What you need to know as a property investor

PUBLISHED 9 SEP 2021   



A lot can be said about investing, and often it can appear like a very daunting approach to creating personal financial freedom, however, with these tips we simplify property investment to show you that with the right information you can also have a healthy property portfolio.

Property investors invest, they do not speculate

Many people see buying property as an emotional decision and while this is only one part of the equation for when you buy your own home, smart investors know that investing in property cannot be about emotions.

They make educated investment decisions based on research, buy a property below its intrinsic value, in an area that has above average long-term capital growth and then add value through renovations thereby “manufacturing” extra capital growth.

It’s about the property

Wise investors know that buying the cheapest property in a prime location is much more valuable than buying the best property in the wrong location. Buy the property you can afford in the best location and never settle for buying a property that is the best in a location that shows no potential for growth.

Property is a high growth low yield investment

While the argument about capital growth or cash flow will rage forever, savvy investors know that the fastest way to build a substantial property portfolio is through capital growth.

They buy properties that will be in continuous strong demand

Of course, not every property in a given suburb will make a good investment or have similar capital growth. Savvy investors understand that investment-grade properties are the type that will appeal to a wide range of owner-occupiers since they make up the vast majority of buyers.

Demographics holds the key

Long-term demographic trends - where and how people want to live - will determine the type of property that will be in demand in the future.

They keep an eye on what is happening in markets not only in the city but as well as smaller towns as people seek a more relaxed lifestyle - a trend driven largely by the COVID-19 pandemic and work-from-home opportunities. They look at how cities grow and expand around us, looking at properties in areas where people are swapping out the suburbs for the more fast-paced life of the city. The growth of townhouses and apartments has become more appealing to young professionals, and smart investors know that these are types of properties will be in demand for the foreseeable future.

They understand where the risk really lies

Most investors believe there is a direct relationship between risk and reward - the higher the reward the more the risk must be. But that’s not really true.

While most investors think the risk lies in the property or the markets or factors outside their control, the biggest investment risk actually lies with the investor – their knowledge, their experience, and their mindset.

The best defense is a good offense. Wise investors educate themselves and develop a level of financial fluency to make their investment journey as safe as houses.

They understand the property market moves in cycles

During a boom, everyone is an optimist and expects the good times to last forever, just as we lose our confidence during a downturn.

Keep an eye on these cycles, research them and learn to understand them. This way you will be able to manage your portfolio accordingly.