A common trap for “Mum and Dad” investors.
We all know that property investment choices should be made with the head, not the heart, but for most of us, this is easier said than done.
Investing in property is a major financial life decision, which pushes many of us beyond our comfort zone.
A key piece of advice I have for my clients is to keep pushing that little bit further and consider buying in suburbs they are not yet familiar with.
Many of my clients are regular “Mum and Dad” investors with less than $500,000 to spend, looking to sure-up their financial future.
They have a natural tendency to gravitate to suburbs they know and like, often close to the family home.
On the surface this may seem logical- they have probably seen the area increase in value over the years, they may know some local agents and they figure they can “keep an eye” on their potential investment.
Unfortunately, their emotional attachment to the area and investment clouds their thinking, potentially preventing them from securing the best return on their investment and duping them of tens of thousands of dollars in the long term.
What is more, they are setting themselves up as the landlords from hell – no long-term tenant wants the property owner doing constant drive-bys.
An added complication in markets across Australia is COVID-induced lack of stock, which is fuelling buyer demand with the potential to drive people to panic buy and over-spend.
We all know that investing in property should come down to price, rental yield and growth, but in reality removing bias, emotion and attachment is difficult, especially when you are investing in your home town, in a tight market.
This is where the value of a buyer’s agent really comes in. Our investment advice is purely driven by facts and figures. We live and breath property investment in particular cities and we know their markets inside out.
In my hometown of Adelaide, that the market remains slow and steady, with low stock levels and increasing interest from interstate buyers seeking market stability.
The north-eastern and western suburbs are particularly popular with families and investors for good reason- they are areas of steady growth, infrastructure investment and quality family homes on decent sized blocks.
But, depending on your needs as investor, it may be worth considering Adelaide’s northern or southern suburbs, which have lower cost properties and some of the highest rental yields in Australia.
Alternately, you may benefit from the capital growth associated with Adelaide’s inner and eastern suburbs, depending on your budget and circumstances.
The key really is to think with your head, not your heart and I would recommend keeping some physical as well as emotional distance from your new investment.
Invest in the right property then get a professional property manager to look after it day-today, your tenants and bank account will thank you.