Advice and Opinion

'Successful' amateur property investment often calls for initial austerity – and patience

Sydney, Australia.

Still reflecting on what he learned or relearned recently in Australia about prospering through property investment, Bill Rawson, Chairman of the Rawson Property Group, said that the common denominator among those amateurs and non-professional investors who have benefited from property investment in Australia recently and to whom he talked or read about is that they were initially always prepared to make severe sacrifices to help them to achieve their goals.

“Australia,” said Rawson, “has in the last decade become a country in which a very high percentage of the population have in one way or another become interested in property and investing in it – for the simple, very obvious reason that Australian property has outperformed their stock exchange for almost a decade with property generally appreciating in value very satisfactorily”.

“It has to be realised, however, that most of those ‘we made it’ success stories which one hears and reads about when visiting Australia almost always involved initially living with great austerity so as to accumulate capital for the first purchases in the investor’s portfolio.”

In a typical case which was reported in Australia’s Smart Property Investment, a newly married couple, having pooled their resources, moved into a small low cost bungalow dating from 1925 which was in many ways very uncomfortable. They then used their spare cash to buy a three bedroom townhouse in a more popular area. This had great views and much open-plan space and was tastefully upgraded by them with expensive curtains, new bathroom fittings and kitchen appliances and a complete repaint inside and out.

“When this was complete,” said Rawson, “the couple was sorely tempted to move into the property themselves. However, they resisted this appealing option and continued to live in their bungalow, as a result of which two years later they were able, with the help of bank finance, to buy a second investment property. Today, they have a portfolio of nine. In most cases they worked hard at smarting up the property and furnishing it, with the realization that, although harder to rent, furnished units in general in Australia command 30 to 35% more rent than unfurnished units.”

The second factor which appears to be common to most successful Australian property investors, said Rawson, is that, while always ready to listen to expert advice, especially if it comes from another property investor, they generally took their time about selecting a suitable property, often as a result finding units which for one reason or another had been overlooked by other property seekers.

“Again and again,” said Rawson, “the investors discovered something below the radar which may have been on the market for some time but, possibly as a result of poor marketing or a poor ‘surface’ appearance has been overlooked.”

It was encouraging, said Rawson, to find also that many of the Australian investors were young people who, as in South Africa, had at one stage overspent initially on frivolous lifestyle enhancing goods such as holidays and cars and had then recognized the deeper and more creative satisfaction of intelligent property investment.

“Australia’s debt-to-GDP ratio is considerably higher than South Africa’s, indicating that they are still a nation of big spenders, but this too, as in South Africa, is changing and from what I saw, it appears that more sensible spending patterns are now once again becoming fashionable.”