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Market Update:
Week Ending 19th Feb 2010
Quick Summary:
Click the links below for quick reference or else read the article in full
Market Update Spots Filling Fast
Earlier in the week I announced details of my next round of LIVE market updates in Sydney, Melbourne, Brisbane, Perth & Adelaide.
Starting at 7pm and lasting two hours, you should definitely attend if you want clear, concise and practical information on what to do to take advantage of emerging trends, as well structured training that reveals how to increase your property profits.
Maximising your borrowing capacity will be the special topic, and as I explain why you should avoid buying property in your own name, I'll give you an alternative that has been one of my 'secrets' to success.
If you haven't already booked your place then I suggest you do so now - especially if you want to come to Sydney, Melbourne or Brisbane because there aren't many spots left in those cities.
The dates and details of the Market Updates are available at:
http://www.propertyinvesting.com/seminars/live-update
Video & Discussion: Why Ugly Houses Make Better Investments
Which would you rather own - a pretty house in a nice suburb, or an ugly house in an area in transition?
You'd be forgiven for choosing the pretty house, but as you'll soon see, targeting ugly houses allows you to buy more property and make more money.
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Note: In conjunction with the text below, you can watch a short video I've prepared on this topic at: |
To begin with, it's important to understand that there are two broad types of investors, and each has different needs and desires from the property they invest in.
At one extreme you have those who lack the time, skill or desire to be active investors, and instead want to buy good quality assets that they hope will go up in value over time.
Such investors are interested in low maintenance 'set and forget' type property and find pre-managed options such as Defence Housing and new 'off-the-plan' homes with rental guarantees appealing.
Yet because many of the risks or problems that beset other property investors have been solved (such as finding tenants, risk of vacancy, maintenance etc), the income and growth returns achieved by these investments will be lower than what active investors can otherwise achieve.
In summary, investors who choose 'less hassle' pretty houses are also willing to accept 'average' returns earned by forces beyond their control, since it is the market that determines when and how much the property increases in value.
Turning to ugly houses, I'm not talking about something that's structurally unsound. I mean something where there is a problem that you have the skill and financial wherewithal to fix.
Examples include: cosmetically challenged; under utilised space; poorly marketed; problem tenants; vendor who needs to sell urgently etc.
The key to your success will be adding more in perceived value than actual cost, because you will need to fix the problem in such a way that a 'set and forget' investor will want to buy it off you, at a price more than the total price you paid to buy, fix and sell the property.
That is, using skill to solve problems in a cost effective way allows you to earn profits on top of (and in higher proportions) to what the general market delivers.
I'm not just talking about active strategies such as renos and developing. As I explain in the video, buy and hold investors will also do better owning ugly houses.
In conclusion, a good investing mantra to remember is "the farther you are away from the problem, the farther away you are from the profit."
Said differently, you will make more money buying problem properties and selling them to 'set and forget investors', than buying solutions and waiting for market growth.
Looking at the property you own and your overall approach, which type of investor best describes you? Are you looking to buy problems or solutions? If you aren't getting the returns you hoped for, perhaps it's time to shift your focus.
If you want to use property to reach your financial goals as soon as possible, it will be better to gain the skill and expertise to find and fix problem properties than buying pretty houses that provide average returns.
