![\"Property](\"https:\/\/cdn.propertyupdate.com.au\/wp-content\/uploads\/2023\/11\/property-value.jpg\")
<\/a><\/p>\nWe're still experiencing a cost of living crisis affecting many Australians and relatively high interest rates causing many households to tighten their belts, continuing economic uncertainty and geopolitical issues around the world leading to uncertainty.<\/p>\n
And, as usual, the media is full of mixed messages with many people now claiming it's a bad time to be buying a home or investment property.<\/p>\n
On the other hand, some more experienced, long-term thinking strategic commentators see it as a good opportunity to get set in the property market at a time when there is still less competition.<\/p>\n
I see it as a window of opportunity for those with a long-term focus.<\/p>\n
While the average investor decides when to get into the market because of where they think interest rates will be in six months time, strategic investors invest because of where they think the property market will be in six years time.<\/p>\n
Of course sentiment will soon turn as it becomes obvious that inflation is under control and interest rates are continuing to fall.<\/p>\n
<\/picture><\/span>Note: <\/span> And at that time, greed will overtake fear, and buyers will be back in the market as they move on with their lives as our property markets reset and the next phase of\u00a0 the property cycle will commence. <\/p><\/div><\/div>\n So, in my mind, this is the right time to make long-term decisions because..<\/p>\n While there is clearly some uncertainty clouding the market at present, for those property investors who do want to get into the market for the first time or add to their property portfolio, the fundamental rules remain the same as ever.<\/p>\n Because no matter if the market is hot or not, those investors who follow these timeless rules for real estate investment are likely to achieve ultimate investment success.<\/p>\n It seems that everyone is a property investment guru when the property markets are booming.<\/p>\n [Notes]\u00a0 I\u2019ve jokingly said that\u2019s when there are 27 million property experts in Australia! [\/notes]<\/p>\n But when times get tough, it\u2019s important to take the correct advice on board from those who have the perspective of having lived through a number of economic cycles and who take a holistic approach to wealth creation.<\/p>\n And that's how the team of Property Strategists at Metropole<\/a> advise our clients - they use frameworks and strategies that I've fine-tuned over 5 decades and that we've safely and successfully helped clients with for a number of decades now.<\/p>\n So let\u2019s look at 9 key beliefs for property investment, no matter what point of the economic or property cycles we are in.<\/p>\n Most property investors are looking for more choices in life and cash flow to allow them to work if they want to, not because they have to.<\/p>\n And that's why some mistakenly invest for cash flow, but that's not how residential property works.<\/p>\n As a property investor your aim should be to build a substantial asset base through capital growth and then this can provide you with a \"cash machine.\"<\/p>\n Sure cash flow is important, it keeps you in the investment game; but it's capital growth that gets you out of the everyday rat race.<\/p>\n Building wealth through real estate is best achieved by buying quality investment-grade properties<\/a><\/u> and holding them for the long term, allowing the market to do most of the hard work for you.<\/p>\n You see\u2026 residential real estate is a high growth relatively low-yield investment.<\/p>\n Sure after all expenses, your net yield may be less than 3%.<\/p>\n But when you consider the capital growth you\u2019ll achieve from a well-located property, the overall returns are very good, especially in today\u2019s still low-interest-rate environment.<\/p>\n And as this capital growth is not taxed unless you sell your property \u2013 and why would you do that \u2013\u00a0 this enables you to reinvest your capital to generate higher compounding returns.<\/p>\n On the other hand, rental income is taxed, leaving less to be reinvested.<\/p>\n This means for investors in the asset accumulation stage of their journey, the more capital growth they achieve (even at the cost of lower rental income) the more wealth they will accumulate in the long term.