With our markets on
the move and a new property cycle now upon us, it’s becoming apparent that more
and more investors are looking for the next property "hotspot.”
The problem is,
hot-spotting is about short-term speculation, not long-term wealth creation.
Most property
investors are trying to build their asset base so that one day it can replace
their personal exertion income.
The key to building
a substantial property portfolio is to use your first property to leverage into
your next property and then use those two properties to leverage into more
investments, and so on.
You will only have
the ability to do this if you invest in locations that consistently provide
long-term capital growth.
By definition,
‘hotspots’ are not these types of areas.
Just as quickly as
they heat up, property values in these locations can come off the boil and cool
very quickly.
Sure many of the
hotspots predicted by some of Australia’s property analysts turned out to be
correct.
Some of the
regional areas and mining towns boomed, at least for a while as investors
chased up prices, but unless they got the timing right, chasing the next
hotspot turned out disastrous for most investors.
After the initial
price growth, often driven by a flood of investors in these small markets,
prices stalled and often dropped substantially, leaving many with properties
worth considerably less than they paid and with less rental income than they
expected.
They are now unable
to sell their properties as buyers have abandoned these markets, which have
little depth from local demand.
If you’re into
investing in short-term trends, being right isn’t what’s important; it’s being
right at the right time that counts.
Very few can do
that, so the history of investors trying to find the next boomtown is littered
with people who get the story right and the outcome wrong.
Instead, I buy in
areas that have a proven long-term history of outperforming the average capital
growth and that are likely to continue to outperform, because of the
demographics of the people living in the area.
Hot spotting is
virtually the opposite of this sensible, not-so-sexy, tried and tested system
for successfully building a property portfolio.
RealRenta has all the
tools that a property manager has but for less than ¼ the cost of a
property manager.
Join now and the cost
is less than a cup of coffee a week to manage your rental property.
RealRenta also has a
free vision, so why not check it out.
Jason Gwerder
Thursday, 12 October 2023
