{"id":9447,"date":"2016-10-04T01:00:36","date_gmt":"2016-10-03T14:00:36","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=9447"},"modified":"2016-10-04T01:00:36","modified_gmt":"2016-10-03T14:00:36","slug":"time-tested-rules-for-investing-michael-yardney","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/time-tested-rules-for-investing-michael-yardney\/","title":{"rendered":"Time tested rules for investing – Michael Yardney"},"content":{"rendered":"

 
\nWhile many Australians will sit on the sidelines waiting for someone to ring the bell heralding the property market has bottomed, savvy investors will be out looking for and buying investment opportunities created by the current buyers\u2019 market.\u00a0 While many unsuccessful property investors speculate emotionally, the successful investors use research and education to get their investments right.
\nMichael Yardney<\/strong><\/a> gives us some of the time tested rules these successful investors use to make their fortunes.
\n <\/p>\n

Transcript:<\/strong><\/h4>\n

Kevin:\u00a0 <\/b>In any market, there are always great opportunities. Many unsuccessful property investors speculate emotionally, and we\u2019ve talked about that on the show before, but the successful, strategic investors use research and education to get their investments right.
\nNow, I did say at the outset that in any market, you can always make money, but there are some rules for successful property investing. We\u2019re going to run through them with you now, along with Michael Yardney from Metropole Property Strategists.
\nHi, Michael.
\nMichael:\u00a0 <\/b>Hello, Kevin.
\nKevin:\u00a0 <\/b>I know there are ten simple rules that you\u2019ve documented for us today. Let\u2019s go through them. The first one you say is they invest, they don\u2019t speculate, which I touched on there in the introduction.
\nMichael:\u00a0 <\/b>Yes, you did. So rather than buying emotionally, like you said, or saying \u201cThat\u2019s going to happen, because that area hasn\u2019t grown for a long time; it\u2019s about to,\u201d or buying emotionally like where they want a holiday or where they want to retire, smart investors do it differently. They make educated investment decisions based on research, buying a property below its intrinsic value, one in an area where the demographics are going to drive capital growth, and where there are other growth drivers, as well.
\nKevin:\u00a0 <\/b>You say in number two that it\u2019s about the property, not so much about the attack strategy, Michael.
\nMichael:\u00a0 <\/b>That\u2019s right. A lot of people get caught up with \u201cI\u2019m going to get some depreciation, or I\u2019m going to get a rental guarantee or tax benefits or negative gearing,\u201d but at the end of the financial year, you always hear people coming quickly to us and saying \u201cI have to buy property before the end of the financial year, because I need some negative gearing.\u201d No, Kevin, it\u2019s about property; you\u2019re right.
\nKevin:\u00a0 <\/b>Number three is it\u2019s all about high-growth, low-yield investment.
\nMichael:\u00a0 <\/b>In my mind, residential real estate is a high-growth, relatively low-yield investment. I know there\u2019s an argument for cash flow, and we\u2019ve discussed this before, but in my mind, savvy investors know that the fastest way to build a substantial property portfolio is through the capital growth rather than through a couple of dollars a week cash flow.
\nKevin:\u00a0 <\/b>Land appreciates.
\nMichael:\u00a0 <\/b>Yes, that\u2019s right. That\u2019s one of the rules successful investors use. They know that the majority of the heavy lifting for the property investment is going to be the location. 80% will be the location, maybe 20% or 25% will be the property itself within that location. But not all land appreciates equally, so they also recognize that they want to buy land in the right areas, areas where there\u2019s strong demand and minimal supply.
\nEven if it\u2019s just an eighth of a block of land under a block of apartments, they recognize that they just need a high land-to asset-ratio, rather than in the regional areas where the land component, while it could be physically big, money-wise, financially it\u2019s not that big of a proportion of their investment.
\nKevin:\u00a0 <\/b>And in tandem with that, number five, you say \u2013 and you just touched on that \u2013 is about strong demand. They buy properties that will be in continuous strong demand.
\nMichael:\u00a0 <\/b>Certain properties and certain locations are going to be preferred as we move forward, and so not every property is what I call investment-grade. You can always make it an investment; all you do is you kick the landlord, the owner out and put a tenant in, but that doesn\u2019t make it investment grade.
