CBD Investors - Where to next?

Limited appreciation, rising costs and now increasing vacancy - Many investors are considering their options, but with so many road blocks which way do you turn during this challenging time?

I have long questioned the performance of Melbourne apartments. Of course, not all apartments, as it is fair to consider A grade properties will continue to shine regardless. I however refer to medium and high density, B & C grade units, with inferior qualities or those simply over supplied. This is not a new message, in fact it has long been discussed, and although COVID has further highlighted the potential issues with buying or holding such stock, it is important to understand it is not the cause. Poor performance indicators were evident well before this pandemic, but the danger here is this could be considered as an opportunity for some. Please note, i'm not saying to buy or sell a Melbourne apartment, but I am witnessing increased investor uncertainty. This is a very uncomfortable place to be and certainly not the ideal mindset to be making key real estate decisions from. Whether scaling a portfolio or considering your options, I challenge one to better understand return potential. To help, the following questions will challenge mindset and start to map your balance sheet. I find this approach aids important buying and selling decisions:

Here are a few questions to help consider your position:

1. What is your return expectation?

2. Target capital growth rate versus actual?

3. What are the long term holding costs?

4. As a percentage, how much rent will be consumed by costs?

Whether buying or selling, my advice is to not rely on hope. Hope is not a strategy, rather track clear performance indicators and compare this analysis with your goals. Disparity should instigate action, appropriate for investors at all stages. Remember, we each have different needs and it is absolutely fine to identify a property that no longer meets your objectives. Issues often arise while waiting for recovery or unachievable long term appreciation. I regularly witness this as a costly mistake. Opportunity cost is better understood versus ignored and this this clarity will assist with key buying and selling decisions. Once understood, making well informed decisions become relatively straight forward, but this is only the first step. Appropriate strategic execution is all together a separate conversation, which is the space I spend most my time. Of course no one buys an investment property with the hope to lose money. Yet this is not the reality! The ultimate skill is running your property portfolio like a business, understand your goals, implement targets and commit to regular review. I have a saying - It's all in the numbers and knowing with precision what is a good deal.

Professional consultancy to challenge whether an investment property continues to meet your goals.

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