It seems that the real estate investing market is about to bottom after the collapse.
This has led to a lot of different messages in the media, coupled with our economic and employment prospects are uncertain, so many investors are confused.
But at this moment of uncertainty, it is certain that some real estate investors will use the opportunities provided by the market to increase their wealth.
Although many Australians will sit on the sidelines and wait for someone to ring the bell that the real estate market has bottomed out, smart investors will actively seek and purchase investment opportunities created by the current buyer market & also find the right real estate agent.
So, let’s take a look at 11 time-tested rules used by these successful investors to create wealth.
1. They have a long-term vision
There is ample evidence that delayed gratification usually leads to better financial conditions and a better life.
Experts say: “Wealth is the transfer of money from impatient people to patient people.”
Real estate investment has always been a long-term game. The longer you spend, the better the quality of your assets, and the less important the timing of the market.
2. They invest, not speculate
Although they think they are just doing their real estate investing, many investors are actually speculating. The problem is that they don’t realize this.
You need to know that all investments have risks, but in my opinion, as an investor, it is very important to minimize risks.
However, the average investor is very emotional when buying a house, often near the place of residence, vacation, or retirement. Then they hope the price will rise.
Others are looking for the next hot spot, hoping to seize the best time in the market. Both types of investors rely on external market conditions to generate profits. Smart investors are different. They make informed investment decisions based on research, evidence, and fundamentals.
They buy properties below their intrinsic value in an area with above-average long-term capital growth, because the population there is affluent, and then through renovation to increase the value of the property, thereby “creating” additional capital growth.
3. The property itself is the most important
Smart investors will never forget an old basic principle; buy the best property they can afford in a proven location. They will not be swayed by attractive financial or tax strategies. On the other hand, investors who are attracted by rent guarantees, tax concessions, or speculative off-the-plan properties to give up profits are likely to miss good opportunities in the next few years.
4. Real estate investing is a high-growth, low-yield investment
3 bad habits can ruin your real estate investing. Although the debate about capital growth or cash flow investment will always be fierce, experienced investors know that the only way to use real estate to ultimately achieve financial freedom is to build a sound asset base. Of course, cash flow is necessary because it can help you repay your loan and allow you to continue your investment activities, but capital growth (having a substantial asset base) is the only way not to be affected by interest rates. Savvy investors know that their investment process is divided into three stages:
- Asset growth stage – this is why the rate of return on the properties they own must increase to create wealth
- Transition stage – when they slowly reduce the loan-to-value ratio
- The money machine they live by – the total asset value of the high-quality investment-grade properties they have built over the years
5. Land appreciation
Smart investors will buy properties with a high ratio of land to assets. This does not necessarily mean that the land is large, but that land accounts for a considerable proportion of the value of the asset. Although the land has indeed increased in value, it is not that simple.
Not all land is the same, and not all land increases in value at the same rate. There is a lot of land in the outer suburbs of our city (ample supply), but most of the demand comes from a small part of the market, namely first home buyers (limited demand). This limits capital growth and makes investment prospects in these regions bleak.
To make matters worse, the land component, that is, the part that appreciates, usually only accounts for less than half of the total property value (in other words, the ratio of land to assets is very low). However, in urban areas close to the city center, the ratio of land value to total housing prices is usually much higher. Keep in mind that it is the limited land supply that has caused prices in these areas to continue to rise, and many owner-occupiers have strong demand for properties in urban areas near the city center.
This trend is likely to continue, as more and more people choose to trade space for better locations and choose to live closer to their workplaces because of better public transportation, shopping, and entertainment infrastructure.
As demand in the central city of the capital city seems to exceed supply for many years to come, successful investors will buy houses in these areas for long-term capital growth.
6. Purchase of properties with continued strong demand
Of course, not all properties in a particular urban area can become quality investments or have the same capital growth. Savvy investors understand that investment-grade properties will attract a large number of owner-occupied buyers because this group accounts for the vast majority of buyers. This is why they will not buy studio apartments, student apartments, holiday apartments and serviced apartments. After all, in the long run, it is owner-occupier buyers, not tenants, or investors’ demand, that push up prices. In the next few years, this is especially important because the proportion of investors in the market may decline.
7. Demographic structure is the key
Long-term demographic structure-how much our population is, our lifestyle, where we want to live, where we can afford housing prices, the impact on the real estate market will be greater than the short-term rise and fall of interest rates, consumer confidence and government intervention important. Today there are more one-person and two-person families. We get married more and more lately, more and more people divorce, and life expectancy is getting longer. Many immigrants who come to Australia are happy to live in apartments. This means that more and more people are looking for safe, medium-density apartments, and townhouses, which will become the preferred lifestyle, and no longer want to live in independent houses with backyards.
8. Surrounded by an excellent team
If you are the smartest person on the team, you are in trouble. Successful investors are surrounded by top advisory teams, who know how to distinguish between independent advisors and salespeople. In fact, they know that they need to pay for consulting fees because they realize that if the advice they receive is free, they are probably the product.
9. Real estate investment is a financial game
Those investors who will be profitable in the next few years have usually set up financial buffers (using offset accounts or credit lines) to help them through different real estate cycles.
10. Understand the real risks
Most investors believe that risk and return are directly related-the higher the return, the greater the risk must be. But it is not the truth. Although most investors believe that the risk comes from the property itself, the market or factors beyond their control, in fact the biggest investment risk lies in the investor’s knowledge, experience, and mentality. Wise investors will learn by themselves and have a certain degree of understanding of finance, making their investment process very safe. Interestingly, most successful investors do not diversify their investments. They are only proficient in one thing, or become experts in a certain field or niche market, thus achieving excellent results.
11. The real estate market is cyclical
During the boom, everyone is an optimist, hoping that the good times will last forever, just as we lose confidence in the downturn. The fact is that our real estate market is cyclical. Every boom is ready for the next recession, just as every recession is ready for the next boom.
Following these 11 important rules before real estate investing will help you gain more health. It’s true that if you have the right knowledge of investments and also about real estate, you could end up making a fortune. Following these rules might help you make that fortune. If you need more info then you can contact me. I’ll be that trusted real estate agent you always wanted.