<\/p>\n The bottom line is that if you build a substantial asset base over time you\u2019ll have choices about how to live your life and if you don\u2019t have a big asset base your choices will be more limited.<\/p>\n Is assessing demographics<\/a><\/u> an integral part of the way that you build your property portfolio?<\/p>\n If not you could be missing the key to building long-term wealth without significant risk.<\/p>\n Understanding demographics could and should be the final piece of the puzzle for you during the decision-making process.<\/p>\n It is certainly something we monitor very closely at Metropole<\/a> as we understand that demographic changes will be more important in the medium to long term than the short-term effects of interest rate changes or government incentives.<\/p>\n After all, we are looking for locations that can ride out a downturn and produce above-average rates of return in the good times.<\/p>\n And this will have a lot to do with the demographics and affluence of the local population - both owner-occupiers and tenants.<\/p>\n Another trend accentuated by inflation, interest rate rises and the high cost of living is that the rich are getting richer<\/a><\/u> and Australia\u2019s middle class is disappearing. \r\n\r\n\r\n You see, many people think wealth distribution is a bell curve, with most of us in the middle and outliers of rich and poor.<\/p>\n But it is becoming more like a U curve with the middle-class disappearing and instead Australia's population being divided starkly between the rich and the poor, with little in between.<\/p>\n So what do property investors need to do about this?<\/strong><\/p>\n Look for areas where more affluent highly skilled knowledge workers live or rent, and you\u2019ll often find these are gentrifying locations<\/a>.<\/p>\n In other words, suburbs where wealthier people are upgrading and moving into.<\/p>\n This demographic can afford to and are prepared to pay a premium to live in these aspirational and lifestyle locations.<\/p>\n So how do you find these gentrifying suburbs?<\/p>\n One of the easiest ways to find a suburb that is improving is to go for a drive and a walk.<\/p>\n Other things you should look for are:<\/p>\n As a property investor,\u00a0if you can pick an area going through gentrification, one that\u2019s shifting from dreary to in demand, you can benefit from its accelerated growth.<\/p>\n And the good news is that you don\u2019t have to get your timing perfect \u2014 the gentrification process lasts a number of decades.<\/p>\n As always, investors should never forget one of the timeless rules of location<\/a><\/u>.<\/p>\n Because when it comes to capital growth, location will do 80% of the heavy lifting.<\/p>\n So, find a location where there is strong economic growth<\/a><\/u> which will lead to job growth which will lead to population growth which will lead to demand for housing.<\/p>\n You\u2019ll find this will occur particularly in our East Coast capital cities as as well as in Perth.<\/p>\n Then, given the long-term trend of the rich getting richer and the widening gap between the rich and the average Australian is not going to change, you should look at wages.<\/p>\n You can look for suburbs where wages have grown faster than the state average \u2013 these are often gentrifying suburbs where wealthier people with higher wages are moving in or established \u201cmoney belt\u201d locations where residents paid off their homes years ago.<\/p>\n And you should only buy in areas where the local demographic has higher income levels so they can afford to both improve and pay more for properties.<\/p>\n Because people living in many of the cheaper locations and regional Australia will suffer more from the high cost of living as they will experience minimal wages growth over the next few years, there will be limited possibilities for capital growth of the real estate in these locations.<\/p>\n As with the above, make sure you take into account the local going rate for rent when researching an investment property.<\/p>\n Because, as obvious as it might sound, rent affordability is linked to wages.<\/p>\n When you eventually retire and enjoy the longest holiday of your life, your income will depend upon your tenant\u2019s ability to pay their rent and paying higher rents over the years.<\/p>\n Fact is, some areas won\u2019t be able to get higher rentals.<\/p>\n These are locations with tenants who are often one or two weeks away from broke.