We all know that property is an incredible investment vehicle, and we only have to look around at what properties were selling for 10 or 15 years ago to see just how much values have risen.
According to CoreLogic, Australia’s national median dwelling value delivered a 6.8% annual growth rate over 30 years. While that by itself is an impressive result, we can see that to achieve that median price, some properties must perform far better, while some will perform far worse.
For most property investors, their results are not usually all that good. A typical scenario plays out along the lines of a family who own their PPOR (Principal Place of Residence) and wants to buy an investment property, so they use the equity in their home and find something that fits their budget.
In a few years’ time, they discover that while their PPOR continues to perform, their investment property is lagging, and they get stuck at this point for the next five years and never go on to grow their portfolio.
This is also backed up by the stats that show that most investors never really get beyond owning one or two properties.
The good news is that there is a very simple reason for this, and it comes down to the fact that when people invest, they are making one simple mistake.
Going back to the example, when the couple bought their first home, they likely bought it with their heart. At the time, they probably wanted to buy a nice family home in a good location, that was close to work and offered a good lifestyle. It was probably also in a good area for schools and had plenty of space for a young family.
However, when the couple decided to start investing, they threw away all the fundamentals that made the PPOR such a great investment and started worrying about other things like rental yields and how much stamp duty they need to pay and what the cash flow might look like.
This was their critical mistake. Had they simply sought out the best possible location and home that they could afford, that would appeal to other owner-occupiers, then they might have had a completely different experience.
In reality, it is owner-occupier demand that drives prices, and the higher quality home you can purchase that ticks all the boxes, the better the result you will see for yourself in the long run.
While we, of course, take all things into account when buying an investment property, if you’re able to look at the purchase from the perspective of what the end buyer will actually want, then that puts a whole new perspective on your purchase.
There’s a reason we focus so heavily on buying high-quality homes in blue-chip locations because we know when the time comes to sell, there will be a steady stream of buyers waiting at the first home open.
However, had you bought that off-the-plan apartment or in an outer suburb or regional area because the yield was better, you would have likely missed out on a lot of growth over the long term, and your property portfolio could well be exactly at the same point it was when you started.
If you are interested in the above, feel free to reach out to a Henderson buyers agent today for more information.