Do I Regret Investing in Property

Read the Prequels: Property vs Shares: Why I chose to invest in property and then Getting the Experts in Empower Wealth Review – a detailed description of my experience using empower wealth and purchasing my first investment property.  Do I regret investing in property?  Well it’s early in my property investing journey, but so far I am optimistic and encouraged by an uneventful rental history and some early capital growth.  In fact, I’ve just finished buying property number 2 (for investment).

Do I RegretInvesting in Property: the First Six Months

Just over 6 months ago, I finally took the scary leap buying property for investment purposes.  I say finally because I have had a vague plan to invest in property for over 15 years.  But I never felt financially ready or knowledgeable enough. 

I spent a long time weighing up the pros and cons of property vs shares.  Then spent hundreds of hours reading property investment books and listening to The Property Couch podcast.  More time was spent analysing data from Your Investment Property Magazine and walking the streets before finally deciding to use a professional buyers agent.

The looming election in 2019 helped me bite the bullet – labour intended to end negative gearing (apart from on new properties).

I wanted to get into the property market before any changes occurred.

Labour lost that election, and negative gearing is probably safe for another few years.  But I thank Labour for creating the urgency needed to end my analysis paralysis.

I had, based on another medic’s recommendation, started listening to the Property Couch podcast.

Over many episodes, I had developed a sense of trust in Bryce and Ben, the friendly duo imparting free wisdom every week.

I reached out to their company, Empower Wealth for help in selecting a great quality property investment.  My detailed review of Empower Wealth is here.

The closure of the property went very smoothly, Empower Wealth walked me through each step with clear instructions and great organisation.

They helped me select a property manager  who started viewings for rent before exchange and I had multiple tenants applying to rent the property – outbidding each other to secure the home.

This level of competition was not expected, but encouraging.  I had been pretty nervous so was reassured the potential tenants obviously thought it was a great property.

Do I Regret Investing in Property: Teething Problems

My new property agent helped me pick through applications and weigh up the pros and cons of each potential tenant.

I ended up signing a contract with the most reliable and trustworthy sounding tenants.  This was all made easy by the property manager.

There were a number of phone calls in the first two weeks, and I found myself concerned this property investment deal was going to be a big hassle.

There were minor unforeseen issues, like the oven not working and needing to be replaced, tenants having difficulty finding plumbing for a washing machine.

None of this was especially cumbersome, but if it was a weekly occurrence going forward, I would have resented the hassle.   I was looking for a passive (ish) investment, not a weekly commitment.

Things settled down though.  The initial issues were fixed, the rent arrived regularly on time, and the property manager organised payment of all bills, taken from the rent.

Do I Regret Investing in Property?  Ongoing Property Management

It should be pretty easy at tax time to have all the property income and expenses (apart from interest) recorded on the property manager’s online platform.

The property manager communicates regularly by email, which suits me well.  They also have an online portal I can log on to view expenses and rental income.  The net rent is transferred to my offset account every fortnight, to put towards mortgage payments.

So far my calculations on affordability have proven conservative, and  I am having no issue with covering the mortgage payments.

I accompanied the property manager for the first inspection, which went well.  The tenants have extended their lease, which I’m thrilled about.

For now, things are pretty easy.  The repairs required have been very reasonably priced.

I’m grateful to the property manager for having a network of proven reliable and fair priced tradespeople.  I haven’t got a similar list for my own home where I have lived for over a decade.

So far, I’m really happy with my 1st experience buying property for investment. I am realistic that there will be times (particularly around the change of tenants) that it will be a bit of a hassle – making decisions, choosing tenants and following up on damage after tenants have vacated.  Having a property manager has shielded me from most of the work.

What’s Next?

We’re saving hard again, with the rent coming in being more than we had planned for, and further drops in interest rates we are already saving for our next property deposit.

It’s too early to know whether the property is performing as predicted, or I will regret investing in property.  But I’m currently optimistic, I’ll update when I have a new valuation.

If you are trying to buy into a hot property market, check out my article on avoiding getting carried away with FOMO.

Why I sucked it Up and Paid for Professional Property Advise

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Why I Sucked it Up and Paid for Professional Property Investment Advise

Everyone I know who has invested in property has horror stories to tell.  They warn me “You can’t make money in property”.  Problems ranged from having no growth or worse, ending up in negative equity, tenants maliciously damaging properties and never-ending, expensive maintenance issues.  One unlucky investor was trying to offload the nightmare investment, and right as the open home started, police performed a drug raid on a neighbour’s house!

But I was intrigued by the contrast between these terrible experiences and the incredible growth reported in the Australian property market over the previous decade.  Below is a graph from the Reserve Bank of Australia demonstrating house price growth over the long-term.  The gradually widening gap between the Consumer Price Index (CPI) and house price suggest (as does widespread media coverage) that property has been a fabulous investment over the years.

