Kate Hill says strategy, locational metrics, timing and professional help will lead to greater success in property investing.
Kate is an experienced property investor, property coach and mentor, and founder of national buyers agency team Advisable.
On the Get Invested podcast with KnowHow’s Bushy Martin, she talked about the right way to buy property, which includes careful consideration of the what, when, where, who and how.
HOW: Sorting out your strategy
The biggest mistake investors make is not putting a plan in place which aligns with their goals and circumstances.
“I think an overall strategy is going to be to buy in the best growth location that you can afford with a cash flow that you can afford. Also don’t assume that local people are like you and that they’re going to want the kind of property that you would want to live in when you need to, so get out of that mindset. If you’ve got a big four bedroom house and lots of kids running around and dogs and you know you’re happy, don’t assume that everyone’s going to want that kind of property type. So you need to look at what the masses want. That’s who you’re buying for. If you appeal to the demand, you’ll get good growth, you’ll get good tenants, and you’ll be able to hold it for the long term,” Kate said.
“Investors also make the mistake of buying in their own backyard because they think they know it and it’s easy. You may know it on a personal level, you may know where the coffee shop is and how to get to work from there, but that doesn’t necessarily make it a great investment area. Don’t assume that it is, and you need to be adult enough and honest with yourself when that might not be the case. But people do that because there’s a lot of fear around it. There’s a lot of money involved and they think they can keep an eye on it.”
WHERE: The locational factors to consider
There are six location metrics to explore when deciding where to purchase an investment property.
“The first one is all about infrastructure development. So what money is being spent on hospital expansions, roads, and in big infrastructure projects? What are these projects and what impact are they going to have on that area?” Kate said.
“Secondly, who lives there? So you’re analysing the demographic trends, you’re looking at population growth, you’re looking at how many people are living there and then who are they in terms of age and all sorts of categories. It’s finding out who you’re buying for and then, where do they want to live. Who are you buying for? And then when do they want to live? It will help you assess the current and future demand for property.
“Then it’s about how well off these people are, or that area is. So you’re looking at economic vibrancy. And then what do they do for a living? So what industries are there? So you’re looking at economic vibrancy and how many industries are there. So it’s not a one horse town, where all subsequent industry service that one major, like a tourism town or agriculture or mining. So you can have, for example, an economically vibrant area that is a one horse town in industry, and you can have a very diverse area in terms of industries where people work that is economically stagnant. So you kind of need to tick all those boxes.
“And then finally you’re looking at supply and demand. You have to understand the current and future supply levels of property. So how many are they building and is it enough? Is it too much, too little? Where is it going? All those kind of things.”
WHEN: Finding the right time to invest
Kate explained there are two ‘when’s’ investors need to consider – the ‘when for you’, and the ‘when in the property market’.
“So firstly, when for you. Just do it when you can, because it’s very rare that property markets across Australia all do the same thing at the same time. There’s always somewhere good to buy. So in terms of when for you, if you can do it, don’t wait,” she said.
“For when in terms of areas, we’re looking at optimal timings for property investing, considering factors like market trends and economic conditions. And a mistake investors will make is buying at the wrong time in the wrong area. And I think sometimes people get that wrong when they just follow the herd and they miss out on capital growth. Let’s call it social validation – they’re reading about it in the magazines and they want confirmation from the herd. But if you then follow that herd, you have generally missed the boat. And then the property doesn’t grow in value as much as you thought it would and you’ve got to wait a really long time.”
WHO: The benefits of using a buyer’s agent
Investors may benefit from enlisting the help of a buyer’s agent who will provide unbiased advice without emotional connections to properties.
“The obvious advantage we’re certainly not going to overpay for a property for you. I will not get emotionally invested on your behalf about any property that we are looking at, right? We won’t get emotionally invested and involved in that purchase process. And obviously we want you to get one, but it’s not a property that we must have. There’ll be another one,” Kate said.
“If you get a good buyer’s agent, they will help you decide on the best location to invest in. They can help you avoid making really major mistakes like overpaying, buying in the wrong suburb, the wrong street, the wrong property type. They can help you find that investment that will suit you and your circumstances and your goals, which will mean that you’ll be able to hold that property for the long term, get that capital growth that you need, and build a portfolio because that will get you into the second, third, fourth, etc. Because one property’s not going to give you financial freedom. You need to build that portfolio. So you need to get it as right as you can, and get professional help not just from buyer’s agents, but from other professionals too. It’s really important.”
However, it’s crucial for investors to find a credible and reliable buyer’s agent who makes decisions based on the client’s needs, instead of their own agenda.
“You need to have someone on your side who genuinely has your best interests at heart. You need to find someone who isn’t just operating on volume and turnover. You need to have someone who is empathetic with their clients. You also need someone who will do risk profiling with that client, will do sample cash flow calculations, who care about your loan structure, who know what interest rate you’re going to be paying, who help you plan with your other professionals to build your portfolio. And again, all of that ties back into the number one point, which is they’re working in your best interests,” Kate said.
“I highly encourage investors really get to the nitty gritty of how an agency works. So don’t be afraid to ask lots and lots of questions because you need to trust the person that you’re working with. Get some client referrals. Go on Google reviews.”
Listen to the full interview here.
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