Two industry experts have revealed the number one misconception investors have about managing and expanding their property portfolio.
Speaking on a recent episode of Investing Insights with Right Property Group, leading property buyers’ agents Steve Waters and Victor Kumar delved into common mistakes people have when embarking on the property process.
For Mr Waters and Mr Kumar, the number one misconception around property investment is that affordable means cheap.
“I think one of the key things that people get wrong is as soon as they hear the word ‘affordable’, they equate it to cheap, right? And then, we’re equating ‘cheap’ to cheap and nasty,” Mr Kumar told co-host Phil Tarrant.
“But you need to, first of all, take a step back and say, ‘Okay, it needs to be affordable to the investor in the sense that it needs to tie back in to their financials, [so] how much capital have they got? How much cash flow they’ve got, [what] their circumstances [are].
“So, as an example, one of the key first things we ask is: ‘Is there any life changes about to happen?’ So, if they can afford a million-dollar home today, but they’re going to lose their job tomorrow and it is already flagged that they’re planning to start a small business, it might not be an affordable property for them.”
Mr Waters noted media commentary can often be a key factor for investors coming to this conclusion – a mistake which could cost them down the line.
“There’s a lot of rhetoric within the media and commentary about what areas actually grow better and there is some commentary around, ‘It’s got to be the inner ring or the middle ring’ or whatever it may be. And let’s just pick a price point of ... I don’t know, three quarters of million dollars, $800,000, whatever it may be to make a good investment. And that’s simply not true. But let’s imagine if it was just for one second. If you can’t afford to get into that market whatsoever, do you just sit back and wait long enough for you to create or save a deposit before you actually get into that market?” he posited.
“[They may] potentially never get into it [or] it might be three, four, five years down the track and as a result of that, the market’s moved. So, you’re always chasing because you’re not going to be able to save enough to get into every market. So, I think finding the markets that are affordable to your scenario is absolutely key.”