Here are five principles of buying property, tested in the real world after buying properties for our clients for twelve years and also from being a property investor for thirty years.
There is no perfect property
There are good deals, bad deals and average deals. It’s only 100% clear with the benefit of hindsight if a purchase turns out to be an outstanding buy.
Sometimes a property that may be a slam dunk deal for one buyer may be a poor match for another buyer…. property is highly individual in that regard and each deal needs to fit the buying criteria and goals of the buyer.
Buy land value
The wisdom here is that ‘land appreciates and buildings depreciate’ which is largely true.
Building costs will rise in line with inflation over the long run whereas land benefits from inflation and also it benefits greatly from investment of other people’s money.. including gentrification of an area and government spending on infrastructure and services. Land also benefits from the increase in population pressures on demand if you are buying in the right areas such as most capital cities in Australia.
This principle is why we check every property for it’s underlying land content.
Buy quality for the long run
The longer you hold a property the more important the quality consideration will be compared with what your purchase price was.
Much better to buy a quality asset for a fair price than to buy something just because it’s cheap or discounted.
There are powerful forces working in favour of the long term investor. Buying at the optimal time is rare and only obvious in hindsight, the transaction costs of buying and selling with real estate are very high. Holding for the long term allows the natural tail winds that are pushing in a positive direction to work in your favour.
Avoid competition
Buying when nobody else is buying is the easiest way to get a great deal. When you are competing against other buyer’s the challenge to buy well rises significantly. We work hard on our relationships with sales agents so that we get an advantage over our buying competition through off market properties and preferred treatment.
Competition also needs to be carefully weighed up for what you are buying. If you buy in an area that has restricted land supply then you are likely to do better than someone who buys in an area where there is a lot of future supply of land and housing stock.
Buy when you can comfortably afford to and keep buying
Market timing and asset selection are challenging. The simple and powerful recipe of buying well located residential and commercial property and repeating as soon as you can comfortably afford to has seem many of our clients become financially independent.
This is a simple idea that is more challenging to implement as life is good at throwing up road blocks and distractions. This wisdom is time tested and proven and will in my opinion continue to be an excellent strategy you should be implementing at the same time you are looking for the perfect strategy.
