..How Will New Investors Approach The Real Estate Market..

Property Investing is all about making decisions..Which most times buying seems very simple and straight forward enough and for some probably the biggest investing decision that they will ever make in their life..

And what timeframe they focus on..

When you look back over the past 7 years unless you bought in a fast bucks mining town or personal circumstances went the wrong way then most would be ahead by a long way..

So for investors that enter the real estate market now with so many off the plan multi level unit block's what will they start with because most if not all cities within Australia within the 5klm's radius of any city someone starting would not get anywhere..

 

Logically I would stay away from this product and personally I would continue to look for value, bread and butter areas which attract FHB and this does not necessarily mean it has to be close to CBD.

I would continue to develop property if it makes sense.

At the moment I am sitting on my hands in the Australian market until I see some opportunities.

 

How will new investors approach the real estate market? For most 'investors' in Australia, just buy and hope, like they have always done.

 

Surely that is not true? Otherwise what is the point of investing if its just guess work?

 

What I find is that outside the PC-circles, 8 out of 10 people I meet that talk about buying property (which seems to be most people nowadays) and do buy property are not able to explain why they think it's a good investment. They buy for emotional reasons, for FOMO and just because they like the area or live close to the area.

Just think about all the types of product and areas that you wouldn't buy - well many many people are buying (and still buying them). That's why I refer to them as "investors" in inverted commas. For example, you are unlikely to come across many people who invest in government bonds that don't have a good knowledge of the product.

 

Most new investors now would have no idea what they''re getting into and probably think that property will just keep going up based on what's been happening over the past few years.

 

Yes, good points, and probably right. Most people who invest in property just buy what they think if a great property based on the guru principle buy blue chip and completely ignore the most important factor which is market conditions.

 

Slow and steady wins the race, I think it's very unlikely we'll have stories of young investors purchasing 10 properties in 3 years unless they received massive assistance along the way. I think it's a good thing to diversify into other areas and have read heaps of articles of young investors concentrating their energy on their own businesses and development of apps on smart phones. In saying that, I still think if a young couple can both have similar values and goals, they can still conquer with delaying any gratifications until later in their lives.

 

Do you know what? Hear this all the time, Especially when we get a booming market which comes close to peak. For some reason people think it wont boom again like it did the last decade, but it does. Read posts on SS on this

Another myth, seems people think slow and steady means safe/no risks? Not so, it will always come back to product and timing. Holding for long term just irons out the creases along the way.

As long as the cycles continue there will always be opportunities to make money and I believe there is a choice slow and steady or investing on steroids, only buying in the early stages of rising markets, or becoming an active investor rather than a passive investor. No right or wrong.

 

From what I've been reading and from external speakings at my workforce, I'm noticing people are purchasing around the 400-600 mark, and it seems they run out of puff after 2 purchasers. Hoping to sell one off at a later stage to help pay the other off.

 

That's probably true that they max out borrow capacity at 2 properties. Despite the hysteria around this on this forum, I don't see anything wrong with it. So what if they can't buy today but have to save up for a few years to buy there next property? It's not the end of the world. Let's say our hypothetical couple saves up by putting surplus funds into an offset account attached to an IP (assuming no PPoR debt). Let's say they have a sizable cash buffer, which is the deposit for their next buy. So interest rates increase and their loans switch from IO to P&I. Their income doesn't actually cover the repayments until rents catch up to the new environment. But hey, they are sitting on a pile of cash that will get them through until things improve or they qualify for IO again. Is that the worst outcome? I don't think so. So much hysteria around this but what is really wrong with saving a deposit and buying when you can afford to?

 

I think 600K is the FHB cut off point in Melb?

 

As of July 1st, up to 600k is free stamp duty, 600-750 is reduced stamp duty.

 

I believe these properties are the smarter play at the moment

 

Agree, the higher the end value, the smaller pool of buyers, higher risk. If you have to sell at least the lower end will be easier and also to hold

 

My uncle bought a property in Baulkham Hills about 11 years ago, he bought it because the area had good schools for his kids to go to and he could live there. He knows nothing about investing (or maybe he's a genius) so he just focused on paying down his Baulkham Hills home P&I and has almost paid it off. 2 years ago they upgraded to a new place in Kellyville. All up he probably has equity of over 1 million and 2 assets worth over 2 million right now. Does it rly matter if he didn't know what he was doing? I don't think so. The lesson I learn from this is to take action now.

 

That's luck and genuinely, good on him. There are many many people in Sydney and Melbourne that have probably done the same. There are also scores of people in Perth and Darwin that did the same but now have a different outcome. Inaction is also action - and those in Perth and Darwin may wish they took no action in the last few years. But then again, maybe not - as they may not be claiming to be property investors (ie bought for family or other reasons).

For me, when I'm trying to learn from successful property investors, I've found I first need to distinguish between those whose success was down to pure luck vs those that know what they're doing. Of course luck is always a factor but I just don't have the balls for relying solely on luck.

 

Thankyou. Before your post, I was begginning to think that newbie investors had no chance at being investers.
If we dont give it a go, we will never know. We have to start somewhere.
So what if my first property doesnt go up in value by $1 million dollars in the first 5 yrs. As long as Im happy with my first investment, it goes up in value over time, it doesn't cost too much to hold and I can sleep at night, thats all that matters to me

 

There is a very good point. Agree there was an element of luck (some maybe more some maybe less). that's why I find it strange how some investors suddenly are giving paid advice in investing (for e.g. they benefited from the Sydney boom - which really could be no different to the poster whose uncle has a few ips in sydney). I would be more inclined to follow those who squeezed their bucks out of development or manufacturing growth or been making gains throughout the last 10-15 years outside of booms.

 

For first timers, I think it all about getting started. If we worry to much, we will never buy the first one. Isnt making mistakes all about learning from them. Even Jan Somers still makes mistakes and talks about them and she is someone who definitely knows what she is doing