Get Rich Quick from Property

Graeme Salt

My MASSIVE property portfolio has been a HUGE OVERNIGHT SUCCESS (give or take ten years).


And I want to share the secrets of my success with all my clients who are now thinking about buying an investment property.


With record low interest rates and daily media reports about a booming property market, we are seeing increased investor appetite for property. But is that right? The September RP Data-Rismark Home Value Index covering capital city house values shows an increase by 5.7 per cent over the past year, while unit values increased by 4.4 per cent. At the same time, rental rates increased by just 3.1 per cent for capital city houses and 2.6 per cent for capital city units. This means that if you buy an investment property now, it will have a worse return than if you bought a month ago.


Given we are seeing more-and-more investors returning to the market and that yields are based on rental rates and home values, if values rise quicker than rents you will see an erosion of rental returns. This is particularly the case in places such as Sydney where the media reckons that there are now so many investment properties available for rent, prices are going backwards in some spots.


Forgive me my pessimism.


Last week NAB produced its Residential Property Survey which showed consumers had high expectations of the property market. However, NAB’s view of the market is slightly less optimistic than the survey, with rising unemployment expected to dampen house price growth over the outlook period. NAB sees capital city house prices rising by three-and-a-half per cent in the year to September 2014 and three per cent in the year to September 2015.


The truth is property is rarely a get-rich-quick investment. Buying and selling a property is much more expensive than shares: you pay an extra four per cent in Stamp Duty when you buy a property and you lose two per cent or more in real estate commissions when you sell it. And if investors are rushing into a market now which has fairly high prices and declining returns, these investors will take a longer time to get rich.


Actually, I only have one investment property in my portfolio. It has taken ten years, but it is actually producing a nice healthy return now.