Risk and reward

Successful property investing is a long-term view.  The rewards come in time, not instantaneously.  Oftentimes, what appears to be a fantastic opportunity is all-too-often too good to be true: that brand new development promising 7% yields with a rental guarantee, for example.  Often, if it sounds too good to be true, it probably is.  The reward may be there, but so might the risk.  The longer you can hold your property, the better you will do in the long-term.  I say the long term because property moves in cycles, and in the short-term, many people can and do lose money.  The long-term view evens out these bumps in price and ensures growth over a long period.  

Base your choice on numbers and evidence, not emotion

Many investors base their choice of investment property on what they personally like, ignoring the fact that they will not be living there: someone else will be.  Every investor must consider the factors that mane a property and an area attractive to tenants, so that they can be sure of a rental return and ongoing growth in the value of the property.  The area might be great, but the property is on the main road and plagued with mould from rising damp.  Bad move.  Or it might be a fantastic property but miles away from schools, shops, transport, work and so on.  Again, bad move.  The ideal rental property is in an area of high demand, where people like to live, and of course it needs to be an awesome home that people will love to live in.  That's how you minimise rental vacancy and maximise the value of your home over time.

Use your own agent: a buyer's agent

Successful property investing requires a separation from logic and emotion; from facts and fiction; and of course a thorough knowledge of the market.  A smart property investor has their own agent to represent their interests and help them to make wise decisions that are based on on data, evidence and property fundamentals.  A buyer's agent knows where the areas are that have the best property fundamentals for growth and low rental vacancy.

Capital growth is king


Some investors focus on rental yield, that is, a property that returns them a profit every week.  Generally, the homes that have a high rental return have a low capital growth, that is, they tend not to go up in value very much over time.  Conversely, the properties that tend to appreciate more in value over time tend to not return a profit to the owner every week - in fact, they cost money each week.  Which is better?  Generally speaking, the low yield / high growth properties return more over the long-term than the high yield / low growth homes.  Capital growth is what helps people build wealth through property.

Buy with selling in mind, but don't sell

Sounds odd?  Let me explain.  At any point in time, there are roughly 35%-33% people renting (depending on the area you're looking at), and the remaining majority are owner-occupiers.  So, while the home you are buying now as an investment is intended for tenants and should appeal to tenants, also buy with a mindset that in time (preferably a very long time!) you may wish to sell, and if you, do, most likely, your purchaser will be an owner-occupier.  When you buy, consider who the next purchaser might be, and ensure that your property could appeal to an owner-occupier and a tenant.

Melissa Maimann is a Licenced real Estate Agent and Buyer's Agent in Sydney.  She assists home owners and investors alike with an affordable service that empowers you to make smart purchase decisions.  Melissa's service is fast, efficient and accurate.  If you need a hand with your next purchase, don't hesitate to make contact.