30 Jul Time your buying around lifestyle – Shannon Davis
Buyers agent Shannon Davis says that while timing of the market is a difficult thing to do, looking at it as timing from a lifestyle or life-span might be a better idea.
Kevin: Many people, when they’re looking at property investment, will agonize over timing: when’s the best time to do it? That’s from a market point of view, but an interesting perspective: maybe you should look at it from your lifestyle point of view. Joining me to talk about that, Shannon Davis, buyer’s agent from Brisbane with Metropole.
Shannon, are you quite often confronted with this – people getting confused about trying to time the market as opposed to timing when it’s going to suit them best?
Shannon: Yes, I think so. Probably the number one question that we get asked is “How’s the market going, and is it a good time to buy?” I think for a couple of reasons, it’s probably the wrong perspective. If you’re just looking to see is it a great time to maximize capital growth and get it absolutely right in its point of timing, you’re probably going to be disappointed.
Property is a long-term hold, and if you want your money back in the first five years, it’s probably not the asset class to be investing in. But also, it’s more important about what your particular circumstances are like.
Kevin: Do you think this comes about because people tend to still think of property as a short-term hold? If you’re going to look at it as a long term, then you will take into account your family situation, your financial situation as opposed to try to get into the property market, make a quick profit, and get out, Shannon.
Shannon: Oh, definitely. I think when people are looking to do those speculative type of things and sell in the short term for a nice quick dollar, that’s probably when I’m least comfortable with the property market. I’m thinking that people are being greedy and therefore, I’m a little bit fearful of those type of circumstances.
I think if you have a deposit saved and your circumstances aren’t going to change as far as jobs or pregnancies or retirement, and you can service it, then it’s a good time for you to extend your asset base.
Kevin: How do you counsel someone when they come to you and they say something like “Well, Shannon, I’m just trying to work out when is the best time for me to buy a property and which area should I be buying in because it’s going to give me the best capital growth?” What’s the first thing you say to them?
Shannon: Just caution that hot-spotting mentality. I think it’s not like shares where you can get in and out in a day. I think this property you could be settled with for five to ten years especially if it travels south capital growth wise. There are always black-swan events or X-type factors such as GFC or Asian Financial Crisis or a credit squeeze that we’re not always [2:36 inaudible] and it can happen out of the blue and all of sudden you’re in with a long-term hold into a property that you might not want to be in because you had the wrong mentality at the start.
Kevin: You could be frozen from… I think you called them black swan events; I’ve never heard them called that before. But you could be paralyzed by that if you’re not careful, couldn’t you, from fear?
Shannon: Oh, definitely. Then you spend so much time on the sidelines that you’ve missed a lot of capital growth thinking that you’re going to pinch a bargain in the inevitable crash. The Australian property market has never had that much severe contractions before, so it’s probably a false economy to be waiting for that.
Kevin: So, Shannon, are you saying that any time is a good time to buy?
Shannon: No, not necessarily, Kevin. I think when property comes away from its fundamentals, then you’re probably heading into a dangerous territory. By that, I mean that yield is very important and as the capital growth skyrockets up, you start to get some yields that are probably not sustainable for the investor.
If they’ve had such good period of capital growth and yields starting to show 2% or low 3%, I think that’s an area that to watch out for, because you’re going to need a bigger deposit, you’re going to need to pick up the gap between the tenant and the taxman and yourself more, and any interest rate rise will further complicate that.
I think they are the times where I’m not looking to extend a portfolio when market has had such great capital growth previously.
Kevin: How often are you reviewing your own personal portfolio and how often do you think someone should review theirs, Shannon? Does it vary?
Shannon: I think if you had an auction outside your house every day for 30 days, you’d get some widely different prices there, so it’s not like a share market where you want to check the paper every day, but I think it needs to be regular.
For myself and my own personal portfolio, I spend five days a year, every year in the same month just reviewing my portfolio, looking at LVRs, looking at my buffer for contingency, and just seeing what capital growth is up in there and what improvements need to be made and look to make decisions based on that.
Kevin: When you take those five days out, are you counseled by someone? Do you do this on your own?
Shannon: I get some appraisals and sometimes even bank evaluations if I’m really serious about extending my portfolio and look to see which properties are starting to bring maybe a diminishing return.
By that, I mean if you compare it to the median in the area, it might have been a while since you’ve done a renovation or a refurbishment and you’re starting to see that your rents may be dropping or vacancies being longer, or perhaps tenants and the references of the tenants aren’t as good as you like. That’s when it’s an area that it might need some improvement offered, just to get that property back up to scratch.
Kevin: Good talking to you. Shannon Davis from Metropole. He’s a buyer’s agent in Brisbane. Shannon, thanks for your time.
Shannon: No worries, Kevin. Any time.