Episode Details

If you want to become a more successful property investor, today's show will point you in the right direction.

First, we'll have a chat about where not to invest.

This aren't just my thoughts. They are the results of a recent university study in Australia that shows where you shouldn't invest. Most property investors never get past their first or second property. You don't want to be in that group, do you? So paying attention to where not to invest can help you avoid falling into the trap that so many investors do.

I also have an interesting mindset message for you.

Finally, I'll have a chat with Dr. Andrew Wilson about first home buyers, because they're going make a difference to our property markets.

This discussion is relevant for first home buyers, but it's also very relevant for property investors, as they're often investing in the same price ranges and markets as first home buyers.

We'll discuss our concerns about the first home buyers' scheme that's going to be starting soon. We'll also look at what has happened when we had these schemes in the past.

Where not to invest if you want property success

Most property investors never achieve the financial freedom they're looking for.

Of the 2.1 million property investors in Australia, 1.8 million never get past their first or second property while only 21,000 investors around Australia own 6 or more properties.

A recently published report found that two-thirds of Australians buy an investment property close to where they live, rather than in another location that could outperform their hometown in the long run.

These buyers felt safe buying in a familiar location, but there's no indication that their familiarity actually gave them an advantage.

The report also found that investors who invest in their own area pay higher prices and that one-fifth of investors self-manage their properties.

Self-management can be a big mistake. Employing a property manager is a way of insuring your asset. It's an investment, not an expense.

Buying locally and putting all of your eggs in one basket may feel safer, but that doesn't mean that you'll get the best return on your investment. Becoming a success in property investing requires more time and effort than just choosing properties near where you live.

But it doesn't necessarily have to require your time and effort.

Turning to a buyers' agent who has more market knowledge can help you get the strategic advice you need to invest in properties that are likely to outperform.

First Home Buyers rush to market fearful of rising prices

As of 1st January, the First Home Loan Deposit Scheme will allow first-home buyers to put up a 5 percent deposit, rather than the usual a 10 or 20 percent deposit.

This will only be available for 10,000 eligible first-home buyers each year, and there are other restrictions as well.

First-home buyers wanting to use the scheme will be limited to properties sold for less than $700,000 in Sydney, $600,000 in Melbourne up to $475,000 in Brisbane and it will apply to owner-occupied loans on a principal and interest basis.

Price caps for large regional centers are the same as those for the capital city in their state.

It also removes the cost of lenders mortgage insurance for first-home buyers with an annual income of up to $125,000 or couples with a combined $200,000 per year.

If history repeats itself, these first-home buyers will push up values in certain locations.

It may also commit first-home buyers to long term financial imprisonment

Why is that?

First-home buyers emboldened by the home loans obtained with their low deposits will be chasing a similar range of properties and the old supply and demand ratio will kick in pushing up property prices.

First-home buyers who miss out on the lottery could end up paying more fo