Buy, Don’t Sell
When I left Sydney in 2005 for the Sunshine Coast Qld my mum gave me one bit of advice. She said, “Whatever you do, don’t sell your Sydney property. So we didn’t, we hung onto it. At the time the Sydney market was not doing too much. At that time we really wanted to be doing a few more things in our new hometown on the Sunshine Coast, so after a while we sold that property in Sydney for around $440,000. My mum was right. If we had kept it, it would now be worth around $1,000,000. I learned from my mistake and want to share the property investment tips I’ve learned as a real estate agent.
When you talk to any savvy property investor that’s truly wealthy, most say the same thing. Once you’ve secured an investment property don’t sell. Instead look long term and use the equity you gain through capital growth as a deposit to buy another. During the global financial crisis the real estate market on the Sunshine Coast took a real hit and for around 3 years, the market did nothing. People panicked and sold for losses. But once that was over, the market started to move again and everyone who held onto their properties are finally benefiting from that. So buy, don’t sell.
You can’t go too wrong buying anywhere on the Sunshine Coast. Over the next few years, the Sunshine Coast Qld has some very exciting, major things happening, you can read more about that here. Just like the stock market, you are better off long term buying in blue chip areas. It’s worth paying market value for a better property in a top suburb than it is to get a lower price for a property no-one else really wants. Very cheap properties also attract very cheap tenants. There are always better performing suburbs that retain their value from decade to decade. When you do your research you’ll find though that the entire sunshine coast is a fairly stable and consistent area to invest.
You can consider buying near the train line, buying near the beach, or buying near large infrastructure like hospitals, shopping centres, and the airport.
It’s Time in the Market, not Timing the Market that Counts
It’s impossible to time the market. By the time we notice the market has turned and is going up, we would have already seen the bottom. So if you are keen to buy now, just do it and get on with it. Even if you buy now and the market goes down for a little longer, over time it will correct and you’ll benefit from the capital growth. Keep in mind real estate is long term. Don’t try to be a millionaire overnight, time and capital growth are the biggest, easiest ways to build wealth in real estate. The best way to remember this one, from my list of investment property tips, is “set & forget”. The real secret to wealth is compounding your investments. Aim for consistency.
Go Against the Grain
So many people have an opinion. It’s amazing how many people have opinions on property investing that have never even done it. If you want to invest in property just get started. I mentioned above that it’s not about timing the market. If the market is falling and people are selling, it’s probably a great time for you to buy. In fact right now is the perfect time to buy on the Sunshine Coast because the market has slightly slowed. Less is on the market, they are on the market for longer & I am sure if you look around you’ll be able to secure a property for a price you’re happy with. Consider doing the opposite to what everyone else is doing. Buy when everyone sells; sell when they buy. Don’t listen to negative people telling you that you’re doing it wrong.
Don’t Fear the Gear
Recently we had the federal election, where if Labour had been elected negative gearing may have been at risk. Luckily, that didn’t happen. If you have a high income negative gearing an investment property is a fabulous way to reduce your tax and build wealth at the same time. I’m a real estate agent not an accountant so don’t listen to me get advice from your accountant. You can also read more about negative gearing in the ATO site here.
Be Passionate About your Investments
Get excited. One of our investment property tips is to have fun & be enthusiastic about this exciting endeavor. Believe in your investments. It will feed your drive and keep you focused over the coming years with what’s possible. Part of this is looking at small improvements to the property, not only to increase the property’s overall value and monthly rental value, but also to attract better quality tenants. Consider new paint, new carpet, improvement to the gardens or adding a shed or carport.
Drive enables you to take risks that very few others would make and get you to where you want to be faster. Constantly focus on the results of your investments. Create a spreadsheet and estimate compounding capital growth over the next 5 or 10 years. Then based on that estimate when you may have created enough equity to make your next purchase. Capital growth is something that can sneak up on you with real estate. Possibly the first year you may experience little growth but that may dramatically catch up to you in the following few years.
I know people who have bought their first investment and to their surprise within less than two years have been in a position to buy their second.
Just this week I saved around $7,000 in interest PA through refinancing. But here’s the thing, I didn’t even change banks. I asked them if they could do any better. It seemed they were prepared to make only very small adjustments, so we pushed them. It’s amazing when they find out they may lose a client with lots of loans what they can suddenly do. About an hour ago I got an email from my bank confirming the new rates have not been activated yet.
You really need to see what your current interest is, what else is available from other banks, then speak to your bank again and talk to the loan discharge department. This will get them moving. Even if they make a small immediate adjustment, it will allow you to do a big more shopping around.
Stick to Your Strategy
Work out what works for you. Once you develop a strategy, stick to it. You need to stick to it long term. Its time and compounding capital gains where the big money is. Over the last few years the Sydney and Melbourne markets have been falling but last month they grew. Plus over the next few months there are some big positive changes happening with lending that will give buyers access to more money & the word is interest rates will slightly fall. People that held real estate through this tough time will start to benefit.
Don’t retire on property rents
Many people think you’ve got to pay property off as quickly as possible, and retire on rental income. But it’s usually the capital growth that makes real wealth. If you’ve generated $200k in equity, through capital growth, you can use that as a funding to buy another investment, then repeat until you have a portfolio of properties all benefiting from long term capital gains. The last of our investment property tips is to focus on equity and capital growth, and not just on paying off all of your property.
Always consult the professional experts in their field to assist and guide you with advice. Speak to a qualified accountant to endure you’ve got things structured correctly. I once rented a property I had lived in. It had a tiny loan and I was earning $800 PW rental income. My wife and I thought this was fantastic until we did our tax to find that most of that $800 weekly income was seen as additional income on top of our normal income an we ended up with a large income tax bill. If we had discussed this with our accountant in the first place we would of done things differently.
A large part of property investing is tax minimisation which is also why its crucial you have a tax depreciation report done on the property too. You can read more about those here.