{"id":9827,"date":"2016-11-15T01:00:33","date_gmt":"2016-11-14T14:00:33","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=9827"},"modified":"2016-11-15T01:00:33","modified_gmt":"2016-11-14T14:00:33","slug":"identfying-a-lemon-property-michael-yardney","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/identfying-a-lemon-property-michael-yardney\/","title":{"rendered":"Identifying a lemon property – Michael Yardney"},"content":{"rendered":"

 
\nAs with any investment, real estate has its good, bad and average performing assets and if you\u2019re not careful, you could easily end up with a property investment lemon. The best way to uncover an underperforming asset, before it eats too far into your bottom line, is to annually review your portfolio and ask yourself some hard questions.
\nMichael Yardney<\/strong> details those in this show.
\n <\/p>\n

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

Kevin:<\/b>\u00a0 No one wants to make a dud investment. When it comes to property, how do you know if you\u2019re buying a lemon? Michael Yardney has been looking into this. Michael, of course, is from Metropole Property Strategists.
\nGood day, Michael.
\nMichael:<\/b>\u00a0 Hello, Kevin.
\nKevin:<\/b>\u00a0 Michael, how do we know if we bought a lemon? What are the signs?
\nMichael:<\/b>\u00a0 I guess the first thing you should do is review your property portfolio every year and ask yourself some hard questions. The questions I\u2019ll be asking myself are \u201cIs this property performing like I expect it to?\u201d I\u2019ll be asking \u201cIs it outperforming the market?\u201d because at the moment, rising tide lifts all ships in some of the big capital cities.
\nI\u2019ll be asking myself \u201cIf this property were on the market today, would I buy it again?\u201d I\u2019d be looking at it and saying, \u201cIs there anything I could do to improve my property so that it can generate more return, more income?\u201d The last question I\u2019d ask myself is \u201cIs this the sort of property that\u2019s going to outperform the market? Is it likely to do well in the long term, in the next decade or so?
\nIn my mind, the answers to these questions will help you decide whether it\u2019s the sort of property that you should be keeping in your portfolio or not, Kevin.
\nKevin:<\/b>\u00a0 One of the important questions I\u2019d like to ask you is what makes a property underperform?
\nMichael:<\/b>\u00a0 There could be a couple of things. The first thing is you could buy at the wrong time of the cycle. This is maybe when values aren\u2019t going to go up much or that they\u2019re near their peak and they\u2019ll be languishing for a while. It could be timing.
\nIt could be the price. If you pay too much, you\u2019re likely to have to wait a couple of years for the real value to catch up. It could be the location. Some locations are just going to underperform. In my mind, 80% of the performance of your property is made up by the location. And it could be the property itself \u2013 in other words, just poor property selection.
\nWhat I\u2019d be suggesting is you look at those, because if you bought the right property but at the wrong time or paid too much, Kevin, generally you\u2019re going to find real estate is forgiving and time will work on your behalf, and eventually, it will be okay.
\nBut if you bought the wrong property or in the wrong location, that\u2019s when you have to look at it more seriously. You maybe have to bit the bullet.
\nKevin:<\/b>\u00a0 I want to talk to you about biting the bullet and how you get rid of it. Before I do that, can I ask you, is one of the reasons why a lot of people buy a lemon because they don\u2019t have a plan?
\nMichael:<\/b>\u00a0 That\u2019s a good point, because they don\u2019t even know what to judge it on. You have to go right back at the beginning and have a strategy and understand, is it capital growth that you\u2019re looking for? Is it cash flow? What sort of capital growth are you expecting?
\nRealistically, in this market, it won\u2019t be as strong as a couple of years ago, so you\u2019re right, Kevin, they have to know what they\u2019re looking for and have some parameters to judge against.
\nKevin:<\/b>\u00a0 Selling the lemon: one thing is about recognizing it and then getting rid of it. I read an interesting blog \u2013 off-topic for a moment, but I suppose it is the topic \u2013 where a well-known commentator was suggesting that if you\u2019ve been holding on to a lemon in one of those mining towns that we know so much about, Michael, maybe you should hang on because there\u2019s a better time ahead. Is there a good time to sell one of these?
\nMichael:<\/b>\u00a0 I guess by the time most people recognize, they\u2019ve already suffered a lot of opportunity cost. People say to me, \u201cIt doesn\u2019t cost much. I\u2019m actually getting some rental coming in.\u201d The cost is the opportunity cost \u2013 what else could you have done with the money?
\nSelling also comes at a cost of paying sometimes some capital gains tax \u2013 often, there isn\u2019t any \u2013 or paying stamp duty on their next property. Yes, Kevin, you often have to step one or two steps backward to move forward.
\nBut hoping that those mining towns are going to come around again, in my mind, it will not happen in your lifetime or mine. The fact is there are property cycles, but in some parts of the world and in some parts of Australia, the cycle between one peak and the other is so long that it\u2019s just not worth waiting for, Kevin.
\nKevin:<\/b>\u00a0 The bottom line, Michael?
\nMichael:<\/b>\u00a0 If your financial capacity is that you can only afford to hold \u2013 I don\u2019t know \u2013 three or four properties, you should aim to own the best properties, the best assets you can. I know there are times when the market is flat and you may not get the price you want, but waiting to take action until the market picks up is only going to increase the gap between your under-performing property and those with stronger properties that are going to perform much better.
\nEssentially, the sooner you identify and offload your underperforming property, the better. Then you can just get on with it, because it\u2019s a financial drain, but often, it\u2019s also an emotional drain on you, isn\u2019t it?
\nKevin:<\/b>\u00a0 It is, indeed. Wash your hands. That\u2019s your advice?
\nMichael:<\/b>\u00a0 Yes, wash your hands with lemon.
\nKevin:<\/b>\u00a0 Good talking to you, Michael. Thanks for your time.
\nMichael:<\/b>\u00a0 My pleasure, Kevin.<\/p>\n","protected":false},"excerpt":{"rendered":"

  As with any investment, real estate has its good, bad and average performing assets and if you\u2019re not careful, you could easily end up with a property investment lemon. The best way to uncover an underperforming asset, before it eats too far into your…<\/p>\n","protected":false},"author":176692471,"featured_media":9828,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[10,11,13,36,17,22,27],"tags":[101],"class_list":["post-9827","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-kevin-turner-sponsored-channels","category-kevin-update","category-latest-story","category-property-investment-topic","category-property-investment","category-research-topic","category-trends-topic","tag-podcast"],"yoast_head":"\nIdentifying a lemon property - Michael Yardney - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/identfying-a-lemon-property-michael-yardney\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Identifying a lemon property - Michael Yardney - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"  As with any investment, real estate has its good, bad and average performing assets and if you\u2019re not careful, you could easily end up with a property investment lemon. 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