Bryce Holdaway of Empower Wealth and TV's Location, Location, Location shares his rules for finding the right property - and, perhaps surprisingly, location isn't one of them.
What should investors consider when choosing the right property for their portfolio?
Bryce Holdaway: When it comes to asset selection, there's usually three tips that I give. Number one, look for owner-occupier appeal. So the alternative of that is something that has investor appeal. And that's like student accommodation or hotel apartments or whatever. And generally if you put up a “for sale” sign out the front, the next buyer would generally be an investor, and they buy a property with their calculator not their hearts. So I prefer to buy properties that have owner-occupier appeal that appeal to both investors and owner-occupiers. Cause they make up 70% of the market. So if I can have something where someone is prepared to put their heart into the equation, throw a little bit of logic out of the window. That's going to serve me really well when it comes my time to sell.
The second one is to look for scarcity and by that, if you're buying an apartment, I like to buy apartments that 95% of the market I ignore. So I like the established properties: art deco blocks, something that's built in the 60s and 70s, small in number, no pools, no caretakers, no lifts because you have the ability to renovate them and add some value so you can create your own depreciation. They are generally in superior positions, surrounded by beautiful homes that will drive the price.
And chances are no one's going to do a fire sale in the property that's going to smash the value. So scarcity for apartments, scarcity for land, I don't like buying where there's a lot of available land around the area. And if it's a house, I like to look for scarcity in terms of the character of the building. You know, the old Victorian homes or an old wooden home or in Brisbane, the old Queensland style home. Something with that character, it has a lot of charm, a lot of appeal, a lot of owner-occupier appeal.
And I guess the third tip is investment grade. It's no good having a property that's got really really great capital growth but very little yield cause the balance is all out and quite often you don't have the ability to hold the property long enough to enjoy the growth because it's killed you cash flow-wise. And the flip side of that is the same.
You've got something that's too heavily focused on income and there's no growth in the equation, again, the balance is all out. So getting that balance right between growth and yield means in my opinion, you give yourself the best chance of having investment grade assets. In the bigger picture of the bigger scheme of things, we're trying to build a portfolio to create an outcome and that will really give you good balance to achieve what it is that you're looking to do.
Should investors be wary of going it alone?
Bryce Holdaway: Look, I think that investors should definitely get the help of someone who has done it before because there's a lot of property. There's over 15,000 suburbs in this country, there's millions and millions of dwellings and the question is, which one should you choose? Particularly given 70% of it is owner-occupier and 30% of it is investor. So which one makes for a good investment? So I think it's really important that you seek help, either from a professional or someone who has done it before because there's so much to consider.
I think when you're looking at property, you're clarifying, you're finding, you're assessing and you're negotiating. Most people are pretty good at finding property, they know which suburb they want, its location is their first choice, but when it comes to actually clarifying what their goal is in the big picture than where they should have got now, assessing that against your plan and then bring out a negotiator against a real estate agent, and they are really difficult things to do.
So just because you live in a property doesn't make it easy for you to choose which is the right one, and particularly when it comes time to negotiate with a real estate agent. Chances are, you're going to need some help from that experience.