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Introduction
Dear Investor,
Invest My Way is a fully independent investment property platform designed by property
investors, for property investors, empowering them to make better investing decisions.
Through the eBooks, Knowledge Base article library and suburb reports available on the
website, Invest My Way aims to assist investors to cover off on the essential steps that must
be followed in order to get finances ready, establish a budget, devise a strategy, select the
right property and complete adequate due diligence.
We wish you the very best of luck with your investing.
Yours sincerely,
Invest My Way
Disclaimer: The information contained herein does not suggest or imply, and should not be construed in any
manner, a guarantee of future performance and/or investment advice. Professional advice is always
recommended prior to making any investment decisions.
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If you ask your local real estate agent about property prices, they will most likely say that
they double every 7-10 years. However, the reality on average is that prices have only
doubled every 15 years, since 1880 and only every 11 years, since 1955.
There is much to ponder about the constantly changing world of property investing but the
most important question (and one that is rarely asked) is this: how long will future property
cycles be?
Most key experts agree that macroeconomic conditions will now lend themselves to property
cycles becoming longer and this is the reason why it is more important than ever to be
educated and well informed about the rules of successful property investing.
To illustrate this further, let us look into the current doubling cycle in Sydney.
In 2002, the median price was $452,000. In 2013, 11 years later, the median price is
approximately $660,000. Even if prices in Sydney grew at 10% per annum for the next 4
years, it is still going to take 15 years for this doubling cycle to complete.
So what does this mean for the modern day property investor?
Yield will become as important as growth in the overall investment decision.
Negative gearing will only be an effective strategy if you time the market correctly
Average decisions and average advice will get below average results.
You may be wondering at this point: is there still money to be made in residential
property?
Absolutely!!!
However, dumb luck is not going to get you through. You have to be smarter than before to
achieve similar results as we have seen in the past.
But let us be honest. None of us want just OK results! We all want to achieve better than
before. Given that, how do we outperform the past and grow a profitable and meaningful
property portfolio?
What we have to offer you is a list of what we believe are 5 keys to achieving success in the
modern day property market.
Introductory eBookThe 5 pillars of successful property investing
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Pillar 1: Timing the Cycle
Purchase during the value cycle of the market, otherwise known as 6 o’clock on the
investment clock.
The value cycle generally has a combination of the below characteristics:
• Poor growth performance over extended period
• Rising Rents
• Under supply of property
• Low vacancy rates
• Strong yields
• Low un-employment
• Recent improvements in suburb amenities
Some so called “advisors” will use past results as an indication of future performance, you
have to be careful with this, as strong past performance can be followed by a market
correction.
Recommendation: If you don’t know the current stage of the cycle you are in, you need to get
professional advice. If you can’t afford the consultation fees involved, then start by looking at
the reports on our website: www.investmyway.com.au. Here you will be directed to markets
that are showing value. Don’t rely on mainstream media to arrive at an opinion about where
the current property cycle is at. In most cases, it will be the exact opposite.
Warning: If you happen to purchase an investment property at the wrong time of the
cycle, you need to accept that losses are possible and frankly, common. Remember that
negative gearing is only a good strategy if the property is rising in value.
Pillar 2: Understand the Cash Flow
Purchase a property that has a strong chance of being occupied (tenanted) for 52 weeks
each year.
Don’t purchase in a location where there is a real risk of the property not being occupied for
more than 4-6 weeks. This is very common in mining towns or remote regional towns. Always
stick major populated centres. Not only that, stay close to places where there is strong
diversification of industry and low unemployment.
Recommendation: A smart investor will always base the purchase price on the potential
income (rent returns) of the property. Always speak to two local property managers to get a
feel of the income that a property can generate. You can find referrals to quality property
managers on our website: www.investmyway.com.au.
Introductory eBookThe 5 pillars of successful property investing
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Warning: With mining towns, remember the 4:1 ratio: it takes four to build a mine and one
to manage it. This means the “demand” in these suburbs may reduce once the mine
construction is over. That can have serious negative effects on your property rent and
value.
Pillar 3: Don’t Pay Too Much
Paying too much will limit capital growth.
If you don’t know what a property is worth, find out! Don’t rely solely on real estate agents as
it is their job to get the highest possible price for their client, which is the vendor.
Recommendation: Get a valuation report off our website: www.investmyway.com.au. You can
also spend four to six weeks inspecting properties and collating comparable sales to get the
real value of properties for sale in a particular area.
Warning: Paying too much will affect the growth and also the annual return of the
investment.
Pillar 4: Location, Location, Location
Location is key to the potential profit (and losses) in your investment but it has to be balanced
with the other 3 pillars mentioned above.
The location will ensure stable cash flow and will underwrite the buyer on re-sale. However,
property investing is not as simple as choosing a great location and paying any price for it.
The term location, location, location has provided novice investors with a false sense of
security.
Double bay in Sydney is a prime example. It is one of the best locations in Australia and in
2012, you could buy a property cheaper than its selling price in 2004. Capital growth actually
decreased on some properties after 8 years. Location is important but it carries equal
weighting with the timing of the cycle, understanding cash flow and paying a fair price. It is
important to remember that its not the location but the economic and demographic changes
in that location that will drag the property price up or down.
Recommendation: The simplest way to identify a quality location is to check the walkscore
rating on our website: www.investmyway.com.au.
Warning: Avoid buying a property next to establishments that can dramatically affect its
cash flow or emotional appeal (unless there is a compelling reason). These include main
roads, service stations, industrial uses and/or commission housing.
Introductory eBookThe 5 pillars of successful property investing
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Pillar 5: Property
What others perceive as the linchpin in property investment should actually be the least of
your concerns.
It’s important to understand that the specific asset selection (the property) only plays a small
part in ensuring the overall success of the property investment – unless of course you are a
property developer. With passive investment, the property itself is a secondary consideration.
Experienced investors know that some of the “ugliest” properties, purchased using your
calculator can provide the best returns.
As previously mentioned, properties move in value because demographic and economic
changes drag them from value A to value B. Properties do not appreciate in value because
you have an emotional connection with them. This is in fact, the number one reason why
people fail. If you fall in love with a property, all sound economic theory can go out the
window.
Recommendation: Judge a property like you judge your shares: by the numbers and
potential. There are many statistics on our website www.investmyway.com.au that will help
you with making a more informed decision about property investing.
Warning: Investors who buy with their heart instead of their head have a higher chance of
failing.
Not every transaction is the same but as long as you try to meet the criteria mentioned above
in the best possible way, you have a high chance of achieving success.
We sincerely hope that you will find the information, tools and research reports on
www.investmyway.com.au useful.
We wish you the best of luck!
The Invest My Way team.
Introductory eBookThe 5 pillars of successful property investing
