First Home Buyer to investor, upsize, downsize and finally retirement. It is a journey but like with very journey you must know the destination before you set out. In today’s show we talk with Paul Nugent, from Wakelin Property Advisory.
Kevin: My guest now is Paul Nugent from Wakelin Property Advisory, who we’ve had the pleasure of speaking to on a number of occasions.
Paul, you’ve been in the industry for a long time. You would have seen that progression from the first-time purchaser or first-home buyer right though to becoming an investor. What are some of the obstacles and challenges you see for people along the way?
Paul: That’s a really good point, Kevin. What seems to impede a lot of people from either venturing into investment property or from furthering their portfolios tends to be a lot of the white noise that’s always out there in the marketplace and in the broader economic commentary.
Anyone who is prudent is going to take on board what is happening in the broader economy, however a lot of people are easily put off by comments that are made in terms of changes to legislation, waiting for interest rates to fall or to stabilize, or waiting for prices to come back – peripheral issues that really just create doubt in people’s minds.
Kevin: Everyone has an opinion, don’t they? Everyone’s an expert. Particularly family, I’ve found.
Paul: I think that’s exactly right. I think it’s those you meet around the barbeque who tend to create the greatest issues for investors. People are waiting for someone to ring the bell and tell them “Now is the time to buy,” or “Don’t buy now; you’d be mad.” Whereas, the reality of life is those who have been very successful buying property as an investment, they listen to others but they rely on their own counsel and they’re not hindered in any way by all this talk. They’re quite focused.
Kevin: It’s a very general statement I’m going to make right now, but I’m particularly impressed with this young generation and the fact that they do their due diligence but they are also very brave about venturing into this. They don’t have the hesitation, I guess, of becoming a first-time purchaser. I’ve even noticed some of them – and you might have, too – who prefer to buy an investment as their first property, as opposed to a principle place of residence.
Paul: Yes, most certainly. That seems to sit very well with the younger generation – by that, we’re probably thinking people in their 20s through to early 30s. I think it gives them that security of a foothold in the market, but by buying an investment property, they still have flexibility in terms of lifestyle, careers, travel, and what-have-you. It’s not uncommon at all for first-time buyers to be purchasing an investment property rather than a home.
Kevin: Let’s talk about that difficult jump from having one investment property to actually buying your second and third. That seems to be a difficult transition for some people.
Paul: Yes, it is, but I think that’s more a mental block than anything else. What those investors that I know who’ve entered into the marketplace and developed a portfolio over a number of years tend to do is assess their financial position every year. They look at their equity position in terms of what the property they’ve already purchased might be worth, they look at any spare cash flow they might have – whether they have had a pay rise or have a new job – and reassess that affordability.
Even for people where those circumstances don’t change greatly over any given twelve-month period, I’ve noticed that over three to five years, those people are able to invariably come back into the market, make a second purchase, and then repeat the process. So every three to five years, it seems to be that with successful asset selection in the first place, growth seems to allow them to have the equity to be able to move further into the market and acquire more.
Kevin: That’s interesting. You’re saying that foundation is absolutely critical to get that right.
Paul: Absolutely, 100%.
Kevin: What about those who are moving through life, they buy their first property, they might have another investment property, they have a large family home, and then they have to downsize because the family moves away. This is another critical stepping-stone.
Paul: Absolutely. That’s part of the life cycle of property, and it’s creating opportunities for those who are moving up in the market to buy into family homes.
It is interesting as people are downsizing at a particular point, many of them are buying smaller properties that suit their needs better as the family requirements change, and some of those people are also buying an investment property on the side to have as a form of hedging, I suppose.
Kevin: I’ve seen a few people move through that stage, where the family have moved away and they have large homes. They’ll actually sell that and think, “I’ll go and live in a unit now,” and find that unit living is not really for them. What advice would you have for people at that stage of their life, Paul?
Paul: Once again, I think it’s doing your due diligence up front, Kevin, and being aware of what you’re buying into. For most people, when they’re buying a home they can broadly work out what they might enjoy about a given community – what the transport linkages are, who is living next door to them, and what’s going on in the area. But it’s very difficult for people who are buying into a unit to see what that community holds.
What I would often recommend for people who are wanting to make that move is to perhaps retain the family home, go and rent something for six to twelve months and see if you like it.
Kevin: That’s such good advice. I’ve seen people who have committed to selling the family home because they know it’s no longer going to suit them but rather than jump into a unit, they’ll go and rent to find out, one, if they like that kind of lifestyle and if they like the area that they’re moving into.
Paul: Absolutely. If you’re making that sort of radical change where you’ve been in one location or home for a number of decades, it’s quite a large move, and you want to make sure that the new spot you’re going to holds the sort of attractions that you need.
Kevin: Exactly, and that is such good advice, Paul. Thank you very much, Paul Nugent from Wakelin Property Advisory.
Thanks again for your time, Paul.
Paul: A pleasure. Thank you very much, Kevin.