Do cheap suburbs under-perform?

I split Australia into 2 groups based on whether a suburb is below or above the national median. Then I compared the performance of the cheaper half vs. the more expensive half over 3 years, 4 years, 5, 10 and 20 years.

For each growth period, the cheaper group outperformed the more expensive. And they…[Read more]

There’s nothing wrong with trying to reduce expenses, but when an “expert” is focused on them, it makes me wonder if they have any other tricks.

I’ve had a number of people contact me over the years wondering whether they should sell their investment property. Many are apartments that have high body corporate fees. They feel they made a mistake…[Read more]

Learning from my mistakes:

Never say “never sell”, there may be a time when you’ll be better off
Pick a loan you can easily replace if your lender turns ugly
Good finance doesn’t make for a good investment, it’s only a lever
Research the tenant if the property you’re buying comes with one already fitted
If buying O/S, re-learn ev…[Read more]

I’ve heard more than one educator/expert/spruiker say you should inspect 100 properties before making a decision. I guess their idea is that you become familiar with what’s out there and how much it sells for.

It sounds like good advice, an extreme dedication to research. But it actually telegraphs inexperience.

A good market is one in which…[Read more]

Each census we get asked whether we rent or own the property we’re in. Based on the answers published about a year later by the ABS, we can calculate the proportion of renters to owner-occupiers in a suburb.

I’ve heard some professionals in the industry suggest that investors want a high proportion of renters since it reflects demand. That is…[Read more]

I don’t believe in Information Overload. I want more data, not less. But I accept some investors may get confused with the massive range available.

I focus my attention on supply & demand. It’s a well-established law of price growth that’s been around for 400 years.

I’ll admit there are some metrics that can be difficult to classify (e.g. expert…[Read more]

When I was a novice property investor, it was drummed into me by the experts of the day, that you buy and never sell because it’s too expensive “trading” property. But I’ve learnt that there are cases where it makes perfect financial sense to sell and invest your dollars elsewhere.

As usual, it all comes down to the numbers: recycle…[Read more]

Location is not nearly as important as timing when it comes to achieving above average capital growth.

If location really was the 3 most important things to get right about property investing, then over a short time-frame you’d expect to see a superior located property/suburb/city edge ahead of inferior ones. Over a longer time-frame, that edge…[Read more]

I can’t count the number of “experts” in Aussie real estate I’ve heard mis-use Buffet’s quote. It might work well in the share market, the context Buffet intended for it, but historical data suggests applying it to property investing is a clear mistake.

Why, because investors make their decisions to buy or to sell for financial reasons, but…[Read more]

A few qualities I’ve heard over the years for an “investment grade” property (or suburb):

Lifestyle location
Safe & friendly
Special
Appeals to a wide range
Affluent owners
Short walk to amenities
Cafes, parks
Street appeal
Views
Natural light
Privacy
Attractive style
Sound structure
Above avg. historical growth

I b…[Read more]

Here’s a great example of how to misinterpret data like an expert…

Let’s say 80% of the properties in a suburb are houses. Some experts would recommend investors buy a house not a unit, since that’s what tenants in the suburb obviously demand.

But the properties in the suburb are those that have been supplied to that suburb – not demanded by…[Read more]

Many experts hype-up yield. But capital growth is the ant’s pants of property investing.

The following chart shows the “total wealth created” for a theoretical $500,000 property over 10 years of constant 7% gross rental yield and 3% constant capital growth per annum.

$180,000 of equity and cash-flow combined.

Now swap the yield with the g…[Read more]

For decades it’s been said that “rent money is dead money”. The “follow-on” has always been that you should aim to own your home rather than pay the landlord.

But it could be argued that paying home mortgage interest could be more “dead money” than rent money.

What are the chances that the place you want to live (or need to) also happens to be…[Read more]

Every few years I hear marketing from investment experts along the lines of:

“You need to adapt to the new phase in the cycle. What worked in the past won’t work now.”

I’m yet to find a case in the last 40 years where capital growth hasn’t “worked” for property investors.

But imagine you’re a professional operating in a very specific patch…[Read more]

Everyone knows that land appreciates while buildings depreciate. So, how can investors best apply that intel?

Some buy houses instead of units. Some buy houses on big blocks. Some professionals suggest you should aim for a larger than average block size.

I’ve even read one blog, where the apparent expert claimed to have discovered the ideal r…[Read more]