Should property investors consider buying off-the-plan units?
Many property investment experts speculate that off-the-plan investors often take the hardest hit when regulatory boards make changes on lending guidelines, leading to a surge of off-the-plan units supply across different property markets.
Should property investors take advantage of this opportunity to buy cheap properties or should they sit on their hands for a while to avoid being affected by depressed markets?
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Smart Property Investment’s Phil Tarrant admits that he is an “opportunist” kind of investor and he is always on the lookout for the so-called “competitive advantage” over other property investors.
“I will find any opportunity I can which gives me a competitive advantage over anyone else to acquire a property either under market value or at a cheaper rate than what everyone else is willing to pay,” he explained.
“I'm always out in there in the marketplace using the people I know… I'll go and… find people who are in distress and that's typically where I'll try and buy a property.”
Phil, together with Andy Scott, shares his tips on how property investors could navigate their way through lending changes and why everyone should be careful of making property purchases in the middle of these transitions:
How do you deal with property markets having an “oversupply”?
Phil Tarrant: If I can locate and identify a property that someone needs to shift really quickly before it hits the market, I'm going to grab that really really fast.
What should investors consider when buying off-the-plan units?
Phil Tarrant: All these guys who have got into off-the-plan purchases have a double whammy of ‘Yes, they’ve got to find the money to settle on these properties and these changes in bank lender requirements mean they're may struggle to do that,’ but then there's the other component—I'll say it's even more important—’Is it actually good investment? Are these things going to go up in value that they've purchased or they’re settling in in a year’s time?’
What would be your advice for people affected by lending changes?
Phil Tarrant: I'm looking at this here now in terms of off-the-plan purchases—if people aren't able to settle on these properties when they come due, what's available to them? There's a couple of things. They can either try and try to move it to someone else to take on the liability at that point in time, or they got to find the financing to do it. And as Ross said, there's some other ways that you can secure financing for the interim periods.
Should property investors continue to buy in the midst of these types of changes?
Phil Tarrant: We've got to remember [that], across Australia, there’s markets within markets… Sydney might be flat… Sydney might not show a lot of growth moving forward, but there's other places in Australia which are showing great great market conditions for investment whether you’re investing in off-the-plan purchases or you’re purchasing established stuff.
What’s your final advice for investors who are always on the lookout for opportunities to buy?
Phil Tarrant: It comes back down to—you need to look at the grade of the investment that you're purchasing, why you're purchasing it, what you're going to do with it over time, and how you're going to finance [it]. That's why you need a good mortgage broker now more than ever before.
Andy Scott: You need to be able… to give yourself wriggle room for whatever your strategy is… Times change and things change.
At the end of the day, whether a property investor is buying off-the-plan units, houses, or land packages, it is important that they have a clear set of goals and strategy to keep moving forward in their property investment journey.
“The summary of this is contingencies. Make sure you've got some ways to manoeuvre depending on the situation,” Phil concluded.
Tune in to Ross Le Quesne’s episode in The Smart Property Investment Show to know more about property rate hikes, hotspots, and other factors that can ultimately affect an investor’s business of creating wealth through property.
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