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10 Lessons from the GFC (Transcript)

The GFC has taught us many lessons about investment property. The following video details the lessons we learnt from th Global Financial Crisis.

Transcript: What we learnt about investment property from the GFC

Hi, this is Peter Gianoli from Investor Assist. Welcome to our series of videos on investing in property. In this video, we're going to outline 10 property lessons we've learned as a consequence of the global financial crisis.

The first lesson we've learned is don't panic. Remember to keep your focus on the long term. Learn the dynamics of the property market. In particular, understand the intricacies of supply and demand. By doing this, you will not overreact or overcorrect to the current flat market conditions. Today's market is only down 2.9%. But on the plus side, rents have increased to around 4.5%. So remember, the long term cycle is far more important than the short term trend. Obviously in the current market, investors should proceed with caution and do their research, but there is no need to overreact.

Lesson number two. Be proactive. To wait and see can cost you money. History tells us that flat markets represent a great time to buy, yet the more cautious investors wait for growth to start up again and end up missing out on getting property at a discounted price. The reduced competition during a downturn can create good opportunity for savvy investors. So whilst you should be cautious, you should take your opportunity when it arises.

Lesson number three. Don't speculate. Base your decisions on personal financial circumstances and the merit of the property. Remember, property isn't a guessing game. It is important in tougher markets to do your due diligence. Factors such as location, type of property, who your potential tenants will be, and even still, who your potential buyers will be must all be taken into account. Put simply, property investors should invest for their target market.

Our fourth lesson, always have a financial buffer. Just buying any property and relying on growth or negative gearing is a dangerous way to make a property purchase at any time, and in particular, in a flat market. As investors, you need to have a long term mindset. Having cash flow is the best way of ensuring that you can do this.

Lesson number five. Expect the unexpected. The last 12 months has seen properties not only decrease in value. But tragically, some have actually been destroyed by natural disasters such as floods, storm surges, and fire. Property insurance is a small price to pay for security. What's more, it's tax-deductible. So don't rely on the unexpected not occurring, it may actually occur.

Lesson number six. Timing isn't everything. Historical sales data tells us over and over again it isn't when you buy but what you buy that's important. Purchasing a property based on price alone is no guarantee of future growth. Selecting the right property with the right profile for growth will ensure property owners have an asset that performs irrespective of wider market conditions.

That takes us to lesson number seven. Always look after your tenants. Just because vacancies are tight, you should still look after your tenants. In fact, if you do so, it is even easier to raise the rent. Now more than ever, with high rents being paid, you don't want a property to remain empty whilst you're seeking a new higher-paying tenant. Keeping happy tenants keeps happy bank balances.

Lesson number eight. Never rely on old data. Twelve months can be a long time in property. You need to stay very well-researched based on very recent data. Attend auctions, speak to realtors and visit home opens. These are all first class ways to stay up-to-date with market information.

Lesson number nine. Always give yourself time to sell. Sellers need to make concessions for buyers in tougher markets. Sellers must be more flexible, and the best way to do that is to allow time in your planning. During times of uncertainty, buyers will want all their T's crossed and all their I's dotted by banks, valuers and the likes before proceeding.

Our final lesson, lesson number 10. Don't be so negative. Whilst waves of sentiment in global markets are difficult to comprehend at times, in markets such as today, people are often too negative. In fact, the Reserve Bank of Australia's Governor, Glenn Stevens, has recently stated in a speech and I quote, "It's overwhelmingly positive for Australians in net terms even if our tendency to dwell on the downside is more prominent on display at the moment. Remember, you may think the future is uncertain. But to be honest, the future is always uncertain. So as long as you stick to the fundamentals, investment in property can still yield you a great outcome."

Thank you for taking the time to watch this video. This is one of a number of videos on our Guide to Investing in Property brought to you by Investor Assist. If you'd like more information on investing in property, please do not hesitate to contact us using any of the details on the screen. Thank you and good luck in your property investments. I'm Peter Gianoli from Investor Assist.

6 min 2 seconds