5 types on property investors

The five different types of property investors, from the Block-inspired DIYer to the young gun

Just saw this while browsing.

Love it ! @Jennifer Duke
Gave me a good laugh.

Young gun
Heavily trolled online and usually seen in “bucking the trend” articles, the young twenty- or thirty-something investor is one of the rarest but most publicised property buyers.

Similar to the “rags-to-riches” investors, but a decade earlier, they usually have a portfolio of four or more homes. With less money to spend than their older counterparts, they’re often highly leveraged.

Their story will be filled with details of how they worked hard, with their parents’ help, and their solemn belief that Anyone Can Do It Too If They Want It Bad Enough.

They’ll likely extol the virtues of rentvesting and never buying coffees or visiting Europe.

In five years, you’ll see them trying to start a property advisory firm.

Where you’ll find them: With their arms folded on the front pages of investment magazines and in property forums.

What they buy: Cheap homes in “up and coming” areas, with decent rental yields.

 

I'm the 6th type
Beyond it all and not understanding why anyone else's financial position is your business - type of investor.

 

@neK nice one! I am none of them. The closest is DIY

They’ll use terms like “cosmetic renovation” and “good bones”, but rarely do they have the qualifications or experience needed to turn these words into a profit.​

The personality drawn to this style of investment is also more prone to consider DIYing other parts of the investment process. Using a buyer’s agent? No thanks. Paying for a property manager? Pfft.​

Not quite. I must be rare because I am on renovation number 5 now and all if mine have been profitable. She nailed it with no BA or PM though. I have never used them.

She missed the Outsourcer. This type thinks they can make money in property with no work or knowledge. So they outsource everything: finance, buying, tenant selection, property management, accounting, the works. They often overpay for IPs and this strategy frequently ends badly. Otherwise known as 'The Sucker'.

 

Ha ha - the test told me Im a "young gun".
Not sure - I think Im probably more like @Perthguy's "the outsourcer"

Blacky

 

Lol rentvesters. So young and ambitious with a good run of luck but lacking the experience and thick skin from preserving through downturns and unfavourable market terms. That'll change with time though.

 

Very funny, well written and accurate archetypes.
Of course, I'm the Block-head investor though I haven't seen much of that program. And I tend to sing in the aisles at buntings.
Edit: ew don't like the ending ....
Double edit: OK didn't realise there was an actual quiz.
I came out as a'young gun' though I have no idea how. I definitely think slow and steady wins the race. Anyway ...

 

Not you. You know you can't make in property with no work or knowledge. What I am talking about is people who come in with no knowledge and by putting in no work. Some get ripped off buying overpriced, unerperforming IPs in other states because they are about to move. Then they hire a cheap property manager who finds them a dud tenant who trashes the place. This is a disaster.

I have no objection to people outsourcing if they put some effort into knowing what they are buying or building up contacts with knowledge and skill. I have seen that go well.

 

I buy for the land and location, what does that make me?

 

By God, I am going to be successful as I am all five.

I am a young gun who accidentally bought a block (that needs a major reno which I will do myself) in a mining town, from my armchair.

 

They are pretty generic.

Started as accidental and then armchair.

 

"Young in age, or at least at heart, your investment style is to get in faster, stronger and sooner than most of your peers. You're admired and abused online in equal measure and have a portfolio that outnumbers your years."

 

You fit inbetween numbers 6-9

My guess would be "the proactive, smart, patient & very successful investor"

 

Hehe... cool
Now... c'mon Brisbane!!!!

 

I was going start a separate post on the challenges of the rent-vestor, but the "Young Gun" investor caught my eye because it was pretty much spot-on. Note that I do not wish to criticize rent-vestors, I congratulate them for taking the initiative to get into property market, in fact, this is what I did in the 90s, when Sydney was too expensive back then.

However, there are challenges being a rent-vestor, the article kind of nailed it to a degree. Some of the challenges, based on experience/hindsight are:

1. Usually the rent-vestor got lucky on the first one or two properties which saw a lot of growth, the rent-vestor then basically sucked-out the equity out of the first one or two properties to pay for the deposits and costs on the other properties in their portfolios, often the latter properties are in poorer performing / lower cost areas, often with a focus on improved yield. What happens is that the machine can just grind to a halt, no more equity growth, no more rental growth, the rent-vestor may then not have the servicing capacity to continue, interest rates rise (when you got a lot of loans 1% increase is a lot). In such cases, it can be a long time between drinks. Solution - try to continue to add value where possible (e.g. renovations), or just don't buy too many properties at the start.
2. Equity is distributed over a number of properties, so instead of having a lot of equity in a few properties there's like a little bit distributed over 5 to 7 to 10 properties (a bottle of wine through ten wine glasses). If sold, by the time selling costs / capital gains tax are taken into account usually not a lot left over, alternatively not enough capacity / LVR to withdrawal equity for the next purchase. Solution - have fewer good quality properties to begin with.
   
3. When it's time to buy a PPOR, then kind of back-to-front, with equity trapped in IPs and not enough deposit for PPOR. Of course, they could withdrawal equity out of Ithe P but it's not tax deductible. I hear people say "I'll rent all my life" but the rent-vestor has/gets a partner, wants to settle down, have their own place, and they need a PPOR (they could defer getting a PPOR until much later but prices on good quality properties tend to continue to grow, and you are always trying to catch-up). Solution - sell your IPs, get the cash, buy your PPOR and then start a new portfolio, set-up offset accounts and try to save as much cash as you can, (but sometimes just easier to sell up and take the gains and start the next portfolio), or as the article suggested start a property advisory business.

 

Problem with this though is if you ever want to sell one, you would be up for a huge capital gain in one hit. So just think about that in your decision to buy. Selling in a year when you aren't making much other money is ideal, or having the mentality or idea of never selling is noble, but real life happens and it won't always work out as you plan in your head....

 

@Gockie - Yep, you got it - life is never linear, it's always goes up and down, round and round, like being in the Sydney to Hobart Yacht race and hanging onto that rope at times.

The adage of "buy and never sell" is one of those myths like "property doubles every 10 years", property investment is just a means to an end, so if rent-vesting was a way to get some big cash to buy a PPOR (because that was the goal) instead of trying to save, then even after all the selling expenses and tax, it still could be the best way in that case. Then one can start a new portfolio again using say LoC from their PPOR. It's possible that over ones lifetime that one develops multiple property portfolios depending where they are at in their "life-cycle". (Of course, a rent-vestor could always live in one of their IPs, but I guess it depends where one wants to live).

 

Like the way you look at a different angle. I can see your point of reserve the borrowing capacity and only buy good quality properties in CG areas, more like saying save the bullet for future use. I would agree your approach in the pre-APRA time. However, with a constantly changing lending environment, lending criteria is getting stricter and stricter, I would now choose to buy as many asset as early as possible before the bank say no.

 

Brisbane runs it's own race..even if it's 20 years behind Mel.. It will get there but really have to be patient - this outpost is not for those who seek gains at a good clip. You might be better off buying a 1 bedder in Sydney instead as the Chippendale result showed.

 

I've got one just 500m away from that one in Chippendale... It's a keeper! And awesome yields too. Having my cake and eating it.
Now please... I'd like to see you boom Brisbane...

 

I Answered all my questions honestly although some of them were tricky because not all the answers represented exactly what I would do. Honestly thought I'd get something else but I guess not haha