I often get asked, “What is the top thing you need to know as a property investor, what’s the number one rule?”
There isn’t one rule. Al and I have rules for every area of property investing, whether it’s taxation law, identifying an investment, duplication, cross collateralisation, finance structure or picking a tenant. Every rule is designed to reduce risk but because people keep asking, we thought we’d do a top ten of some of our old favourites for you and discuss each.
- The best time to buy a property was twenty years ago; the next best time is as soon as you can afford a deposit.
- While building your initial portfolio, drive the cheapest car your ego can handle.
- The great man Warren Buffett said, “Be fearful when others are greedy and greedy when others are fearful.”
I’ve always been big on market cycles and identifying where each city market is in its cycle. Now, it usually takes two or three years to bring stock to the market and for it to really heat up and get into a frenzy.
When markets are booming and the newspapers are saying property can’t go wrong, developers like us are getting ready to dump huge amounts of stock on the market. So we know all of the other major developers are in exactly the same boat because we see it time and time again; when a city market is in a frenzy, stock is dumped on to the market and the market goes flat. So when is the best time to buy a property? When the market is quiet and flat.
We’ve been active in the Brisbane market with some of our clients for two or three years now. We’ve seen what’s happening there – all of a sudden the market’s picking up. It’s the same in Perth at the moment. We’re developing four or five hundred lots over in Perth. I wouldn’t buy one of those for myself to own as an investment property, at this point in time. I still think Perth is a great spot but the market’s going too steep and anything that goes up must come down a little bit.
- Over capitalising is like a bad haircut, time fixes everything.
- Get rich quick often translates to lose money fast!
- Ignorance is the greatest investment risk.
- Stay in control of your cash flow because cash is king.
They ask us, “What happens between jobs?”
If the majority of your property is being held by taxation and rent, really all you need is a buffer – the difference between the rent amount and your interest repayments. If you stick 10 grand in the bank, that small amount gets chipped away so that you can last six months quite easily, holding an investment property. If each repayment costs you $50 out of your back pocket, then $5000 lasts a long time. So set a small buffer aside, so there isn’t any pressure on your portfolio. You can go and travel for three months or lose your job and you’re not going to feel that anxiety of having to get a job. Cash is king – keep a buffer.
- Diversification is for people who don’t know what they’re doing.
We don’t agree. There is another saying here which actually ties this one up pretty well:
- Put all your eggs in one basket and watch it like a hawk.
- Compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t… pays it.
Albert’s family came from a very rich background in the electrical industry. They understood business and they understood compound.
- Money won’t buy happiness but it won’t make you too sad either, will it?
- Land appreciates, buildings depreciate.
Director of OpenCorp, Cam McLellan is committed to sharing his passion and property investment knowledge with everyday Australians.
After thriving in the telecommunications, technology and recruitment sectors and making the BRW Fast Starters list twice and the Fast 100 list three times in 8 years, alongside accomplished OpenCorp entrepreneur and brother-in-law Allister Lewison, founded OpenCorp eight years ago.
Cam started investing in real estate at a young age and quickly mastered the art of building sustainable wealth. He has used the same wealth building strategy to develop a multi-million dollar business, sharing his knowledge and skill with ordinary Australians. Cam has personally bought, sold and developed numerous properties and has an extensive residential and commercial investment portfolio.
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.