If you are interested in why I chose to invest in property rather than just index funds, check out my take on whether to invest in property or shares.

The problem was, I didn’t know anyone who had “got it right” in property.  There are property advisers everywhere, adverts pop up every time I’m on line and I’m receiving constant emails and occasional cold calls from companies I have never heard of. 

I am starting to suspect I am the actual product on sale here! 

The experience I’ve (and most of my specialist colleagues) had with financial professionals so far have demonstrated that they do not work to an ethical code comparable with what, as doctors, we would expect.  The Royal Commission suggests that financial advisers have often not put the clients’ interests first.

I felt vulnerable and inexperienced approaching a financial professional.  How on earth would I find someone I could trust?

I was introduced to “The Property Couch”.  I have a 30 minute each way commute, it sounded up my street, so I started listening on the way to and from work.  The Property Couch is free and very easy to listen to, but extremely educational.  I planned to save a 20% deposit over three years, so I had plenty of time to educate myself.

As I listened to 100+ episodes, I began to understand why those horror stories had occurred.  Poor capital growth and even negative equity, was relatively predictable in an off the plan house and land package.  Especially so in a town with low, or a single source of employment.

Poor quality tenants who trash properties are largely predictable, and therefore avoidable, by selecting good quality properties that will attract great quality tenants, and by using professional screening and rental management.  And buying a house in the cheapest street in town is probably not going to end well!

A common theme among the property investors I knew seemed to be a lack of time invested in learning about property investment.  Also, the source of advice seemed to be an issue, with investors being “advised” to buy a property when in reality the “adviser” was a salesman making a commission, or following a friend’s hunch about the next property “hot spot”.

The hosts of the property couch run a property investment firm in Melbourne, but aim with the podcast to share free information to encourage investors to make more logical, informed choices.

Although I’m sure the podcast is great advertising for Empower Wealth’s services, there is definitely no hard sell and the hosts are happy for you to use the information to purchase without professional assistance if you want.  I thought this was pretty awesome.  I was working hard to save all the cash I could – I didn’t really want to lose a chunk of it in fees, and hoped to use all this valuable information to work it out myself.  I consider myself reasonably smart and was keen to learn.

I listened to the property couch for around a year, as well as reading every relevant book and internet article I could find! I narrowed my search to Brisbane, and started buying Your investment property magazine.

I geeked it up, attempting to analyse data including historical suburb median value growth, rental vacancies, days on market, yield, percentage owned vs rental, household income trends and public transport links.  I rather enjoyed constructing large and complex excel documents in an attempt to narrow down suburbs in a logical and strategic way, but that’s probably just me!

I felt a bit confused by contradicting data, and not really knowing how to weigh one factor against another, but eventually constructed a list of suburbs in Brisbane I thought looked promising.

Over the next six months, at every opportunity I would explore these suburbs on foot when I had time, to get a good feel of the area.  For those of you not familiar with Brisbane, it is very hilly! And hot!! I bordered on heat stroke several times and had to call an uber to rescue me to the nearest air-conditioned shopping centre!

Even when I hired a car for my exploration, I was completely bewildered. One street would look great, well-kept cars, house proud occupants, but I’d walk around the corner to find boarded up windows and toys left to rot in the front yard.

You might have guessed by now; I do only work part-time! I don’t imagine many would have the time, patience or be downright odd enough to take on this ridiculous quest!  I did enjoy checking out all the gorgeous Queenslander houses, though!

With the start of 2019 came the impending election, and labour were threatening to abolish negative gearing benefits for property investors, one of the factors differentiating this investment strategy to me above others.

There was a lot of doom and gloom around the effects this would have on property prices.   Is it just me, or are the media always predicting the end of the world, and it (luckily!) never turns out that bad in the end?  I suspected this was the case this time, still wanted to invest in property (possible at least in part due to the amount of effort invested so far AKA Sunk Cost bias), and I definitely wanted to get in before negative gearing was abolished.

I had managed to save more than 10% deposit plus costs at this time, so decided to go ahead with my purchase sooner than planned.

It was clear to me by now that my attempts at “research” were fairly hopeless!  I was like a fourth year medical student on my first clinical placement (Or a patient who has been extensively googling their symptoms)– I had read all the books and knew a lot of the lingo, but had no idea how to synthesis the enormous amount of data to make anything resembling a sensible differential and management plan. At least I now knew what I didn’t know!

It took a while to come around to the idea, but I was going to pay for professional advice.  I now had a company I had developed some trust in, and had a way forward.  If I didn’t bite the bullet and accept professional help, I was going to be stuck in “Analysis Paralysis” forever.  I was fearful of making a mistake, and damaging my family’s future.

I reached out to the Empower Wealth team, and started the process to become a property investor for the first time.

Do I come to regret investing in property?  Check out my reflections after six months of being a property investor.

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