Emotions make poor investors

ONE of the major dilemmas for property investors is where and what to buy.

“It always surprises advisers how many investors are emotional about their purchases,” Bellarine Property managing director Christian Bartley said.

“Many people see their investment properties as an extension of their own home and indulge in the same feelings of pride of ownership. They turn down a property with terrific investment potential and strong rental demand just because they themselves couldn’t live in it.”

According to Mr Bartley, many investors lose out by making heart rather than head decisions about property purchases.

“The strongest demand for both resale and rental is usually, by very definition, around the median price in any marketplace or location.

“Furthermore, the luxury markets are usually the first to be hit by any economic downturn. Much of the luxury rental accommodation is leased by corporations who, in poorer economic times, can no longer justify the cost of accommodating employees in high rent areas.

“And high income earners are unlikely to commit to large mortgages or rents in a climate of economic uncertainty with the possibility that salaries or jobs could be under revision.”

Mr Bartley said median priced properties – those in what you could call the large mass of the market – were not as badly affected and usually gave their owners the best long-term return.

“If they lose some demand from their usual occupiers because young people move back home or families scale down to smaller or cheaper accommodation they pick up tenants or purchasers who can no longer afford the luxury markets.

“Investors should forget the question ‘Could I live in it?’ and instead concentrate on analysing objective investment criteria.”

For more information, phone Christian Bartley on 0410 695 325, email [email protected] or head to bellarineproperty.com.au.