Expert Advice with Brett Warren 12/12/2018
With another year coming to an end and the prospects of an interesting year ahead for property investors I’d like to share two property investment tips and two success tips I would have liked to learn earlier in life.
TWO PROPERTY TIPS
1. Location does 80% of the heavy lifting of your property portfolio.
Speculators tend to look for the next hotspot for an initial quick hit.
Other investors look for cash flow positive properties to improve their circumstances.
Both of these are short term factors and will not get you to where you want to be financially over the longer term.
On the other hand, successful investors look for locations that have a proven track record of strong capital growth which will outperform over the longer term because of their demographics.
These tends to be areas that are gentrifying or where the locals have higher wages and therefore higher disposable incomes.
This type of suburb can deliver double the capital growth of the general market.
2. Smart property investors choose capital growth over cash flow.
The aim of all investors should be to build a substantial asset base that will one day give them more choices in life and hopefully financial freedom
While cash flow is important to help serviceability, especially in this stage of the credit cycle, you can’t save your way to wealth.
It’s just too difficult to build a substantial asset base from after tax cash flow.
On the other hand tax free capital growth will provide you with the deposit for your next property and the increasing rents from your high growth property will help pay for your mortgage.
Most of your assets when you retire will be your tax free capital growth – the increase in value of your home and your investment properties – not money you have saved or rent that you’ve collected or superannuation you’ve put away.
TWO SUCCESS TIPS
1. Success does not come from one big event or occurrence, it comes from a series of smaller things.
I always used to think I would be successful as a result of one big break or event.
I would get a promotion or win the lotto or flip a property and make a substantial amount of money.
But I’ve learned that success comes from a series of smaller events.
So take every opportunity you can to better yourself or your circumstances, change your habits to be more productive and work hard towards a long term goal that you are committed too.
2. Successful people have multiple streams of income.
In most cases your salary has a ceiling so whether you earn $50,000 per annum or $500,000 per annum your level of savings is capped.
You cannot save your way to wealth and success.
But by investing the income you save in high growth assets, diversifying your portfolio and adding multiple streams of income from property, shares and business you can fast track your wealth and are not solely reliant of your salary.
Brett Warren is a director of 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.