the process correctly, then you will undoubtedly make a robust property portfolio.
Should you be time-poor or do not know how to go about doing research, feel free to leverage independent buyers agents/consultants out there to help you through your journey.
Next steps: Should you want to learn how the author built his $5m balanced portfolio in 7 years, and aspire to own something similar, feel free to get in touch via email at firstname.lastname@example.org or book an appointment here.
Disclaimer: This article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where applicable, seek professional advice from a financial adviser.