Many property investors often get dejected the moment they find out that they overpaid for an investment, but Right Property Group’s Victor Kumar and Steve Waters believe that as long as the market trajectory is upwards, an asset will always be giving off significant returns.
Investor Jack Henderson, 21, bought one of his properties before an auction, by offering a purchase price to the seller through his agent and sealing the deal before the property was actually put up for auction.
According to him, he was not able to get an independent valuation before putting an offer because it was “quite rushed”.
He shared: “The agent was rushing me a little bit because he wanted to get the deal done, obviously. So, I rushed home ... and then I rushed back and I actually gave him the contract at North Bondi RSL [while] he was having a beer … It was quite rushed and funny.”
In the end, he found out that he overpaid about $10,000 to $20,000. However, while he admits to losing confidence in the beginning, the property investor realised that the amount was “nothing in the grand scheme of things”.
“If I look back on it now, I got it for a great price because now it's probably worth $150,000 more,” Jack said.
According to Victor, property investors should ideally be avoiding overpaying as much as they could, but if the property gets you on the market that maintains an upward trajectory, then the risk might just be well worth it.
The property professional explained: “[If you didn’t buy the property], six months down the track, you'd be paying a lot more for that particular property … Property, as everyone should understand, is a long-term proposition.”
Steve agrees that the market trajectory is the key to knowing that you’re getting a good investment.
“You've got to get the trajectory of the market right because if it's in a soft market, well, then [it’s not worth it],” he said.
Being aware of this data is also vital for setting up contingency plans in case anything unexpected comes up and affect your property portfolio.
Smart Property Investment’s Phil Tarrant, who is an avid investor himself, makes it a point to study all the possible “worst case scenario” as much as he takes time to choose his next investment property.
According to him: “I look at my portfolio and I go, ‘Worst case scenario ... What happens if this happens?' ”
“What happens if half of my tenants move out tomorrow? What would I do? What would happen if interest rates went up by a percent or two percent? What would I do? You [need] all these contingencies. … You need to know what your fallback position is, right?” he added.
Lastly, to maintain a good property investment journey, establish a good relationship with reliable property professionals who can help you navigate your way through the ups and downs of property markets.
Tune in to Jack Henderson’s episode on The Smart Property Investment Show to know more about the gentrification of a suburb, buying before content, and what your list of priorities should be for a new property.