How buying the wrong property can delay your progress for up to 10 years
Simon and his wife started investing in 2004 but had to stop due to a big mistake brought about by a mix of stubbornness and poor choice.
“Just after we got married and purchased our first house (Kareela in southern Sydney, purchase price $560,000), we bought a studio apartment (Yes, we now know!) in World Square in the Meriton complex (Yes, now we also know about that!),” Simon shared.
“Purchase price was $451,000, with all costs rolled to a mortgage of $472,000. This then went backwards as Meriton offloaded their last lots at $380,000. We subsequently sold Kareela just on six years ago for $760,000 (eight years for $200,000 – not great, but we significantly reduced our mortgage in that time) and rolled the leftover of approximately $600,000 in equity into a new home in Caringbah South for $985,000.”
He added, “World Square had done very poorly for us and really shook us when it came to investing. And with my wife looking after the two kids and one income, we stopped investing (silly mistake but an emotional one).”
Smart Property Investment’s Phil Tarrant and buyer’s agent Paul Glossop agreed that buying the wrong property can really stop an investor from achieving his goal and set him back to as far as 10 years.
“It’s always people going after what others are doing, and when something like World Square was all the rage. That’s a big, big block and it’s got a lot of apartments in it. There was a lot of people at the time thinking, ‘This is going to be Mecca for making money in property.’ What happens a lot of the time is people maybe get blindsided as to what actually is happening within that,” Paul said.
“As far as where the opportunities lie, I guess the bad investments can sometimes cost ... they can cost everything. As we know there’s a lot of regional mining stuff that has made people, quite literally, lose everything.”
His advice to investors: Set a clear goal and avoid being too greedy.
Building a property portfolio is all about knowing your target and crafting a strategy that will ultimately lead to achieving that specific goal.
According to Paul, “Part of this here is it was a first purchase and it was something that was potentially a little bit speculative at best ... very hard to get comparables in something like World Square at the time. Even now, as we look through what’s happening in Sydney CBD, there’s pockets [in] there that are going high.
“I can see why people sometimes get pulled into that. It sounds a bit glamorous to own a studio apartment in the city. You tell your mates about it. ‘Oh, if I buy it today, I only need to put a deposit down. It’s not going to be built for two to three years and it’s going to be worth 10 times more.’ This is the spiel you’re going to get. I don’t want to get into off-the-plan apartments. If I hear off-the-plan, my red flag goes up. [But there are] some excellent off-the-plan purchases out there. You just need to know why you’re doing it and how you’re getting it,” Phil concluded.
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