January 06 2022
"Fruit for thought when it comes to investing. Number 3 seems to be something a lot are guilty of!" - Marco Zande, Strategy Executive.
Many thought 2020 was one of the most turbulent years yet, we continued to experience many unknowns in 2021, and when faced with some tough decisions it’s no surprise many Australians have fallen victim to common property blunders this year. With the start of a new year, and as we still navigate uncharted territory due to factors out of our control, Aussies should still be aware of the most common property mistakes and how to avoid them heading into what is hopefully a prosperous 2022.
Primarily considering capital city opportunities VS regional
In 2020, quite a few Aussies flocked to regional towns to avoid tough restrictions, fulfil a sea or tree change dream or due to loss of income. We haven’t seen the same level of activity in 2021 and I believe many have gone back to the age-old belief that you must buy in large city centres and are therefore ignoring growth opportunities in regional and coastal markets. Although a ‘sea change’ may no longer be relevant to your personal circumstances e.g. you are now physically required in the office, you can still consider these areas for an affordable investment opportunity, instead of sinking the majority of your money into a smaller place in a capital city. If you are looking to do this, look for national parks or undervalued beaches that are located in affordable capital areas.
Following the trends
If you invest where everyone else does, you will see mediocre results. If you’re hearing about it, it’s probably too late! Your own individual strategy and goals are so important in property investment, so make sure you don’t just follow what your friends or neighbours are doing. Evaluate your life and understand what you really want – is it a bigger backyard, a study, a balcony, proximity to cafes and restaurants? The pandemic has forced many people to realise what they truly want in their life and property. It’s also important to do your own due diligence. Look at the facts and statistics available to you, some fantastic resources include Corelogic, Australian Bureau of Statistics, Real Estate Investar, sqm research. This allows you to take control of your own strategy, instead of relying on the ‘trend’.
Waiting to see if the market stabilises or drops
At the beginning of COVID, experts predicted a major crash in the market, causing people to hold onto their deposit or batten down. Some economists predicted a mammoth 40% crash. Well as you know, this certainly didn’t happen, with the ABS stating that residential property prices rose 6.7% in the June quarter 2021, the strongest quarterly growth since they began recording in 2003. The property market is very resilient and it’s important to seek individual advice or expertise, as everyone’s situations and goals differ. I’m still finding people holding off now as it’s ‘too hot’, but long-term investors know that you can’t time the market and when you’re ready to buy, you buy!
Not considering non-traditional investment strategies e.g. duplexing, renovation, land subdivisions
A buy and hold strategy, whilst popular, will not produce the same equity and results as other investment strategies. Consider duplexing - through duplexing, I created enough equity to leave my full-time job as a music teacher. I believe duplexing can become the new ‘Great Australian Dream’, as it’s become so expensive for Aussies to own their quarter-acre block and big home. When you’re creating these smaller units or smaller blocks, you’re selling them to people who can afford to buy something smaller but can’t afford the traditional home — at least not in their chosen location.
You can also consider subdivision. Subdividing a block in a desirable suburb can provide an instant increase in equity, and there are various strategies available to you. You could sell the land, build and hold, or build and sell. Whatever you choose, subdividing provides you with great flexibility depending on your investment or lifestyle goals.
Buying a property that you’re unable to add value to
No matter the size of the renovation or your budget, you should always aim to achieve an ‘equity uplift’. A cosmetic renovation, not a major gut and overhaul, will increase the amount of rent you earn and add significant value. Every dollar you spend on renovation should return three dollars in value. Look at painting the property, replacing floor coverings, adding new blinds and of course bathrooms and kitchens are the money makers. If you’re planning on living in the property for a significant period of time, there is no rush to add value, but this is a significant consideration for when you re-sell.
Source: Australian Property Investor