One of the characteristics of Australians who get into real estate investment is that they tend to be herd animals.
They dive into property investment when they hear or read in news media that there is a boom happening – and so they want to be part of it.
This is where the FOMO syndrome – Fear Of Missing Out – plays a major role.
But people who behave in this way are the least likely to achieve success with property investment.
And it may help to explain why most Australians who attempt property investment never get beyond one or two properties – and less than 1% create a property portfolio of five or more.
Those who make it to the 1%, the ones who develop a portfolio and achieve financial success, are the ones who behave differently to the herd.
They understand that no one ever got rich in real estate by following the herd.
The smart investors are usually doing the opposite of the herd – or, at the very least, leading the herd.
Because by the time the herd starts to stampede, the boom is already well-advanced and the best time to buy has been missed.
The smart investors, the ones who make up the 1%, think and act independently.
They conduct property research and they access the best advice available. They spend money on advice, information and mentors before committing big money to a piece of real estate.
They’re usually well ahead of the pack, which will stampede when media reports a boom is happening – which is usually a year or more after the smart investors bought in the target location.
Lately I’ve become increasingly concerned at the behaviour of herd-following investors in the Perth market.
Investors are buying too quickly, paying far too much for poor real estate – and failing to conduct proper due diligence before signing contracts.
When houses are commonly selling within a week of being put on the market, and at prices well above the asking price, then you know that buyers have lost sight of sensible processes.
That’s what’s happening in Perth at the moment. Investors are buying anything they can get their hands on, paying more than the property’s value and failing to do basic due diligence like building and pest inspections.
Some of these investors will end up with dud properties with expensive problems and they will seriously regret their actions.
It’s a classic case of buy in haste and repent at leisure.
Don’t get me wrong: I’m not saying “Don’t buy Perth”.
I’m saying: “If you’re buying in Perth, do so with the same due diligence you would apply anywhere else.”
The reality is that the Perth market has been rising strongly for three years. Those buying with undue haste right now are buying with the attitude that they can buy any property in any location at any price and still make big money.
This is not sensible investing.
Perth is undoubtedly one of the nation’s leading markets on price growth but that doesn’t mean that you can jump into this market recklessly and buy anything you can get your hands on at any price.
You still need to choose your suburb well, based on sound research principles, and you still need to choose the individual property with appropriate care and attention.
This is where the resources provided by hotspotting.com.au can make a huge difference.
Our new Top 5 Perth and WA Hotspots report suggests locations with good credentials for ongoing capital growth and also some regional alternatives that we think are worth considering.
Anyone with a hotspotting Membership, including the most affordable, the Hotspotters membership, can access the website’s research portal where you can conduct thorough research on suburbs and also on individual properties.
The resources include valuation estimates for individual properties, so you can ensure you’re not paying too much for the home you’re considering.
It’s so important that, even in a frenzied boom, you buy the right property in the best location at a reasonable price.
I urge everyone to ensure that they’re making buying decisions in Perth – and elsewhere – based on thorough research and due diligence, not the FOMO syndrome.