Following the crowd? You might be shooting yourself in the foot
Obsession with buying in goldmine locations can distract you from your own circumstances.
On an episode of Property Investing Insights with Right Property Group, Victor Kumar and host Phil Tarrant spoke about the dangers of falling into the “perfect investment strategy” trap.
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“When you’re investing, you are investing in the opportunity, not the area. It’s really important to understand that,” said Kumar.
Social media, investment forums, and media platforms are awash with bold claims about the best locations for property investors, but relying on external sources of information can lead to poor outcomes.
“The key here is not to do standard investing, but do strategic investing,” said Kumar. “The definition of standard investing is: I’m going to buy where everyone else is buying, and I’ll buy something.”
This can lead to hordes of investors making poor investments in overcrowded markets, as in a recent example from a Perth-based buyer’s agent.
Kumar recalled: “The agent comes back to me and says, ‘Hey Vic, can’t help you on this one. I’ve actually got 16 unsolicited offers – no conditions, no pest and building – all from eastern seaboarders’.
“When things like that start happening, when people start buying site unseen and they pay 30, 40, 50 per cent above the listed price, that’s mad.”
Instead of following the crowd, Kumar warned that investors must always evaluate “how that property really fits into your portfolio”.
“There is no solid hard-and-fast rule in investing, it’s all relative,” he said. “The opportunity ties back into your financial capability, it ties back into your age, it ties back into what you’re trying to achieve, how it fits into the family sphere.”
“You’re not investing by the averages, you’re investing by the specifics,” he said.
As well as location, timing is an important factor for investors to evaluate at an individual level.
On a large scale, Kumar noted that now is good time to buy. “Property will not become cheaper, so if you’re waiting for ‘when’s the best time for me to jump in and I’ll buy when the prices are lower’, it’s not going to happen.”
However, he noted that just because it’s a good time to buy in general doesn’t mean it’s a good time for you personally.
“We are at high inflation, and if your job is at risk and you’re struggling to meet your mortgage repayments right now, don’t put yourself out on a limb,” he said.
Listen to the full conversation with Victor Kumar from Right Property Group here.