\nYou want one that\u2019s going to be in strong demand, in my mind by owner-occupiers, because they\u2019re the ones who will push up property values around it, and also you want the sort of property that tenants are going to want to live in so that your vacancies are short.
\nKevin:\u00a0 <\/b>Yes, and that probably takes us into point number six \u2013 doesn\u2019t it \u2013 about the demographics.
\nMichael:\u00a0 <\/b>That\u2019s right. In my mind, it\u2019s the long term demographic trends \u2013 how people want to live, where people want to live \u2013 that are going to determine the type of property that will be in demand in the future. As our cities mature and as we have an older population and more one-and two-people households, I think secure, medium-density apartments and townhouses will become more of a preferred style of accommodation, as many of us swap our back yards for balconies.
\nKevin:\u00a0 <\/b>Number seven is one that I\u2019ve seen you demonstrate so well over the years, Michael \u2013 I\u2019ve known you for a number of years now \u2013 and that is the team that you build up around you.
\nMichael:\u00a0 <\/b>We\u2019re talking about the ten rules of successful property investment, and one of them is that you do need to be part of a team. You have heard me say before that if you\u2019re the smartest person in your team, you\u2019re in trouble.
\nSuccessful investors surround themselves with a good team, but they also know how to discern an advisor who\u2019s independent from a salesperson, where sometimes you get caught out thinking this person\u2019s working for you when in fact, they\u2019re not.
\nKevin:\u00a0 <\/b>Risk and reward, Michael?
\nMichael:\u00a0 <\/b>Successful investors understand where the risk lies. There are some risks you can protect yourself against, and there are others that are out of your control. We really can\u2019t control the market, we can\u2019t control the political system, we can\u2019t control whether the government is going to change negative gearing rule or superannuation, but you can be prepared for things like that by having financial buffers in place and by owning the right properties.
\nOne of the biggest risks smart investors recognize is it actually lies within themselves: the way they think, maybe what they choose not to do by procrastinating \u2013 they know that\u2019s a mistake. So risk is external and also internal, Kevin.
\nKevin:\u00a0 <\/b>And the final one \u2013 and you and I have talked about this on many occasions; it\u2019s a subject we can divide an entire interview to \u2013 is that the property market definitely moves in cycles.
\nMichael:\u00a0 <\/b>That\u2019s right, and so do investor emotions. During a boom, everyone is optimistic and expects the good times to last forever, just as we lose our confidence during a downturn. Of course, the truth is that property markets do behave cyclically, and each boom sets itself up for the next downturn \u2013 and they\u2019re the sort of conditions we\u2019re heading into currently \u2013 but similarly, each downturn paves the way for the next boom.
\nI think one really just has to make the most of the opportunities and recognize that every year, something going to come out of the blue despite all your best homework, all your best research. There will be an X factor, sometimes on the upside \u2013 like this continuing lower interest rate environment and the long cycle we\u2019re in \u2013 or sometimes on the downside like some of the economic, political, and finance changes that are affecting us, as well.
\nKevin:\u00a0 <\/b>Indeed. Michael, thank you so much for your time, great talking to you. We\u2019ll catch you again next week.
\nMichael:\u00a0 <\/b>Thanks, Kevin.<\/p>\n","protected":false},"excerpt":{"rendered":"

  While many Australians will sit on the sidelines waiting for someone to ring the bell heralding the property market has bottomed, savvy investors will be out looking for and buying investment opportunities created by the current buyers\u2019 market.\u00a0 While many unsuccessful property investors speculate…<\/p>\n","protected":false},"author":176692471,"featured_media":9448,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[32,10,11,13,22,23,25],"tags":[101],"class_list":["post-9447","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-buying-a-property-topic","category-kevin-turner-sponsored-channels","category-kevin-update","category-latest-story","category-research-topic","category-selling-a-property-topic","category-sponsored-channels","tag-podcast"],"yoast_head":"\nTime tested rules for investing - Michael Yardney - 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