Finance advice

7 property investment 'wrongs' to avoid next financial year

TroyGunasekera 70x60As we’re experiencing one of the best growth cycles in property in the last 50 years, many investors are flocking to the market to begin, or to add to, their portfolio – but many will be unsuccessful.

Blogger: Troy Gunasekera, national manager, The Property Club

Whilst a large number of Australians dream of having more than one investment property, many first time investors tend to stop at one purchase, largely because of financial difficulty in keeping up with finance commitments and in some circumstances are forced to sell or refinance their property.

Anyone looking to invest in property during the coming financial year needs to be mindful of the most common and easily avoidable mistakes people make.

Too many property investors make simple mistakes with their investments, and then don’t understand down the track why the journey is so difficult and why things go wrong.

Many investors would be much more successful if they took the time to learn about the market, sought solid, professional advice and developed the correct business mindset.

7 wrongs property investors should avoid

1.    Wrong property. The wrong property may lead to long vacancy periods, low rental yields and difficult tenants. Research what the rental demand is for in the area, and invest in what tenants will want rather than what you personally prefer. You may prefer to invest in a house, however there may be more rental demand for units in areas 10km from the CBD. You might also think one-bedders are too small, but these may be preferred in inner-city areas.

2.    Wrong location. The right location should experience capital growth and good rental yields – and is more important than the property. The latter can be improved – the location can’t. “Location is so important that at Property Club, we research the market weekly for areas that are due for growth. Clues to look out for are growth in infrastructure such as roads and public transport, or changes such as population growth. Essentially, it’s areas that are due to have property undersupply, with relatively low future supply coming through, and yet buyer demand is growing,” Troy says.

3.    Wrong tax planning. Ensure you seek an accountant who specialises in property investments, as this will make a significant difference to your cash flow. They should know, for instance, that using the principal part of your repayment to fund a second property will make more money than you will otherwise save in tax.

4.    Wrong funding. Many investors get caught with the wrong loan by committing to a high-fixed interest rate, being charged extra unnecessary fees or having high-break fees and hidden penalties. “I recall Property Club discussing with one investor about the benefits of selecting a 7.5% variable rate which was predicted to come down. He was instead talked into fixing for five years at 12% by the bank manager. It pays to do your research, get professional advice and stick to it,” Troy says.

5.    Wrong tenant.  Many investors experience the nightmare of having a tenant that can’t be evicted or does damage to their property. Look for a property manager who knows how to spot a bad tenant, attends to your every request, is unflappable, can advise you on maximising your rental returns, and has investment properties of their own. When you have a good tenant, consider locking them into to a 12-month agreement, as this will help guarantee your rental income.

6.    Wrong mindset. Investors need to keep a financial perspective, have a firm understanding of the market and make factual decisions. “Property investing is a business – very different from buying your own property. It’s important to maintain a business mindset, where you keep track of the property’s value and rental growth, maintain accurate records, conduct an inspection at least yearly and attend to any council or strata matters that affect the property value and rental returns,” Troy said.

7.    Wrong advice. Most people would never allow a friend or family member do their tax, service their car or even cut their hair. So why, then, when it comes to purchasing a property do so many choose not to seek professional help and instead take advice from family and friends who lack the expertise? Investors need to take advantage of professionals who are active property investors and are experts in their field.


About Troy Gunaskera
TroyGunasekera 340x408Troy Gunasekera is the National Manager of The Property Club, Australia’s largest independent property group guiding members of all ages to become financially independent through investing in property.

With his wife, Troy has an impressive portfolio of properties worth over $5m diversified across Australia. His own investments are the result of his continual research into the latest developments in property finance, interest rates and property markets Australia wide.

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  ["title"]=>
  string(72) "Mortgages in a tighter lending economy and why Brisbane is a good option"
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Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

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To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

Hear from\u00a0Son\u00a0about:\u00a0<\/p>\r\n

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  • The pitfalls that he has seen people get into<\/li>\r\n
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    Whether it\u2019s building a successful property portfolio or investing in one of their Development Funds, Open Corp can help you through every stage of your investment journey. The team has 40 property specialists who collectively have been involved in over $4 billion worth of property transactions and the acquisition of more than 8000 homes and investment properties.<\/p>\r\n

    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

    In this episode, hear from\u00a0Michael\u00a0about:\u00a0<\/p>\r\n

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Mortgages in a tighter lending economy and why Brisbane is a good option
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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
Mortgage Trusts, an alternative first step for property investors
Should a real estate title be in one person’s name only?

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A property investment plan years in the making
object(stdClass)#1213 (52) {
  ["id"]=>
  string(5) "18287"
  ["title"]=>
  string(75) "Regional Victoria showing up Melbourne in price performance, new data finds"
  ["alias"]=>
  string(74) "regional-victoria-showing-up-melbourne-in-price-performance-new-data-finds"
  ["introtext"]=>
  string(139) "

Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

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Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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