In several States and Territories around Australia you will hear the cry that it’s a ‘Buyers Market’. Meanwhile in the population capitals of the country real estate speculators have just reaped the rewards of ‘Superheated’ Markets.
A Bull market is never the time to enter as a purchaser especially if you are an investor. So what happens to the savvy investor in 2016? They either take their new found wealth to buy a Ferrari or alternately look for sage investment opportunities outside the major capital cities which offer opportunity for Capital Growth and return.
So if you are not buying a Ferrari here are my tips for the 2016 Property Investor.
Get out of your own Backyard
Throughout my real estate career I have witnessed investors purchasing property close to their own home so that they can ‘Keep an eye on it’.
In my opinion this is one of the silliest reasons I have heard to drive a buying decision which should be based on figures rather than whether it’s close enough to show your mates.
You already have a large investment in the area that you live and chances are you didn’t buy there because of the growth rate or the return. A decision to purchase an investment in that same area may therefore be based upon the wrong indicators as they are two very different transactions.
Any stock broker worth their salt will tell you to diversify your portfolio through the acquisition of shares in different Companies. This is a technique which enables you to spread the risk. Real Estate Investments should be viewed in a similar fashion.
Don’t Forget to Buy
Day 1 in real estate some 27 years ago I was handed a ‘Funny Fax’ hot off the roll next to my desk which had a picture of an old bloke with his beard down to his knees and a walking stick in his hand. The caption read ‘This is the picture of the young man who waited for the price of Real Estate to come down’.
Great advice. The median price when I started selling was under $100 000 so things have risen a bit since then!
Do not get too caught up in analysis and fail to make a decision over whether you think that the market might drop another $5k before it hits the best value. You are purchasing this investment with the long term in mind and in 10 years’ time when the price has doubled, chances are you won’t even remember what the purchase price was.
Another wise man said to me that the only time that you know that the market hit the bottom is after the price already went up. Unless you have a crystal ball or a time machine then you will be well served to listen to those blokes called Agents. If they are suggesting that it is a Buyer’s Market it is because they know that properties are taking a while to sell so make sure that you don’t forget to buy.
Maintain your Property
Just because you have a Professional Property Manager looking after your property and you have awesome tenants you will be needing to spend some money on the ongoing maintenance of your investment property. Especially if you want it to look the same when you get it back as when you handed it over
No matter how good your tenants are they are highly unlikely to do improvements to your home or invest money into the upkeep. Your home will suffer wear and tear. The ATO even allows you to claim it so they know it is going to happen. Make sure that you are prepared for it.
Factor this expense into your Annual Budgeting so that you are doing everything you can to elevate your future Capital Value when it comes time to sell. If you budget on a shoestring you will be handed back a very different home to the one that you initially purchased.
Take full advantage of cheap money
Interest rates probably won’t remain at historic lows for ever. Though the Reserve Bank has not yet given any indication of an impending rate rise, I would still suggest investors take advantage of the current situation and consider locking in rates where possible. Money is cheap now, but it can’t last forever.
Darwin is pretty damn good
Finally, none of us really know what 2016 will bring. We can’t actually say for sure whether interest rates will rise, fall or stay the same. Nor can we predict with complete certainty the locations or property types which will provide the greatest capital gains or the highest rental yields.
What I can tell you is whilst Darwin’s median rental prices have come off over the last 12 months their yields have remained the same as the highest in the Country. This is due to the median prices dropping also. Combine this with the opportunity to access cheap money and investors entering the Darwin market are actually better placed from a cash flow perspective right now than they have been over the last 5 years.
Why would you put your money anywhere else…..and we have Crocs to protect it for you!
If you require further information about this article or would like to chat about the marketplace in general then do not hesitate to email me on glenn@rhdarwin.com.au
