Series 2 of 7; Series 2:Tailored Plan: Part 1.
I believe you must engage a Buyers Agent with every property purchase, Using a Buyers Agents/Buyers Advocate and Property Advisor is key to more property investment success. These are extracts from my latest book “The Australia Property Investment Handbook 2018-2019”. In all good book stores now. Also Read Property Finance Made Simple and Property Investing Made Simple.
Fear, not purchasing well, not building a large enough property portfolio, or simply just buying a property or two with no idea what the properties should be, all affect a goal being achieved.
An intelligent investor will not just focus on capital growth. They want to avoid the risk of becoming a slave to their portfolio, to have to keep working just to make repayments thinking they will wake up in 10 years and the portfolio has doubled. They want to sleep at night as interest rates rise (and they are, and will continue to independently of the RBA).
An intelligent investor will not focus just on positive cash flow either, as they want to achieve capital growth and more wealth at retirement. Whilst they don’t want their properties to be a negative impact on their lifestyle, they realise the importance of capital growth.
Too many authors of property investment books, and others that operate within the property industry, promote just one strategy: either capital growth in blue chip suburbs or positive cash flow in regional locations. This is misguided.
The most optimal plan is to buy several capital growth properties with excellent cash flow in blue chip suburbs near major infrastructure hubs, preferably near Melbourne or Sydney CBD.
The reality is not everyone can afford to do this. The idealists out there who promote only buying capital growth properties in blue chip suburbs, or only buying positive cash flow focused properties, are just that – they are idealists, not realists. Their logic, in isolation to most people’s financial situations, is sound, but it is disconnected from the vast reality of society in general, of typical mum and dad investors in the burbs.
RULE: Investors need a balance of both capital growth and cash flow in order to grow a portfolio and more likely achieve their goal.
Good capital growth locations typically have low yield. This would mean the property would likely be negatively geared.
Cash flow focused properties are in areas with less capital growth. At least this strategy reduces the risk of being exposed too much to the unknown future cost of debt. Fixing your interest rates can help as well, providing knowledge of what your repayments will be for a while. But no one can beat the banks – in the long term it works out to roughly the same as having a variable rate loan.