Expert Advice with Brett Warren 12/07/2017
In today’s economic climate, many investors are sitting on their hands and waiting to see where the chips fall.
I can understand why.
Times aren’t what they used to be, with major corrections underway in certain parts of the country, and banks under pressure to slow investor activity.
Lending criteria has never been tougher, and we’re looking down the barrel of imminent interest rate rises.
Investors want to know: how should they proceed safely?
These concerns are valid, but they aren’t a reason for sitting still.
Waiting for the climate to become more investor-friendly is like waiting for snow in Alice Springs!
Instead of hoping, you can start preparing yourself now – then you’ll know when it’s safe for you to act.
Here are some solutions to help you move forward with your property investing goals, even in uncertain times:
1. Be financially ready
If you’re worried about property prices or servicing a mortgage, especially if interest rates rise, the best place to start is a health check of your finances.
Sort out a budget, and visit a broker who can give you an idea of your borrowing capacity, mortgage repayments and even organise pre-approval.
As part of your budget, start bumping up a buffer fund and a decent deposit.
With investor lending criteria tightening up, you’ll possibly need some extra cash to get your loan over the line.
A bigger buffer will also help offset potential interest rate rises.
2. Invest your time
But spend it wisely – in research.
Research costs little to nothing, but it’s almost impossible to buy a successful property investment without it.
Once you know your borrowing capabilities, you can start pinpointing regions in that price range.
Then, start drilling down to specific suburbs.
Talk to local agents, visit 100 properties, and get to know how the market is operating and who it appeals to.
Then, when the time is right, you’ll know which property to pounce on.
Times of uncertainty can actually be great times to buy, when other investors are less active and sellers are looking for quick handovers.
3. Become more aware of changes in the market
During your research, you’ll need to know more than just yields and median prices.
You also need to focus your search on finding properties under market value, or in areas with future plans that will boost the value of surrounding properties.
For example, look for suburbs with new infrastructure that shortens commuting times, or the additions of hospitals, major shopping centres or airports (ie employment hubs).
Suburbs with evolving economic circumstances can change the demographic it attracts, and improve the suburbs overall appeal and desirability.
4. Find a quality team of experts
The people who assist you through your property purchase – and the management of it afterwards – can actually make or break your success.
Now is a great time to find an independent property strategist to coordinate the other team members and guide you in an unbiased fashion.
A mediocre broker might set up an unfavourable loan structure; an over-worked conveyancer might miss an important clause in the contract of sale; or an inexperienced tax accountant might miscalculate valuable depreciation benefits and tax claims.
Ask other investors for recommendations, and meet with potential team members in person before you sign them on.
5. Don’t procrastinate just because everything isn’t roses
Property prices will always go up and down.
Interest rates will always fluctuate. Property cycles will always keep you on your toes. Waiting won’t help, or make any of these potential problems go away!
However, when you start preparing yourself financially and gather some knowledge about different markets and their peaks and troughs, these issues don’t seem so alarming anymore.
Remember: people have been investing for decades, through global financial crises and sky-high interest rates, and still came out successfully the other side.
Be prepared, and build your confidence about moving forward, and you’ll begin to view uncertain times as being par for the course.
Brett Warren is the Senior Property Strategist at Metropole Properties in Brisbane and uses his 12 plus years property investment experience and economics education to advice clients how to build their portfolios.
He is a regular commentator for Michael Yardney's Property Update.
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.