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The available information on property investment from free resources to paid seminars and mentorship programs could be downright overwhelming, but one expert narrows down the secrets to success into three basic growth drivers.
Mortgage broker John Manciamelli highlights the importance of discarding emotions when making investment decisions, focusing instead on market fundamentals.
According to him, ‘emotional investing’ often draws the line between a good investment and a property lemon. “Remember that you're not buying something that you're looking to live in yourself,” he highlighted.
While this could be easier said than done as most property buyers tend to have an appreciation for physical structure and interior design, the mortgage expert strongly encouraged investors to sit down and consider the ‘numbers side’ of the property that they are looking to add into their portfolio.
Mr Manciamelli said: “Even I have once thought, ‘This place is great’, but then, quickly, I thought, ‘I'll have a quick look at the numbers.’ It’s almost like a science.”
As a mortgage broker, Mr Manciamelli often assists investors in accessing finance for their portfolio. During the process, he considers three growth drivers that reflect a good investment:
Simply, this refers to the level of supply and demand for dwellings in an area, which ultimately affect property prices.
When there is high demand and low supply, dwelling prices tend to go higher, while prices go down when there is an oversupply or a weak local economy.
“Is there more demand than supply? You should always ask that,” the mortgage expert said.
Investors are also encouraged to look at the volume of building approvals in the area to be able to gauge how supply and demand will move in the next few years.
When searching for a good location for property investment, the local economy is one of the fundamental forces that influence the movements of the market. In fact, experts consider it the ‘gold standard’ that determines the wealth-creation potential of a real estate asset.
Among the economic elements that investors should take into account are the industries present in the area, the employment rate and wage growth as well as the demographic trend.
According to Mr Manciamelli: “What we're looking for is a deep economy and a broad economy. With more jobs, there's always going to be people demanding property. In terms of demographics, ask yourself, ‘Where are those areas that are changing from blue collar to white collar?’”
These elements, in contrast with other investment data that property research will require, are not mere numbers and statistics. Instead, investors must be willing to understand industries, key employers, trends and outlooks.
When industries are thriving and employment rates are booming, wage increases, consumer confidence goes high and, ultimately, housing demand rises, putting positive pressure on property prices.
Finally, Mr Manciamelli strongly advised looking into the current and future infrastructure in the area to have a clear understanding of a suburb and a property’s potential for wealth-creation.
The creation and improvement of roads, railways, bus services and other transport systems increase the demand for property as it provides easy access to significant employment nodes, commercial and industrial centres and other important establishments.
Moreover, the presence of schools, hospitals, recreational centres and sports facilities within and around the suburb increases the appeal of the property to growing families and the older generations alike.
“It’s the holy grail, so find out if there’s going to be a new freeway or a new hospital, because when you get them, the demographics in the area will start to change and so will the property market,” Mr Manciamelli highlighted.
While the growth drivers mentioned above have stood the test of time, Mr Manciamelli advised investors to do thorough research and due diligence before jumping into any purchase.
After all, no two investment journeys will be the same. The best decisions will be the ones made based on the investor's specific goals, capabilities and limitations, both personal and financial.
Mr Manciamelli said: "Anywhere in Australia, in any state or anytime, there are a number of these places that's perfect for property investment. You just need to be able to identify them."
The mortgage expert encouraged investors to take advantage of all available resources and, where appropriate, back themselves up with the knowledge and expertise of property professionals.
According to him: "Read the newspaper or look online, and you'll find infrastructure plan, jobs growth, migration patterns and more. Then, you've also then got professionals to help you assess the financial feasibility of the purchase.
"You've got the tools to help you get there. And if you get it right, you can buy something for $20 a week," Mr Manciamelli concluded.
Tune in to John Manciamelli's episode on the Smart Property Investment Show to know more about the key indicators of market movements and how investors can weather fluctuations.
An investment is an asset or item purchased with the expectation that it will generate income or appreciate in value in the future.
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.