The New Year is seen as an opportunity to start over, and for investors, the last thing they want is to lose money on the real estate market.
No one is exempt from making mistakes in their investments. Therefore, proper direction is essential to navigate the market. In an interview with Your Investment Property, Michael Yardney, CEO of Metropole Property Strategists, lists the worst investment strategies to adopt in 2019 – and warns investors against practices to avoid as much as possible.
1. Change the strategy of your property according to the current market
Although the market has changed in recent years and prices are falling even more in many areas, this does not mean that your strategy should change. Proven strategies should be kept unless your goals have changed.
Yardney says that people who have a proven real estate investment strategy and who own investment grade properties should not lose confidence.
The decline in the value of well-located properties in the capital is temporary, while the overall long-term growth in the value of "A" class properties is permanent.
"The current correction we are seeing is a normal part of investing and it is important to invest according to a strategy that has always worked, rather than looking for a short-term solution that will work now," says Yardney.
2. Invest in off plan properties for additional benefits in depreciation.
This is a sure way to lose money in 2019, and Yardney provides the reasons.
The price of many off-plan purchases is inflated by high marketing costs, promoters' margins, developer profits and price premium, as this is the main type of property that foreign investors ( who can not buy established goods) usually buy.
There is already an oversupply of this type of property in many Australian capitals. This means that there will be very limited, if any, growth in capital or rents.
There is little shortage in a block of 100 or 200 apartments, which further limits capital growth. "Out-of-the-money" buying is accompanied by uncertainty about completion dates, finishes and market conditions when you take possession of them later.
Some investors who subscribe to the plan will have to sell because they fail to obtain the necessary financial means to settle in the context of current tightening of loans. Most new apartments will not be valued at contract value at the end of the contract and banks will only lend you a small percentage of the new lower value of your property – not the contract price.
Add to this the fact that banks often only lend on a 70% loan-to-value ratio in the postal codes where most major developments are located, and what appeared to be a good investment at the beginning, with beginnings that have gone wrong.
Many of the large unexpected complexes are built to poor standards and are likely to be the slums of the future.
A large number of apartment buyers in out-of-town subdivisions are foreign investors. They do not usually attend company meetings or spend money on maintaining the building. They may be very difficult to hunt if they do not pay their bodily contributions.
"All of this means that you have to buy your property out of the plan with a significant discount to compensate for those strangers, but currently, developers must sell you their products at a higher price, not at a reduced price. financially feasible projects for them, "says Yardney.
In addition, almost all plan developments are sold to investors. Yardney prefers to buy properties in buildings that have a high proportion of homeowners. He believes homeowners tend to be better at occupying buildings and improving their long-term capital growth.
3. Purchase of a new house in a new subdivision
These goods will also make profit-making nightmares in 2019, according to Yardney.
Some investors buy new homes in new outlying suburban neighborhoods because they have heard that land values ​​are gaining value and they feel they have a lot of land for their money.
However, when you take a closer look and add the value of building a house to these places, the land usually represents less than half the selling price, which gives these properties a very low land / asset ratio.
Others are considering buying housing in these new suburban suburban subdivisions, mistakenly believing that, if the properties are cheaper there, they will be more affordable to the masses because the value of their properties continues to grow.
This is a misconception, as it is exactly the types of areas that suffer the most when interest rates rise. Residents in these areas generally have lower disposable incomes than people living in wealthier suburbs.
Even though they are great places to live and raise a family, the new suburbs or outlying suburbs are not usually a great place to invest. Yardney pointed out that one of the key factors that improve capital growth is the scarcity and that something is missing in these suburbs.
Yardney also revealed that he would avoid investing in these areas because of their demographics. they do not elicit the same demand from a variety of tenants as the inner suburbs and halfway to the ring.
Can you afford to buy in this suburb? Find out how much you can borrow
Top suburbs:
Westbrook
,
coburg north
,
Penrith
,
Lockridge
,
mt colah
Get help for your real estate investment
Do you need help finding the loan that suits your investment?
When you invest in real estate, it's important to make sure that you do not just have the lowest available rate that you can get, but you also have the features of ready adapted to your needs.
Just fill in a few details below and we will then do what is necessary for an Australian mortgage broker to contact you and establish which features or types of loans are suitable for your needs? We will even help with the paperwork. In addition, an appointment is free.
We value your privacy and treat all your information seriously – you can check
our privacy policy here
