Tommy's First Word - Issue 131, current to 21 June 2011

There is an old saying that when the going gets tough, the tough get going. Sure it’s a hackneyed phrase, but I believe it is still true! We all know of tough situations when someone with a little courage and a lot of foresight has taken advantage of the circumstances by an initiative that pays dividends at a later date. I wonder if perhaps such a situation exists right now in the residential property market. For those who are prepared to chance their arm a little, defy the sceptics and start or expand their portfolio of residential property investments, the medium to long term results could be rewarding.

I say medium to long term for the simple reason that I have always seen property investment in this light and not necessarily a way of accumulating wealth overnight. It is no secret that experienced property investors prefer a   market when most people are a little on the back foot and competition is minimized.

Buying right is critical and although it may sound cruel, a slow market is when many good buys are made with someone’s need to sell ultimately becoming someone else’s good fortune. I believe that this is the situation that prevails at the present time. Prices have  reduced somewhat, there are good buying opportunities available and interest rates have not been as favourable for a long, long time  as they are right now. Predictions are though that interest rates are likely to show an upward trend later this year or early in 2012.

So for anyone looking for investment property, here are a few points to consider in your deliberations:-

1. Align yourself with a good agent. Acquire as much market information as you can yourself, and insist that your selected agent provides you with sufficient data so that you, yourself have a clear opinion as to what is value buying and what is not. There is a  multitude of market data available and even visiting open homes for a period in your areas of preference will give you a good idea of  what represents value and what doesn’t. It will also give you a clear picture of how well your chosen salesperson performs by their  general demeanour and attention to client’s needs and questions.

2. Develop an investment strategy. Establish what your short and long term investment plans are. Treat your investment portfolio as a  business which means structuring your purchasing entity to suit your circumstances e.g. as a trust, partnership or a company perhaps. Ready advice is available in this regard. Also structure your personal and investment borrowings in a way that maximizes your taxation advantages. I suggest that you discuss this aspect with our associate mortgage broking company, Moneybox, whose consultants will be pleased to advise you in this regard.

3. Don’t buy on emotion. By this I mean, look at your potential purchase through the eyes of a tenant and not necessarily as to what you  would buy for your own occupation. Proximity to schools may not be a prerequisite for you but can be a big influence in securing a family  as tenants. Public transport, shopping availability and recreational facilities may be other plusses for prospective tenants. Buying in a  good resale area is logical but sometimes overlooked in the excitement of buying. Even though you are not buying with the idea of turning the property over quickly, circumstances can change and having a resaleable property is always comforting.

4. When buying, look for upside in a property. By this I mean constantly look to see what potential the property has for improvement. This  may only be superficial in the form of redecoration or landscaping or it could be more substantial in the form of upgrading the kitchen or  bathroom, adding another bedroom or perhaps even having subdivision potential. Don’t be blinded by these possibilities though without  onsidering the effect any additional expenditure will have on the long term value of the property. There is little point in installing a  brand new and expensive kitchen if these costs are not reflected in an enhanced value for your newly acquired property.

At the end of the day, common sense and good advice is the key to making a good buying decision. For the reasons outlined above, I believe that the winter months may be a good time to seek out investment opportunities and together with my salespeople, Tommy’s will endeavour to guide you with these important buying decisions. Give us a call at any time.

Best wishes,

TOMMY HEPTINSTALL

Managing Director