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Don't count on past performance

Video Transcription

The more you know about the most common mistakes that investors make, the better your likelihood of building lasting wealth.

In this series of short videos, Ahamad Imam and I discuss the common mistakes I’ve seen investors make.

Today we discuss the issues that come with relying on past performance of an area.

It doesn’t necessarily guarantee the same results will happen in the future.

Watch today’s video as I explain why…

Some of the concepts we discuss:

  • Clearly past performance is an important indicator of how a location could perform in the future, but it really depends upon how far back you go. Short-term past performance is a very unreliable indicator.  Just go back a few years and have a look at how Gladstone, Port Hedland or Moranbah performed in the short term, and you’ll see why a number of unfortunate investors jumped into those markets trying to take advantage of some of those locations, the hot spots at the time,  only to find today that their properties are worth half of what they paid for.
  • While past performance is an important factor to consider, a number of years ago we changed how we research at Metropole and it has made a significant difference to the performance of my own properties that I bought and those of our clients.

Rather than looking at the past we look into the future.

We look for a location that will have multiple drivers including:

  • Economic growth which will lead to job growth, wages growth in population growth
  • The right Demographics – the type of people who are living in location and in particular we look for areas where people have higher disposable income than average because this affluence will allow them by new homes and improve their value due to fine the area
  • Supply and demand – we avoid areas where there is significant future supply the demand
  • It's more important to look ahead rather than backwards.

With thanks to Michael Yardney's PropertyUpdate.com.au

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