How do you avoid the property investment hype and pitfalls?
The media world was abuzz this week with the story of Kate and Matt Moloney, once crowned investors of the year and now facing bankruptcy. Their case was held up as a caution against property investment, with talk of property bubbles bursting and the lingering debt they now have hanging over their shoulders.
The Moloneys’ experience – subject of a newly released book – has been highlighted as an ever growing possibility for residential investors, but it all seems long on hype and short on facts when it comes to those who’ve made responsible portfolio decisions.
With all due respect to the Moloneys (and only the knowledge of their situation is what I’ve drawn from newspaper reports) it seems they made many rookie errors, which illustrates the danger of investing without professional advice.
In an article quoted on domain.com.au, the Moloneys bought 16 properties in mining towns. Hang on, I’m going to repeat that – 16! I stress to my clients that a spread of assets amongst different areas in Australia is essential for maximum portfolio growth and – wait for it – as a risk management strategy.
My very general advice to new and investors is as follows:
- Seek out expert advice. From finance to property choice and your individual strategy – and not just from one source either. Make note of what you’re being told and ask yourself whether it adds up. Put it to the sleep test and if you’re still awake eight hours later, it’s not for you.
- Have your numbers done. Make sure your lender does worst case scenario repayments, put a buffer in place for each investment and ask yourself how you’d finance everything if your risk strategies fell over.
- Do your due diligence on the property market (both local and national). Is it an area that’s grown at a rapid pace, from out of nowhere? The best indications are that it will fall again equally fast.
- Don’t put all your eggs in one basket. It makes me sick to think of how the Moloneys risked their money in one area. Allow for a mix of property types across the country to safeguard your wealth.
As always, if you have a question, leave your comment below.
Until next time,
From the desk of Christine.