<\/p>\n On the other hand, some people rent,] not because they\u2019re close to broke, but because they choose to live in aspirational locations or because renting suits their lifestyle and this type of candy is more likely to be able to afford rental increases over time.<\/p>\n Location is one thing, but buying the right type of property in the correct location is also very important.<\/p>\n Investors should always look for a property that will be in continuous strong demand by owner-occupiers.<\/p>\n The pandemic has changed the way we live, work, and what we want from our properties.<\/p>\n Urbanisation has returned as people are moving back from regional Australia, but working from home a couple of days a week has become the norm, and unsurprisingly densely populated large high-rise apartment complexes have fallen out of favour as buyers increasingly look for properties with more space.<\/p>\n For many, being locked in a Coronavirus Cocoon a few years ago has not been forgotten and has highlighted the importance of our third place \u2013 our neighbourhood.<\/p>\n Third place is a term coined by sociologist Ray Oldenburg<\/a><\/u> and refers to places where people spend time between home (\u2018first\u2019 place) and work (\u2018second\u2019 place).<\/p>\n These so-called \u201cthird places\u201d \u2013 the restaurants, bars, gyms, houses of worship, barbershops, and other places we frequent that are neither work nor home - have never been so important.<\/p>\n If you can walk out of your home and you\u2019re within walking distance of, or a short trip to a great shopping strip, your favourite coffee shop, amenities, the beach, or a great park, you will appreciate the benefit of the third-place \u2013 the importance of your neighbourhood.<\/p>\n Buying a brand new property <\/a><\/u>is like buying a brand new car in that it carries a premium.<\/p>\n Depending on the make and model of the car, you can lose anywhere between 10% \u2013 15% of a new car's value disappears once you drive it off the dealership lot.<\/p>\n And you can apply the same concept to those brand-new properties you\u2019ve been looking at.<\/p>\n Sure, you get tax benefits and maybe stamp duty concessions, but they are factored into the price.<\/p>\n As are marketing costs and developer margins.<\/p>\n So instead of looking at new builds<\/a>,<\/u> it would be a much better investment to spend your money on an older, established family-friendly property.<\/p>\n So, remove the emotion of looking for something shiny and new.<\/p>\n Valuers recognise that these costs are factored into the price and on resale, you would never recoup your contract price, so their valuations come in low.<\/p>\n Meanwhile, if that isn\u2019t enough to convince you, most new complexes have had minimal capital growth for a decade.<\/p>\n So by buying one of these, you\u2019d be giving the developer your capital growth profit - but it\u2019s not them to have!<\/p>\n Always, always have a financial buffer in place to see you through the rainy days.<\/p>\n If the coronavirus pandemic and widespread lockdowns have taught us nothing else, it\u2019s that cash buffers<\/a><\/u> are exceptionally important.<\/p>\n How much you need as a buffer varies depending upon your money management skills and cash flow circumstances, but it is often wise to hold between 6 and 12 months of living expenses in an offset account.<\/p>\n Whilst it\u2019s unlikely that you will be without any income for between 6 and 12 months (and without income protection insurance cover), it does provide that \u201csleep at night\u201d factor.<\/p>\n A cash buffer ensures you have sufficient time to make whatever adjustments are prudent, including selling assets.<\/p>\n This reduces unnecessary stress and anxiety and pressure to sell assets quickly.<\/p>\n By having a financial buffer in place savvy property investors by themselves time, not just properties<\/p>\n Remember, as, with anything, there will always be pessimists around willing to give their two cents worth of advice.<\/p>\n And they're usually wrong.<\/p>\n While the Property Pessimists and Negative Nellies will tell you to avoid investing in property, there will always be people who tell you to buy property, or to buy a particular type of property or in a particular area.<\/p>\n But make sure you\u2019re wary of their hidden agenda.<\/p>\n These people are likely to project market is all salespeople who represent the seller, not you.<\/p>\n Instead, get holistic wealth advice from independent experts who have no properties for sale.