The four property investing fundamentals you need to know

One of the great things about the real estate investing community is it’s a broad church. The investor enclave comprises a diverse cross-section of people — from first-time millennial purchasers, to middle-aged mums and dads, to those contemplating their imminent retirement and everyone else along this spectrum.

Investors have a variety of risk tolerances too. While some may be happy to snap up whatever is on offer, paddling fast and hoping they’re perfectly positioned, others will be more clinical in their research and decision-making, allowing waves of opportunity to pass them by while they keep a keen eye on the conditions with a plan to jump on the ride of their lives.

Whether you’re an early- or late-stage investor, have a high- or low-risk tolerance, or are looking for blue-chip or more affordable locations, there are four fundamental philosophies I think you should understand to elevate your chances of building a cracking property portfolio.

1. Timing is everything

There are two great regrets I commonly hear from seasoned property investors: ‘I started too late’ and ‘I sold too soon’.

The former can be remedied by learning how to adopt a winning investor mindset. The latter is often a result of not accepting property is a long-term investment. Long-term investors sit at the pointy end of the plane.

Most investors looking for solid gains across their portfolio’s lifetime need to be in it for the long haul. Buying quality property, with the right ingredients, means sometimes you can ride a rising market wave and profit quickly — just ask Sydney property owners who bought in 2011. However, if you look back over the 15-year period in the run up to 2011, you’ll find growth in Sydney property values lagged other capital cities for most of a decade before it had its boom run.

Big money comes from patience. You need to allow compound growth to do its thing over the long term.

Be prepared to resist the temptation of making a ‘fast buck’ and selling too soon.

2. Nothing beats location

You can’t out-train a bad diet, and you can’t sweeten a property lemon.

It’s fine to have the big home with the tasty finishes, but if it’s positioned on a main road in an isolated suburb where’s there’s an oversupply problem, then your chances of realising a great return are limited.

Location is the key to success because it’s of ‘limited supply’, and can’t be changed regardless of how much money, time and effort you have at your disposal.

Make sure you research your locations well, looking at region, suburb, street and individual property to ensure you maximise your chances.

3. The nation is your market

Real estate in Australia has evolved at a rapid pace over the past decade.

Ask your elders (for millennials, this means anyone over the age of 40) about where they were most likely to invest two decades ago. The vast majority — if not all — would say the suburb they lived in or, if not their home suburb, certainly somewhere within their home city.

Today, it has never been easier to be a borderless investor, capable of seeking out markets anywhere across our broad, brown land. There is a wealth of information readily available online and a growing number of professionals capable of helping you study and acquire an investment property in a multitude of areas.

Don’t limit your thinking to tracking those five suburbs you know and love, where you used to ride your bike and play street cricket. Broaden your horizons and take advantage of all the real estate that’s on offer.

4. Free your mind — the rest will follow

I understand the concepts of gut instinct and emotional connection. They can be important tools when you need to react quickly to the question of, ‘should I stay or should I go?’ To be a successful investor, however, the numbers must make sense first.

As a fundamental, I implore you to run through the figures carefully before making decisions that will affect your financial security. Start with your home budget and make sure you won’t go broke — or at least, have a buffer — if you must take on a higher level of risk. Check your loan commitments and ability to deal with a mortgage.

Check and recheck the figures on properties you are interested in investing in, too. Don’t just take an agent’s word for it. Do your own research into rental income and comparable property values. Do they all make sense?

Get the numbers right so you can rely on your heart and gut without fear when an opportunity presents itself.

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