We hear it all the time, would-be property investors who are waiting for the Sydney property market to slow down before they buy something. And some of these people have been waiting for a couple of years and have now been left behind.
Now, don’t get me wrong. I am not an advocate for jumping on bandwagons. And there are plenty of Sydney suburbs and properties where people can easily do their dough. But in the areas in which we buy (more on that later), if you buy the right property, you can secure yourself an excellent investment, even if it’s at the top of the market.
What do unsuccessful property investors often say?
They got advice from the wrong people. They bought the wrong property. They didn’t get help from a professional.
What do successful property investors often say?
They wish they started earlier. Some even say they wished they borrowed more.
When is the best time to buy?
When you are ready. Forget trying to time the market. Property investment is a long game – if you buy a quality property in a good location, it’s time IN the market that will make your investment successful, not being clever and “timing” the market.
What is it that holds people back?
Usually it is fear (assuming, of course, that they are financially able to purchase an investment property). What do they fear? Making a mistake, losing their job, having a tenant trash the place, dealing with selling agents… the list can go on and on. These are all legitimate concerns, and you may be relieved to know that there are ways to mitigate all of these risks.
So let’s look at the cost of doing nothing.
Here’s a really rough illustration to show what lost opportunity can look like. According to various measures, the Sydney median house price has risen around 15% per annum since 2013. So, if you had $700K to invest back at the end of 2012 and bought a house, it could feasibly be worth almost $1.25M by now (even more if you have made improvements).
If you were watching the market and decided to invest towards the end of 2014, that same house would have cost you $926K. And if you had bought it then, you would have enjoyed around $300K capital growth over the following 24 months.
You might be shaking your head and thinking, these median growth figures (and statistics in general) can be interpreted in many ways. Well, here are some concrete examples of capital growth in Sydney’s Inner West just last year.
In February last year an apartment in Newtown sold for $1M. Through some sad circumstances, the same apartment hit the market again later in the year, selling for $1.183M. That’s 18% growth in just 9 months!
A house in Annandale sold “off market” in October for $3M, having sold at auction exactly a year earlier in exactly the same condition for $2.41M. Now that’s a staggering 24% growth in 12 months.
Now here’s one of our very own success stories.
We purchased an “off market” apartment in Marrickville in May for a client for $832K. In October I was at an auction for an almost identical apartment in the same complex that sold for $912K. Another one just sold in February 2017 for $958K. Our clients now have $126K in equity gained in only 9 months and I am pretty sure that they wouldn’t have been able to save that much over that time period!
Obviously these rates of growth can’t be sustained, but… If you are out of the market you won’t see any growth. Click To Tweet Under normal market conditions, with the types of property we buy in the locations we buy in, we believe that it is reasonable to expect to double your money in 10 years.
(A note of caution here, we are using only one measure of a good investment for this illustration: capital growth. We recommend you get financial advice for your situation as aspects such as cashflow and borrowing capacity are critical considerations.)
Let’s be clear. It’s very easy to get this all wrong. The way to overcome this is to get educated and/or get professional help. We help our clients gain the knowledge and confidence to take the plunge and purchase a sound investment property. We aren’t into taking risks and we aren’t into get-rich-quick-schemes. The secret is a solid understanding of how to choose a location, how to identify the characteristics required for capital growth and then how to determine the right price to pay. Put simply: get educated then get started!
The thing is, many people have been waiting for the market to cool down for the past two years and missed out on some seriously good growth. If this is you, what will you be saying at the end of this year if this growth continues?
Published March 2017
DISCLAIMER: Good Deeds buyers tips are intended to be of a general nature. Please contact us for advice that is specific to your individual circumstances. You may also need to get advice from other professionals such as an accountant, mortgage broker, financial planner or solicitor.