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BLOG: Talking strategy – Why I buy where I buy

16 AUG 2018 By Phillip Tarrant 6 min read Investor Strategy

At the moment, the assets we've acquired are in affordable belts. When I look at how markets fluctuate, a lot of it is around the buying behaviour of people. Here’s what I mean.

PHIL BLOG

Once upon a time, if you were a property investor, you would have wanted to start securing properties around the $700,000 or $800,000 mark because that would have been part of your strategy, closer to the inner cities, etc. A lot of those people who would have traditionally gone down that route wouldn’t be purchasing those properties because they couldn’t get the funding to do so; but they would still want to invest in property. They’re probably coming down a bracket and looking at that sort of $400,000 or $500,000 mark.

In the suburbs of Sydney where we have exposure, that’s pretty much the price point that we’re at. So, we’re not investing in off-the-plan apartments or new railway lines out near north-west suburbs of Sydney or closer into town. We’re in that affordable belt.

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Our exposure to the market in this slow down is going to be as significant as compared to other price points in this market. We’re going to be safer in terms of price drops in your Mount Druitts, your Saint Mary’s, your Ambervales, your Penhursts. Steve Waters, my buyer’s agent, told me these are better assets to be holding in these market cycles.

For him, it’s all about security in terms of our cash flow; not renting out a $500,000 property at $400 per week isn’t going to hurt us as much as if it was a $800,000 property at $500 to $600 per week.

We’re also quite heavy in Brisbane in the south-west and up north. We’ve got a few properties in Petri, Logan Spring, Springfield, Logan Shire and Kingston. There hasn’t been any shifts yet in those markets, but they’re long-term plays. A lot of people invest in Brisbane on the basis that we should start seeing some growth up there. We’re not going to see the prices decline in Brissie; this, I feel, is what we'll see across some of the other eastern seaboard states, Sydney and Melbourne. For us, these are going to be strong in terms of capital growth

Longer term, they’ll be good assets in our portfolio. And I sort of sit here thinking now, and I look back to when we were buying in the western suburbs of Sydney – 2011, 2012, I think it was. We could have bought a lot more back then. We didn’t because financing back then was a trouble, or we just weren’t not ready to actually get something, but I sit back now and just go, “Probably could have twice the amount of properties that we could have at that point in time in Sydney, and I wish we did it.” If I can go back then, I would buy, buy up like a madman. It’s always nice to look in hindsight.

In 10 years time, are we going to be looking back at Brisbane going, “Shit, we should have bought a lot more when we could have in Brissie.” Do you reckon we’re going to have that same mindset? Steve tells me no, and with good reason. We’re probably not going to see the same rate of growth we saw in Sydney, but if we looked back on every market that went from low to high, there’d be a lot of times I wish I could go back and buy up.

For now, our strategy is to wait patiently for a year or so and then look to strike in Sydney, but during Sydney’s softening, Steve tells me it’s down more to luck than good management.

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