Risk is not a function of asset quality.
A high quality blue chip asset can be priced so high that it is high risk and a low quality asset can be priced low enough to make it low risk.
I would class this type of risk as Entry risk in property investing. Separate from long term risk.
Risk needs to be thought of differently in property investing than say shares. Thats because the cost of getting in and out of property is so high.
Entry price risk needs to be balanced with long term risk, which is different.
This is why as a business we prefer to purchase under valued blue chip real estate in our major capitals.
We feel major capitals with large diverse economies will provide lower long term risk and ultimately higher capital gains over the coming decades than smaller regional markets, especially those smaller markets that are reliant on one or two industries.
Of couse, major capitals have thousands of suburbs and only a few areas meet strict investment criteria from a long term risk perspective.
When it comes to entry risk then, we have found that there is generally only a dozen or so suburbs that are investable at any given time.
We are only investing in 6 suburbs in Melbourne currently, out of the 600+ suburbs there, as an example.
Doesn’t mean there isn’t plenty of other great areas to invest in Melbourne, there is, but we feel there is just more value in these suburbs today.
Risk is pretty boring to think about and never really talked about in relation to property investing. I always find this strange as every investment needs to be adjusted for risk and individuals own risk tolerances.
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Don’t be the person on the left…
Most people will never buy an investment property, despite the fact that every adult at some stage says they will.
9% of the population will buy an investment, roughly 70% of those investors will purchase only one property. 90% of all investors will only ever buy two or less.
A tiny fraction of the population will purchase 3 or more investment properties. Aim for the less than 1% who do.
#brisbane #brisbaneproperty #melbourneproperty #queensland #sydneyproperty
Should you buy here?
Not financial advice, educational and entertainment purposes only.
Before buying any investment properties in any state or suburb, contact your financial advisor for advice.
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Median income to median house price ratios
‘I’ll save the capacity for the next one’
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