A prominent industry figure has revealed his secret formula for a guaranteed successful investment, highlighting one of the biggest mistakes investors routinely make.
Speaking to Smart Property Investment, founder and executive chairman of The Hopkins Group, John Hopkins, shared the company’s views on the essential criteria investors should be looking for if they want to guarantee a successful property investment.
“[Property investment] must be long term in regards to the investor, but also long term in terms of the investment class,” he said.
According to Mr Hopkins, when it comes to property, it’s 10 years minimum.
“You buy the right property in the first place, you put it in your back pocket and you don’t sell it,” he said.
“And those clients of ours that in the 80s bought those apartments in Kirribilli for $50,000, or in Albert Park for $21,000, I can tell you that they are the ones who are laughing.
“They are the ones who have more property because the rent has gone up, the value has gone up and the value of the borrowed money has gone down.”
In addition to the investment being long term, Mr Hopkins believes there are two other essential criteria.
“They must be secure investment classes, and you can make those judgements with property.
“I can tell you that those properties in Elizabeth Bay or Carlton are not risky. But an apartment in Surfers Paradise or Gladstone is.
“And the third criteria is that the investment must attend to itself. What that means is that you buy it, and you don’t have to do anything to it.”
Mr Hopkins said the biggest goal for most property investors is to obtain the highest possible returns.
“That’s a combination of capital growth, income growth, the confidence with which you know people want to occupy it, and an appropriately high initial yield.
“Returns aren’t just capital growth, but everybody tends to look at their capital value, less their debt, and they say, ‘That’s what I’m worth’.”
According to Mr Hopkins, there are two other qualities that investors should be looking for, which are just as important as high returns.
“That is security and flexibility,” he said.
“Security is where we can be confident that the underlying supply and demand circumstances of that specific market won’t change, resulting in that asset losing value quickly.
“Flexibility: if there’s a change in the general economy, if there’s a change in the specific circumstances as they relate to that particular investment class, or if there’s a change in the circumstances for the particular investor, we know, again, that we can manoeuvre the situation within a reasonable period of time without having a fire sale.”
Mr Hopkins said he recommends investors put flexibility at the top of their list, security second, and returns third.
“They don’t [put flexibility at the top], because everybody is hunting money,” he said.
“And that’s where the spruikers go.
“But security and flexibility [are] what save people when markets change.”