By hotspotcentral.com.au 12 August 2016 | 1 minute read

By Michael Fuller, Hotspotcentral.com.au

Have you ever wondered what the truly successful property investors do differently? Read on to access your FREE INFOGRAPHIC and learn the '5 ways wealthy people make money in any property cycle

 Warren Buffett said, "Price is what you pay. Value is what you get"


Warren Buffett was referring to the fact that a share priced at $2 is not necessarily worth $2. It could be worth a princely $4 or, heaven-forbid, $1.  

The problem is value is subjective based on skill and price is objective and misleading.  

Property investors are often at the mercy of valuers who decide whether the sale price is indeed good value. 

In good times, property value can also be distorted by market sentiment. 

Buying off-the-plan is a good example. Investors perceive values to be increasing in an area so they lock in a price hoping that after construction prices will have moved up. 

Property market cycles generally last around 7 years, with 80% of the growth in the final 2 years. So by the time the market starts rushing upwards, everyone piles in and then the market peaks. 

Many investors get caught out with settlement valuations falling under the contract price. So they either have to find another 10% for example or lose their 10% deposit (and risk being sued by an angry developer). 

Then media headlines lament the losses 'mum and dad' investors have made, everyone gets fearful and stops investing until the market is near its next peak. 

It's no surprise that less than 1% of investors can retire and live off rental income.  


Another Warren Buffett classic: "Be fearful when others are greedy and greedy when others are fearful." 

The wealthy 1% of investors prefer to buy property when no one else is buying. When vendors are nervous and highly negotiable. When the market is depressed and undervalued.

Thousands of investors use Hotspotcentral.com.au's algorithmic research app Boomtown. Here's what the more successful do to make money in any property cycle …



First off, they are not worried about property cycles. They change their strategy according to the cycle. In fact, Boom-cycles are when they go on holiday!


Importantly, they combine the following strategies:

  1. They buy under market value.

They never pay retail price for properties. They ensure there is a safety buffer of at least 20% (instant equity) in case prices fall.  

  1. They look for positive cash flow.

They don't get bogged down in negative gearing debates. In fact, the majority of investors who negatively gear property in Australia earn less than $80k.

  1. They buy and sell at the right time.

Yes, you can time the market with the right technology

  1. They add value.

The 2016 BRW Rich Listers are overwhelmingly property developers. The youngest and new entrants are worth in the $100s of millions. They buy a development site and add tremendous value. And they spend less of their own time than most renovators would.

  1. They use experts.

They use other people's expertise and contacts to make it happen. 


GET YOUR FREE INFOGRAPHIC  which summarises what the top 1% investors do differently into 6 key lessons.


Now, I know what you are thinking! 

"These ideas make sense, but how can I make it happen? I'm not a developer with deep pockets, vast experience and any spare time." 

"I don't have the time or expertise for market research I don't know who to trust to pick the location and right opportunity for me." 

Well, here's how an ordinary investor, Tracy Smith, did it. In this short video case study (from 05m:46sec), I'll show you in the numbers and strategy how Tracy combined all the above ways to buy a property at 21.7% below bank valuation.  

Tracy’s property was immediately cash flow positive. The rental estimates were initially $450/pw but she got $490/pw (the estate agents do get it wrong) after 25 viewings on the first day. 

Best of all, the $93,000 in manufactured equity meant she had the deposit to hold the property without lender mortgage insurance and without putting in any of her own money. 

This meant her original investment money was immediately freed up to start again.

That's how the wealthy invest ... independently of the property market cycle and without regard to sensationalistic media headlines and general market sentiment. 

She did not invest in Sydney or Melbourne just before the boom cycle. She invested in a South Gold Coast location where 85% of residents are owner-occupiers and tenant vacancy rates less than 1%. 

Apart from her instant 21.7% discount and strong positive cash flows, the area is statistically set to smash the market average due to its strong reading on 8 property supply-demand indicators we share with you on our Armchair Developer web page. 

And finally, if you're a traditional cash-only investor who prefers not to hold property, Tracy's annualised cash-on-cash return was 57%... 

... and she did it all in her SMSF. 

What kind of returns are you getting in your SMSF? You might want to check. 

GET YOUR FREE INFOGRAPHIC  which summarises what the top 1% investors do differently into 6 key lessons.



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.

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