Q. I recently saw some statistics from the ATO that showed very few investors end up with more than one investment property. Why do you think that is? What holds people back and what can I do to break the mould?
A. One of the biggest mistakes we see with investors who are trying to grow their portfolio quickly is that they focus on yield. Now yield is obviously very important because it helps with your serviceability and a lot of people start to hit that serviceability wall when they hit that second or third property.
But while yield is very important, if you chase a dud property that’s not going to grow in value for you, then even though you might be getting a slightly better yield, if it doesn’t grow in value you’re not going to be able to generate that additional equity.
So the better thing to do is to look at the existing property portfolio that you’ve got and figure out ways to get better yields from that rather than chasing a high rental yield location in what might be a sub-standard growth area.
In terms of other mistakes that investors make – some of them actually give up. They find that they have a couple of properties, they’re told they’ve hit the serviceability wall and they even end up thinking about selling some.
Really, property is a long-term journey. While everyone wants to get rich quickly, you really need to focus and understand it’s a long-term journey. Be prepared sometimes to sit for a couple of years if you can’t get into the market. But ultimately if you buy the right properties in the right locations and you get the right tenants, you’re going to do well and make a lot of money over the long-term.
Damian Collins, managing director, Momentum Wealth