INVESTING 101: TRUST YOUR GUT
"I see property as something that will generate a good investment return for me in the long term"
For first-time or novice investors, the prospect of pouring hundreds of thousands of dollars into a single asset is understandably terrifying. It’s all too easy to become bogged down by fatalist headlines or contradictory opinions.
Yet there’s a good reason that property investment has been a tried and true method of wealth creation for the better part of a century. Easier to understand and less volatile than other types of investment, the property market presents opportunities for a spectrum of budgets and aspirations.
We asked three investors to share their experiences and advice for those looking to take the plunge into property.
Twenty-six-year-old financial analyst, Ben Huang was already the proud owner of his own home in Sydney’s CBD when he decided to make his first foray into property investment. “I see property as something that will generate a good investment return for me in the long-term,” explains Ben. “It’s always going to go up in the next 10-20 years.”
The ambitious young investor was able to take the equity he had built in his own home and put it towards the purchase of a three-bedroom apartment at Ed.Square – a new urban mixed-use development located in Sydney’s south west that ticked all the boxes. The development’s onsite retail centre and premium location were both key drawcards. “When it comes to investing I would always choose masterplanned communities,” says Ben. “With masterplanned developments, there’s been thought put into what’s best for the community. In this case it was the shopping and the train station.”
But aside from carefully crafted amenity, there’s one other key reason that Ben preferred to invest at Ed. “There’s an opportunity to get in early and buy off-the-plan. You only have to put down the deposit and then you have a few years before you have to settle,” explains Ben. “That gives you extra time to keep saving so you can hopefully take out a smaller loan when settlement day does arrive.”
Ben encourages other first-time investors to look beyond their own preferences and experience to find the best opportunities. “I always see investors choosing their dream home as an investment. They think ‘If I want to live here, then it will be good for investors’, but I don’t see it that way. I live in the city, and that’s where I want to be. But for people currently living out in the western suburbs, their work and families are already close by. They love where they live and if I can invest in places where people feel like that, then I know my investment will do well.” Ben’s purchase at Ed was just the first of what he hopes will be a diverse and successful portfolio. “Once you have a property, you can draw some money from that investment and put it into the new one,” explains Ben. “My plan is to buy an investment property every two years. It’s definitely manageable if you do your finance and research correctly.”
Stepping up: making the move from owner-occupier to investor Melinda and Barry Bouquet had recently settled in their new family home in Avondale, a Frasers Property community in Melbourne’s north west suburbs, when they decided to take the plunge and purchase their first investment property.
“We were chatting to our sales consultant for Avondale, and we got talking about all the other developments Frasers had going, and she told us to keep an eye out for Burwood,” recalls Melinda. “For the last year or two before that we had been thinking that, going forward, we’d like to sort of set ourselves up a bit. So when it came on the market we decided to go down and have a look, and we were just blown away with what they were building there.” The community that captured the first-time investors’ attention was Burwood Brickworks, a highly anticipated mixed-use community in Melbourne that will be anchored by what is anticipated to be the world’s most sustainable retail centre. “The world is leaning towards more sustainable living, so the retail centre was a huge drawcard for us and I think for a lot of people,” says Melinda. “I loved the idea of the rooftop urban farm, and of course the onsite supermarket and restaurants and all of that.”
With two young children at home, the couple hope that their investment at Burwood Brickworks will give them peace of mind as their family grows. “It feels really good to have something behind us for our future and for our kids,” says Melinda. “It gives us a legacy to leave something for the kids in the future. It’s very exciting for us.” For others considering taking the plunge and purchasing an investment property of their own, the couple advise that research is king. “Look at the surrounding area and how the rental market is performing. Speak to a financial advisor and make sure you’re not spending above your means, but I think research is definitely the number one.”
Brick by brick: building a diverse property portfolio Greig Francis started his property portfolio as a young man in 1995, after his work took him from Adelaide to Sydney. After first purchasing a Frasers Property home for himself, Greig put his money into a property at The Ponds, a Frasers Property community in a newly established suburb, previously part of Kellyville.
“At the time everyone said, ‘What are you doing? Why would you buy out there?” Greig recalls. “But I thought it would be the next Castle Hill, where you’d now be hard pressed to find something for under a million.” Greig settled on his property at The Ponds on Friday, and on Saturday he purchased another investment property in Balmain Shores, a Frasers Property community in Rozelle. Greig then went on to purchase two further investments with Frasers Property, as well as two other properties in other developments in Sydney and Queensland. “I was a man on a mission,” Greig laughs.
The seasoned investor also has holdings outside of the real estate market but says that he’s always viewed property as a safe bet. “I was only a kid when I bought my first house in Adelaide,” says Greig. “When I moved to Sydney I really stretched myself to buy because history shows that real estate increases. People get caught up in the doom and gloom of headlines that say the property market is going to crash and prices will go down by 20 per cent. I swear the day I bought at Balmain Shores the headline in the newspaper said ‘prices set to crash 20 per cent’. The market is cyclical and it will always correct.”
For those looking to build a portfolio of their own, Greig offers a few key items for consideration. “I definitely see off-the-plan as preferable, and it must be a good developer. Off-the-plan gives you depreciation, which is a non-cash expense that you can claim a tax deduction for. It’s also good because it gives you a bit of extra time to compile your deposit and hopefully harness some equity from capital gains on other properties. In terms of finding a good developer, I’ll give an example. When I bought my place at The Ponds I had a building inspection done by a third party who basically came in and said ‘I’m telling you right now, you’re wasting your money. I inspect these homes all the time and I can never find anything wrong with them.’”
New edition out now - Live Proud Spring/Summer 2019. This latest edition tells the story of our 95 year history of creating communities in Australia, as well as many more customer stories. We hope you enjoy the read.