Property expert and CEO of property portfolio company Empire, Chris Gray has warned property investors not to delay buying and to take advantage of the current market conditions.
Rate cuts and the First Home Owner Grant have seen a surge in first home buyer activity in the market, and investors should use this as an opportunity to enter the market themselves, says Gray.
“Investors should not leave it too late to enter the property market. Many people truly believe that residential property is a safe, solid investment for the future and are keen to invest.
“But in my experience as a buyers agent, I’ve found people tend to wait for 100 per cent perfect conditions before making a decision. If they miss that exact point in time, it leads it leads to more excuses.”
While the current market is driving the perception that now is not a good time to buy, Gray said that the truly smart investors are using recession-proof strategies to build their portfolios.
He has provided the following recession proof-strategies for investors when buying property:
1. Choose property that’s attractive to tenants. You’ve got to buy something that suits the majority of tenants in that particular area. Factors such as these will ensure your property is attractive to renters and will guarantee your income stream.
2. Choose property that will grow in value. If the property is close to a major CBD, beaches, schools, public transport and leisure facilities it’s more likely to grow by more than the average in a good market and is more likely to hold it’s value in a down market. If you buy around the median price then more people can afford to rent it and more people can afford to buy it if you put into a forced sale position.
3. Buy blue chip. Cheap properties are cheap because they are not in great demand and there’s plenty to choose from. It’s often worth paying market value for a good property in a top suburb than it is to get a discount for something that no one else really wants. Time in the market is more important than timing the market.
4. Create instant equity. Do some quick renovations such as a paint job, re-carpeting, tidying the garden, painting the fence, installing new curtains or blinds, and replacing the kitchen-cupboard doors. For every dollar you spend on renovating you should be aiming to get at least $1-2 back in the value of your property.
5. Refinance your property to create a buffer. When your property grows in value, refinance to create an emergency ‘buffer’ zone. This will ensure you can continue to make mortgage repayments even if you lose your job. Don’t find yourself in a forced-sale position as you won’t get the best price and it may trigger capital gains taxes and other expenses.
6. Re-sign your tenants. Hire a professional property manager to ensure you get reliable tenants and that they pay a good market rent. Consider tying your existing tenant down to a new 12-month agreement. This will help guarantee your rental income.