How many times have you heard someone say, “You make money when you buy?”
I’ve bought 16 investment properties and never made a single cent … when I bought. The only time I’ve ever made money is when time has passed.
You lose money when you buy. You make money in property investing when you H O L D.
To buy a property you not only need a deposit, but you also need to pay stamp duty, building and pest inspections or maybe a strata report. Legal fees too. Then there’s all the time you spent researching, arranging finance, visiting open inspections, haggling, signing contracts.
The people who make money when you buy are real estate agents, property developers, sellers, conveyancers and so on.
Who says this?
Some professionals say that if you buy a property for a good price, you’ve locked in some immediate equity at the time you buy. But again, this is not only wrong, but bad advice.
The easiest suburbs to buy under market value are the ones that are experiencing negative growth, that is, the very worst investment markets.
“The best investment markets are the ones where buying under market value is virtually impossible”
Don’t focus on buying cheaply – you haven’t made a profit. What you’ve probably done is bought in a dud location.
“I would much rather pay over market value for a property in a hot market than pay under market value for a property in a flat or falling market”
If your property investment strategy is based on achieving good capital growth, then every month after you’ve bought, is another month you’re moving forwards. If, however, the key to your investment success hangs on buying well, how can you do that every month?
Your focus as an investor should be on making money as you hold, not when you buy. Your research should be focussed on what is going to happen after you’ve bought. Don’t focus on buying well, focus on finding properties that will grow well as you hold onto them.
Jeremy Sheppard is head of research at DSRdata.com.au.
DSR data can be found on the YIP Top suburbs page.
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Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.