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With market conditions unlike the ‘boom time’ of the past, for the first time investors are changing their strategies and looking to new ways to invest, according to a property expert.
Think and Grow Rich’s Stuart Zadel, told Smart Property Investment that the old passive ways of investing are no longer ‘enough’.
“In the new economy, what worked in the past will not work in the future, in fact, for many, it’s not even working now,” Mr Zadel said of the buy and hold technique.
He explained that this is due to prices not doubling every seven to 10 years as they used to, something we’re seeing “for the first time in Australia’s history” as prices fell around the country.
A common trait of investors using the ‘old’ method is that they are losing money on their investments. According to the ATO, Mr Zadel explains, 63 per cent of investors are losing, on average, $9,000 a year per property through negative gearing.
“This places a terrible drain on investors cash flow and in many cases their properties are also worth less than what they paid for them. The net result is has stopped many investors in their tracks and cause many to leave the market.
“But it’s not all doom and gloom. Great money can be made if you have the right skills and we are seeing the emergence of a new breed of property investor,” he said.
He calls this new breed “the property entrepreneur” and they are identified by their more proactive approach to investing as they look to use new skills to make money immediately.
These techniques work “in any market and, reasonably, in any location”.
He lists cosmetic and structural renovations, small developments, strata titling and buying distressed properties below market value as the new skills of the trade.
Negative gearing occurs when the rental income of a property is not enough to cover the total costs of managing the rental and re-paying the interest portion of the loan.
Property refers to either a tangible or intangible item that an individual or business has legal rights or ownership of, such as houses, cars, stocks or bond certificates.
Real estate is a type of real property that refers to any land and its permanent improvement or structures that come with it, whether natural or man-made.