Property investment tip: Go back to the basics

Many people tend to take too much factors into consideration, but as complicated as property investment seems, Mark advocates “going back to the basics” and learning about the fundamentals of property investment before going on to purchasing properties.

His advice to budding investors: “Just do it ... just keep it nice and simple.”

He shares his tips with Smart Property Investment for people who are looking for that one “final push” before they jump-start their journey: 

Before anything else, learn about the “fundamentals”

Mark believes that only the investor can determine the right time, the right area and the right property to build his portfolio.

He advises people looking into starting a property investment journey to educate themselves about the market and avoid depending on a financial team from the get-go.

“One thing you’ve got to be careful of doing is thinking that someone else has the answers for you. I think that’s the first thing. I really do believe that if you’re going to get into the property market, you’ve got to know the market yourself. You’ve got to do all of the homework yourself. You’ve got to understand the fundamentals of the marketplace yourself, and that’s not that hard to do,” he said.

Once you have equipped yourself with basic knowledge, before diving into the market and purchasing properties, go through different resource materials such as textbooks and podcasts, and then find field experts who can run through the “fundamentals” with you more thoroughly.

Mark explained: “Go along to seminars, listen to podcasts, but don’t go to somewhere where they’re actually going to try and load a deal into you at the same time. As soon as someone starts to tell you they’re going to sell you something or they’ve got something for sale, run for cover. Run for the hills, because that’s really the wrong place to be.”

Re-evaluate your mindset on interest rates

“It’s about affordability,” Mark said.

While many people consider low interest rates as a good sign to start investing, most of the time it actually works the other way around.

According to Mark: “To some extent, the lower the interest rates, actually it’s probably one of the worst times to buy if you look at the mathematics of it because there’s an inverse relationship between low interest rates or high interest rates and property prices.”

“Priced market – the prices of it actually adjust relative to affordability. The lower the rates, the higher the purchase price because affordability usually stays around about the same, on the same basis. It just adjusts, the market adjusts all the time. So, low interest rates could mean high-entry price. High interests rates could mean low entry price,” he further explained.

Buy where you can afford

Another fundamental lesson in property investment is learning to adjust your plans and work around the hurdles.

“Buy where you can afford and rent where you want to live. That’s my view. Don’t say ‘I want to buy in Paddington, but it’s too expensive for me.’ Don’t complain about that. Rent in Paddington, or stay at home with your family, or rent with a friend, but go and buy somewhere where you can afford. You might rent in Paddington and buy in Ballina,” according to Mark.

Always keep in mind the “fundamental questions”

Instead of asking “when is the right time to buy” or “which is the right property,” investors must always buy “based on fundamentals,” Mark suggested.

He said: “The fundamentals are always the same: population growth – are there jobs in the area? What’s the economics of the area? In other words, what drives the area? Is it driven just by tourism or has it got some basic industry in there? [Are] there schools? [Are] there amenities? Is it somewhere families want to go? What’s the demand? What’s the population growth? Those are your fundamentals.”

Phil and Mark agreed that most people tend to overcomplicate property investment when, at the end of the day, successful investors determine their progress only by going to the fundamentals of the field.

According to Phil: “There’s a lot of moving parts that you’ve got to get right, but it’s not hard. Why do you invest in property? You invest in property, it’s wealth creation, mainly. So, you buy property because you want the thing to go up in value, and you want, essentially, the rent to underwrite the cost of the mortgage and other costs as much as possible. It’s not hard, right? It’s pretty simple.

“We’re just actually trying to bring people back to the beginning, back to the fundamentals, back to the simple stuff. Just buy an investment, get it cash flow positive. What you learn from that – you learn about the mortgage, you learn about how you can get someone to find the property for you, you learn how to manage it. Then go and do another one, and then do another one,” Mark concluded.

Tune in to Mark Bouris’ episode in The Smart Property Investment Show to know more about his secrets to success in property and how you can cut through the noise and doom and gloom to build a strong portfolio regardless of market conditions.