Hear no evil, see no evil

THE experts have said it so it must be true – the property boom is over and we are headed for doom and gloom. Don’t put it into the property market right now or else you are bound to end up a sure fire loser, they claim.

I have never liked the experts very much – mostly because they are usually wrong. Three years ago they told me that property was about to crash and not to buy. Luckily, I didn’t listen, buying two properties in Perth which have grown in value by 114 per cent. Sure, property in some parts of Sydney did plateau and fall during the same period, but Sydney makes up way less than 10 per cent of the total market, so it is hardly an appropriate indicator on which to base purchase decisions.

Australia has hundreds of markets, each of which behave independently of the others and boom or plateau at different times. This means it is always a good time to buy property - you just have to work out where. Knowing how to identify what happens in an area just before it grows is the most important thing.

As to relying on the ‘experts’, or asking others where you should buy, this is like taking a share tip from a daily business newspaper - if you are hearing about it, chances are that it is too late.

Savvy investors learn how to research and ask the kinds of questions which mean they are the first ones to discover the next area in which to invest. They also learn quickly that the area in the immediate vicinity of where they reside may be a great place to live, but perhaps not the best in which to invest. Buying an investment property is a totally different ball game to buying an owner occupied residence.

When I buy property, I rarely know where I am going to invest - I just know how much money I have. I start a macro search in every state, typing my price range into the property search engine. Of the thousands of responses I get, I eliminate by first looking at the population (deleting towns with less than 15,000 people), then I move on to its proximity to a large town or city, then cash flow, and on through the 20 ‘must ask’ questions which I have developed.

More and more areas are eliminated and pretty soon I have a manageable list on which I can do comprehensive research. This way, I always seem to find a gem in an area which hasn’t come to the attention of others yet. For example, I bought in Mildura several years ago; in Elizabeth (South Australia) three years ago; and in the southern suburbs of Perth four years ago.

Each of these areas suddenly became very popular and experienced great growth after I had already bought. My purchases had nothing to do with luck - they were all about following a set procedure which left little to chance, and certainly nothing to what the experts thought.

Buying property that has room to grow is about understanding the factors that drive growth. If an area is growing simply because everyone is buying there, it may be a false reading which quickly abates once the prices rise and the yields reduce. An area which has no other factors to drive growth - such as infrastructure, population growth, and a vibrant economy - will quickly plateau and may even begin to lose value once the attention diminishes.

If you want to succeed in property investment, put in the hard yards yourself – get educated, take the time to research and understand that there is simply no way to ‘get rich quick’ with property (or any other vehicle, for that matter).

Margaret Lomas is founder and director of property advisory business Destiny Financial Solutions and an author of five property investment books.