Doron Peleg property investment

Property investment fundamentals and lessons learned

Navigating through the property investment maze is a daunting task for many. 

But it doesn’t have to be.

Riskwise Founder Doron Peleg has become an expert in turning all the confusing property investment jargon into ‘plain english’.

He told Bushy Martin on the Get Invested podcast that it is most important to understand the fundamentals.

“Now, when you are an investor, you want to make the best decisions. You want to maximise the return, but minimise the risk,” Doron said.

“The first thing that you need to do is to understand exactly your general objective.

“What do you want to do? Do you want to buy a house for owner occupiers? And generally speaking, is your strategy short term, long term, etc. and how much money do you have?”

Doron outlined the first key move for new property investors. 

“What is the absolute best thing that I can do with half a million dollars?” Doron said.

“The first question is property type, and the answer is very, very clear and obvious, which is a house.

“When you buy a house, you also buy a piece of land, which is very, very important. You cannot create more land.”

In areas like Sydney’s northern beaches or Manly, even a small amount of land is valuable. The simple reason is because there is not enough land in high demand areas.

“If you buy the right property for the right price, we call it a ‘Triple A’ property,” he said.

“You don’t want any physical land issues or any concerns that will reduce the demand for the property.

“If the property is not right, and does not tick the boxes, other properties will enjoy the demand.

“The impact between a Triple A property to a below average property could be six figures, which means that the impact could be $100,000 at least after ten years.”

Looking back on 2019, Doron said external events had a big impact on the property market. 

“The recent twelve months were the most challenging in the Australian history as recorded in the property market,” he said.

“Lenders actually decided to apply a full and thoroughly stricter credit restrictions. And then we had the (Banking) Royal Commission and potential changes to negative gearing.

But the market dodged a bullet at the Federal Election.

“If Labor won the election, there would be a huge impact on property prices. Property prices would definitely (have gone) down,” Doron said.

 “They (the Labor Party) were extremely clear regarding their intentions to change negative gearing and Capital Gains Tax and to allow it only for new properties (if they were in government),” he said.

Following the election, it wasn’t long before the property market bounced back.

“The RBA cut interest rates and also implied that there could be more interest rate reductions,” Doron said.

“And the borrowing capacity was increased. A huge positive impact on the market sentiment.

“And then what happens? People are re-entering the markets. The top end of the market that suffered strong price reductions during the downturn is showing very strong price increases.

“If we think about the lessons, so we have quite a few here. Think long term and don’t seek quick wins.

“If you have the right property, which is the house, a piece of land in the right location, the only thing that you need to do is wait.

“Why? Because even in the worst-case scenario, (if) Labor won the election and would have abolished negative gearing after a couple years, give or take, the market would have reached the same equilibrium point. 

“Because of a very simple reason. There is massive under supply of houses in the inner middle and middle rings of Sydney and Melbourne. Simple as that. There are not enough houses. So, the only thing that you need to do is wait. And with a huge population growth in those cities there is a huge demand for houses.

“An established and existing house that carries a lower level of risk for price reductions will deliver better capital growth over the long term.

“Don’t cut corners, just do it right the first time. That’s it.”

Listen to the full podcast interview here.

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