Wednesday, May 28, 2014

Investors, is this the time for a portfolio upgrade?

Strong auction activity is the topic of conversation across the real estate world in Australia this week, but what does this tell clients like mine who are property investors?... It's a tangible sign that the real estate market is continuing to perform. Headlines such as 'Massive week for auctions throughout the country' appeared all week on news channels and social media.

According to the latest RP Data figures there were 3,111 auctions scheduled across the nation last week, with over 1,000 auctions being held in both Sydney and Melbourne, an increase of 53% on last year. With a combined national clearance rate of 66.6%, this is a staggering result! At Toop&Toop we've had a massive run of auction sales with 100% clearance for two weeks running and four out of six sold prior to auction last week.

Adelaide has had back to back weeks of high auction numbers, with 121 last week and 119 this week. This is almost twice as many as those in Canberra (72) and Perth (69), which shows South Australia continues to be a serious player in the auction market.

My focus in the market, as head of Property Management, is with investors and considering different investment opportunities is continually front of mind.

So... How can investors make the most of this?

The current auction activity combined with the market surge at the bottom-end creates a great opportunity for investors looking to upgrade their property portfolio. With the right approach, you can turn property over quickly and get rid of your run down stock at a premium, and replace with a fresh build. This can all be done without experiencing an extended period of reduced property numbers in your portfolio.

There are many benefits of upgrading. We see clients faced with continual expenses to maintain older properties, as well as properties that are unsuitable to be rented out. These properties can be a money pit, have an extended period of downtime between tenancies and achieve a low weekly rent in the market. 

For those with a long-term investment strategy these properties can be cashed in and turned over for more profitable and stress free returns, even after factoring in stamp duty and legal fees!

So who will buy them? There is an emerging market for 'home renovators' no doubt (and in no small way) stimulated by reality TV shows such as The Block and House Rules... and these buyers are currently paying a premium for run down properties. 

The 'renovator' home often attracts emotional purchasers and these properties are currently achieving great results, particularly at auction. Whether these buyers are looking to add value through renovating themselves, or simply wanting a blank canvas to work with, investors can make the most of this and clean up their portfolio.

This period in the real estate cycle provides the opportunity to reduce your exposure to costly maintenance, receive additional depreciation on a newer build and remove the rental downtime required for repairs or renovation projects that might be looming. In turn, you will attract better quality tenants who are looking for key features, such as new bathrooms or kitchens. 

The market is embracing auctions. Take this opportunity to run a high-intensity auction campaign to move lower end stock and look to purchase more tenant friendly property.
Investors, now is a great time for a portfolio upgrade.

Please call one of our team for a chat about your investment strategy. 

Regards,
Suzannah Toop

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