2020 - A New Year With New Rules
21 January 2020
The biggest hurdle I find with people I talk to about buying property is having the confidence to commit to the decision, and the confidence to look outside their own back yard.
The stakes are getting higher, the fear of failure and also the fear of missing our (FOMO) compound in the buyer’s head and heart to plant seeds of doubt.
Add in everyone’s else’s 2 cents worth, a bit of media spin and information overload, purchasers end up making rushed and mentally easy acquisitions then hope for the best.
You need to take control of your emotions if you are going to successfully purchase property. Personally, I always ask my peers in the industry for a second opinion when I’m buying for myself, because I know how easily emotions can cloud judgment.
If you have the time and confidence you can find some good opportunities. A couple of examples we found for clients over Christmas include,
A Commonwealth Bank tenanted property with a 3yr lease showing a 7.4% net return with 5% annual rental increases, plus the capital growth, - 15mins from the Gold Coast - it’s a great outcome.
This property was 800km from my client’s home and was well outside of their search zone, and circle of comfort, but you need to be able to spend the time to investigate and get yourself comfortable with doing that.
Another couple of properties for budgets between $400,000 and $1,500,000, have been new duplex’s in Western Sydney and regional city growth centres showing between 3.5% - 4.5% net cash flow plus 3%-5% annual growth, combing to give between 6.5% - 9.5% annual return, plus the depreciation tax benefits on top.
However, you won’t always find these properties on the real estate web pages. Online data is a great thing, but with that comes information overload, and filtering the noise from the real opportunities is becoming increasing difficult. Many agents are starting to expose their listings onto their social media platforms first, before being offered to the general market, which makes it harder again to keep abreast of it all.
This situation is making it increasingly difficult to purchase the right property or to spend the time required make the contacts and get “in the know” over a wide variety of markets.
This is leading people to go to markets that are deemed to be “safe” – like the Sydney North Shore and Eastern Suburbs, where investment returns are currently as low as 1.0%-2.0% net on cash flow and some suburbs are showing a 15% price reduction from their peak in late 2017/early 2018.
As real estate is becoming more expansive, and offering lower returns, just following the crowd is not going to give you the returns that it has in the past.
Purchasing property in 2020 will be very much about looking outside the box.
