The 5 fundamental principles of property investment
In any economy, and in all sectors, you will always have pioneers and the followers. The pioneers are the ones that enter the market when everyone is fearful and stick around until after the followers (or masses) have entered and driven prices upwards. The pioneers are the ones that many talk about with phrases like; “I wish I’d invested when he/she did”.
Blogger: Mark Rooney, Investinus Group
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1. Always buy at a discount.
This is a fundamental and a great reason why I find people asking me more and more about the US property market. It has become obvious to people that the Australian market doesn’t seem to offer any discounts to investors.
2. Cash flow positive.
This is critical to ensure that you don’t become one of the ‘buy and hope’ investors. Most investors in Australia use this methodology; buy and it will go up in value. This is not the case and over the past 10 years the cost to hold properties has far outweighed the end returns. Do the numbers yourself, put in the 10 per cent or 20 per cent deposit of a property purchase 10 years ago and add in the holding costs, rates, insurances etc, etc and you will be quite surprised on the actual return you receive. Then last but not least don’t forget to pay capital gains if it was a rental property. That will surely wipe away and real returns.
3. Invest for the medium to long term
This is essential. If you have observed the two previous fundamental principles, then you are in great shape to do this. The truth is that no one can predict what will happen to the Australian or the US market in the short term, but chances are if you hold your property for the medium term in the US and I would say for at least 15 years in Australia then you should be in a favourable position.
4. Stack the odds in your favour.
This is a really important point to consider at this stage – what type of property will you invest into? Sexy properties mean risks, whilst dull and boring often means safe, solid and reliable. We buy safe, solid and reliable 2 and 3 bedroom houses, simply because they appeal to a wide choice of buyers.
5. Always add value
This is continually done throughout the investment, not just at the beginning it should be maintained throughout. Look for opportunities to paint the walls or redo the floors and when you do decide to finally sell the asset don’t be afraid to invest a little more to get back a little more in the sales price.
Due to the constantly changing economy and property market, the days of the amateur investor are long gone. This is critical to ensure that you don’t become one of the ‘buy and hope’ investors.
Greed and fear are two of the most powerful reasons as to why people buy anything. Coupled with the media, many people make their investment decisions based on the thought that they can either make a quick profit or that they may lose a lot of money. If you take nothing else away from this read please be mindful that you are the one who pays for the costs of a bad investment not the people writing the stories in the media or elsewhere.
Investinus Group has developed an investment offering that allows our clients to have access to positive cash flow properties. Feel free to contact us for your ongoing investment property needs.
About Mark Rooney
Mark first found out about the advantages in the U.S real estate market in February 2002, whilst on a business trip to Canada and the U.S.A. The initial contacts made were able to assist with learning and studying the market place and how an Australian can invest into the U.S market safely and also have assurance that a team there can protect the asset.
For the next 4 years Mark researched the U.S real estate market and looked for opportunities to build further relationships with people. Over the next few years Mark gained an understanding of the various cities and what investment outcomes they provided a foreign investor.
In 2009 Mark was asked to assist others with purchasing property in the U.S.A. This was the initial beginnings of Investinus Group, whose focus is ensuring that their clients have a safe and secure investment in U.S. real estate.
The group aims to build strong relationships with their clients and the people who work with them, suppliers, property managers, attorneys, accountants and developers.
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