It seems that currently trying to find a “good deal” is as easy as sourcing toilet paper was back just before the April lockdown... Everyone
is looking for it and worried it’s going to run out. Property markets are tight and FOMO (fear of missing out) is in the air. While there
are all sorts of factors contributing to this, I want to focus on the mental game we play when we decide to shop in these conditions.
Two things we need to bear in mind with property are:
1. we are there to play the long game;
2. most investors will hit their goals from having a few properties (a portfolio) over time, as opposed to spending forever- and-a-day to
land an amazing deal. I’m sure I’m not the only person who looks back on deals I didn’t buy years ago because I was quibbling over small
things (usually something like a few thousand dollars), and kick myself for the action I didn’t take. In my inexperience I thought I was
being smart, now years later I can see I had it totally wrong.
FORGET THE PERFECT DEAL
Every day I talk to people who are looking for the “perfect deal” and have major FOMO that they will miss out on the deal of the decade if
they “settle” for a property that simply gets them started in the right direction. I also know that in another three years, some of these
same people will still be looking for their “fairy dust” deal, likely having missed out on tens of thousands of dollars with the
opportunities they didn’t take.
Which is why I can often be heard saying to clients that: “You don’t need perfect, you just need good enough.” You are looking for an
investment property that over time helps you to buy your next one and work towards your financial goals, not a life partner.
I am not advocating for one minute to be laissez faire or casual with your due diligence, rather take this as a suggestion from someone who
has been in the game for a while that you keep the focus on your “why” of investing rather than the “what”. Don’t have such a narrowly
defined brief that you pass up on deals that over time would work very well for you.
There are exceptions to this rule of course. If you are targeting properties to undertake a type of project or strategy then it’s going to
be important for you to hone in on properties that allow you to do just that. For example, homes you can add a bedroom to, or subdividable
But this narrow approach isn’t necessary if you are a new investor who is looking for something broader such as “cashflow positive” or
“add value opportunity”. These types of deals can still be found if you know what you’re looking for, how to find it and how to avoid
KNOW WHEN TO COMPROMISE
However, what we often see in our business is new investors have a “wish list” of all the desired features in their dream property.
Experienced investors will know what to compromise on to hit their goals, newer investors will often miss out on a great deal that meets
their highest objective, because they major on a minor. I’ve seen people turn down a great deal that is yielding well because it didn’t
have aluminium joinery, only to spend the next year saying they want another deal just like that one ... Gone!
Similarly, we see clients turn down a high cashflow property with upside because a 6.9% yield isn’t good enough, it needs to be 7%. This,
despite the fact there can be good equity created. I’m not a fan of using gross yield as an indicator of a property’s potential in this low
interest rate environment, preferring instead to look at actual cashflow. We are regularly now seeing sub-6% gross yields performing
well... Who would’ve thought?
So, with this hindsight wisdom in mind I’m here to tell you that if you’re looking to buy an investment property right now, then please
feel confident that if you get the fundamentals right, and hold on long enough, it’s really hard to get it wrong.
It's not just about finding a deal, to truly grow as an investor you need to plan towards your end portfolio and work with people who can help you move towards that vision. iFindProperty has a service that achieves that for clients, and we are excited to share it with you
As an accountant is not a place for my personal political opinions, but professionally speaking I’m pleased with this result, and cautiously
optimistic we might have a friendlier tax environment for the property sector for at least a few years. But what does this mean for property