2023 is the year of opportunity for investors.
Despite much speculation about investors wanting to leave the market as Government’s tinker with tenancy rules to try and alleviate the rental crisis, there are good reasons to consider investing now.
There are plenty of options to buy well in locations with growth credentials, achieve good rental yields to offset higher interest rates and find rising income through rental increases amid historically low vacancies.
Property investment expert Jason Paetow of AllianceCorp joined Hotspotting founder Terry Ryder in a recent webinar to discuss how investors are setting themselves up for future growth by buying in a market when competition is not as strong.
Paetow discusses:
- Investors who hesitate will regret it
- More than one investment property should be the aim
- Don’t be blinded by the national picture
- Target affordable locations
- Where it is good to invest now
INVESTORS WHO HESITATE WILL REGRET IT
Paetow says for those looking to build a long-term portfolio and achieve some long-term financial goals the best time to invest in property is always yesterday.
“Our rule has always been that as long as you’ve got the deposit and the bank will lend you the money, you should get out there and start buying property,” he says.
Investors who held off in mid-2020 during Covid, missed out on 20% or more in capital gains.
“A lot of investors unfortunately wait for everyone else to come into the market first, by then it’s too late,” he says. “You’ve maybe missed out on a substantial amount of growth there and it’s very hard to negotiate or get discounts, the vendors are getting what they want. The rule is always you get into the market when you can afford to.”
MORE THAN ONE PROPERTY SHOULD BE AIM
Paetow says people can’t save enough to be wealthy and one investment property won’t do it either.
“If you can actually get into a market where the market’s about to surge, you’re going to generate some equity pretty quickly in that property which is going to allow you to release that equity quicker and then put that money towards buying your second property,” he says.
“If you end up purchasing your first property, you’re generally not relying on savings to get the deposit to buy the second. That would just take too long. On average it can take six to seven, even eight years for someone to save a deposit for a property. What you (should be) relying on is being able to release some of that equity.”
DON’T BE BLINDED BY NATIONAL DATA
The mistake many investors make according to Paetow is they read the media about what is happening to the property market nationally, instead of investigating what is happening on a suburb level.
“Even though you might have a national average saying that the market has dropped 6%, you will still have pockets throughout Australia that have actually increased by 5%, 10% or even 15%,” he says.
“When you think about the property market, think about it like dropping pebbles in a pond. Different areas will take off at different times. Just because the national average is low, doesn’t mean to say people haven’t made money in property.”
TARGET AFFORDABLE LOCATIONS
“Our average purchase price for our investors is as low as $350,000 to $400,00 for an entry level property in some regional areas,” he says.
“People that are hanging onto those properties can afford typically the repayments or any fluctuation in interest rates,” he says.
“There are still some great pockets in around Australia that are, are still very affordable. You don’t have to restrict yourself to the major capital cities. Our general view is that I would prefer a client to have maybe two, three or four properties in their portfolio at a more affordable price point as opposed to just one (more expensive) investment property. The challenge with buying something at a much higher price point is that generally the rental yields are a little bit lower.
“If you are looking to purchase something over $1 million in some of these major capital cities, you might find that the holding costs could be as high as $200 or $300 (a week) or even more if interest rates are higher.”
WHERE IT IS GOOD TO INVEST NOW
Paetow says parts of Western Australia and South Australia are good options for investors, including north of the Perth CBD where there is a lot of infrastructure being built and Adelaide, particularly around Playford which has been delivering consistent returns.
He says they tend to be overshadowed by east coast cities, but investors should not think this means they are not worthwhile.
He also believes Logan in southeast Queensland is ripe for investment.
“We’ve been investing in Logan for many, many years now, and it’s seen a massive uptick, particularly during the last boom as well,” Paetow says.
In terms of regional areas, where yields can often be higher, Paetow says they are interested in Townsville at the moment.
