Buying Property - Can you just "Wing it"
19 September 2019
Is buying property easier than buying hot plates?
When buying property most people focus on the wrong things, and usually don’t even consider the most important aspects of a location or property before making one of the biggest financial decisions of their lives.
They usually have no plan, no strategy and very little understanding of their responsibilities, financial commitments and no thought on how they are going turn one property into two or more.
I read an article in the AFR this week, in which the founder of Pace Development Group in Melbourne, Shane Wilkinson was talking about how “ people do more research when buying hotplates then when they buy a new apartment”.
As a developer of new apartments focusing in Melbourne, his concern was the lack of understanding or investigation buyers put into the competency of the developers, and negative impact the structural issues on some buildings in Sydney is having on the high-rise unit market nationally.
He makes an interesting point and it’s a topic I speak about regularly.
Here’s a thought for you!
Before you purchased your first property, when were you sat down and educated about the important things to consider before buying a property? If you did have this conversation, who was your educator? Your Parents? Your mates? Your boss or a trusted adviser?
How much experience did they have in purchasing property? The rules, regulations, economy and financial structures, change regularly. Your needs and situation are different to theirs, how current was there experience, or like most people did you have “Learn on the Job”.
A little bit of knowledge is a dangerous thing and gives many people enough false confidence to make what is pretty much an irrational decision.
IE - borrow as much money as the banks will give you, go and buy a property you know very little about and may have spent 15 – 20 mins inspecting. Because you like the kitchen/aspect/garden/colour of the bathroom .
The “She’ll be right mate” approach works for one maybe two property purchases, but if you want to really turn your expensive hobby, into a profitable business, then you need to understand all the rules of the game, and use and manipulate them to your advantage.
If you think I am exaggerating, here is Statistic for you. – According the ATO for the financial year 2016/2017 about 0.86% of the Australian population were claiming to own 3 or more investment properties. – That’s less than 1%. – That’s not a lot of people. Considering how many people own 1 house.
The reason for this is not about housing affordability, certainly not the cost of money, it’s about people not understanding how to play the game. They have a little bit of knowledge and make short sighted or misguided investment decisions.
Education will set you free, having a working understanding of a few key areas will make a big difference to what and where you purchase.
Here are a few key topics to get your head around .
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Money and Economics Principles |
Planning Law |
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Financial Lending |
Taxation |
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Property Law inc Strata & Ownership |
Building Law and Standards |
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Environmental Law |
Property Management |
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Property Maintenance |
Landlords Obligations |
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Self-Managed Super Fund Regulation |
Commercial and Residential Leasing |
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Property Markets |
Social Housing Location and Density |
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Reasonable Investment Returns |
Location to Location Variations |
Each of the above is a topic unto itself and not all will apply to every deal. But having an In-depth understanding of a few of the main topics and how to put that understanding into practice is how you turn your expensive hobby of negative geared property investments into a self-supporting property investment business.
If reading this is raising some serious concerns about your current approach to property purchasing, there are several books and property investment courses that will help bring you up to speed.
Obviously, we here at Aspect Buyers Agency can also help guide you through the process as well.
Building a property portfolio by buying negative geared property near where you live, where you work or where you go on holidays, will only get you so far, to become one of the 1.0%’ers (owning 3 or more investment properties) you need, either a larger disposable income or a strategy on how to build a positively geared property portfolio.
For most people, the correct strategy will be their only option. Making informed, educated investments, is never a bad idea.