<\/p>\n By the way\u2026that\u2019s what our team at Metropole<\/a> specialise in - we have the experience, perspective, and know-how to point you down the right path.<\/p>\n Similar to the above, when embarking on your property investment journey, try to avoid the negativity.<\/p>\n Sure, the future is uncertain.<\/p>\n There are geopolitical issues in the world, rising fuel costs, high inflation and rising interest rates; and this might cause a feeling of despair for some.<\/p>\n But as the saying goes, 'This too shall pass.<\/p>\n It\u2019s important to remember we\u2019re in a cycle and the good times will return soon enough.<\/p>\n There is little doubt that we are living in \"interesting\" times, but as alway, this too will pass.<\/span><\/p>\n For me, it is always the property fundamentals that really matter.<\/p>\n The long-term view outsmarts short-term thinking.<\/p>\n People will always need somewhere to live, and homes are the true \u201csafe haven\u201d in the current environment.<\/p>\n It is always challenging to invest when everyone else is running around worrying about the end of the world.<\/p>\n But you shouldn\u2019t make 30-year investment decisions based on the last 30 minutes or even the last 30 days of news<\/p>\n In fact, these are precisely the conditions that present the best opportunities for those investors who have a long-term plan.<\/p>\n Now is a great time to get all your ducks in a row and take advantage of the property opportunities that markets are presenting.<\/p>\n So while the property markets will create significant wealth for many Australians, statistics show that 50% of those who buy an investment property sell up in the first five years. \r\n\r\n And of those who stay in the investment game, 92% never get past their first or second property.<\/p>\n That's because attaining wealth doesn\u2019t just happen, it\u2019s the result of a well executed plan.<\/p>\n Planning is bringing the future into the present so you can do something about it now!<\/p>\n Just to make things clear...buying an investment property is NOT a strategy!<\/p>\n It's important to start with the end game in mind and understand what you need and what you want to achieve.<\/p>\n And then you have to build a plan, a strategy to get there.<\/p>\n The property you eventually buy will be the physical manifestation of a whole lot of decisions that you will make, and they must be made in the right order<\/p>\n That's because property investment is a process, not an event.<\/p>\n If you\u2019re a beginner looking for a time tested property investment strategy or an established investor who\u2019s stuck or maybe you just want an objective second opinion about your situation, I suggest you allow the team at Metropole to build you a personalised, customised Strategic Property Plan<\/a><\/p>\n When you have a Strategic Property Plan you\u2019re more likely to achieve the financial freedom you desire because we\u2019ll help you:<\/p>\n And the real benefit is you\u2019ll be able to grow your wealth through your property portfolio faster and more safely than the average investor.<\/p>\n Click here now<\/a> and learn more about this service and discuss your options with us.<\/p>\n Your Strategic Property Plan should contain the following components:<\/p>\n Click here now<\/a> and learn more about this service and discuss your options with us.<\/p>\nThe fundamental rules for property investing don\u2019t change<\/span><\/h2>\n
9 rules to succeed in today\u2019s property market<\/span><\/h2>\n
Rule 1: Your long-term aim should be capital growth<\/span><\/h2>\n
<\/p>\nRule 2: Demographics will drive our property markets<\/span><\/h2>\n
<\/a>
\nYou\u2019ll \u201cknow it when you see it\u201d because you\u2019ll find evidence that people with money are moving in:<\/p>\n\n
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Rule 3: Location, location, location<\/span><\/h2>\n
<\/p>\nRule 4: Remember rent affordability is linked to wages<\/span><\/h2>\n
<\/p>\nRule 5: Focus on continued strong demand<\/span><\/h2>\n
<\/p>\nRule 6: A brand new property is like a brand new car<\/span><\/h2>\n
<\/p>\nRule 7: Have a financial buffer in place<\/span><\/h2>\n
<\/p>\nRule 8: Be careful who you listen to<\/span><\/h2>\n
<\/p>\nRule 9: Avoid negativity<\/span><\/h2>\n
<\/p>\nThe bottom line<\/span><\/h2>\n
Over the last year or two, the residential property market has shown its resilience.<\/p>\nYou need to plan<\/span><\/h2>\n
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