Lessons learnt – what 2023 taught us about property investing

As I write this, we’re near the end of 2023.

And every year, we spend some time reflecting on the lessons the real estate market has taught us.

It’s this kind of thinking that gives us clarity on the best moves for the following year and allows us the luxury of accurate thinking instead of just following the crowd.

Here are the 6 big lessons we either learnt or were re-enforced by 2023.

Lesson 1. Hope for the best but prepare for the worst

2023 was a big reminder that the market doesn’t always go your way.

And sometimes, the factors that don’t go your way can really hurt you.

The big one in 2023 was interest rates.

We had 5 rate rises which was more than we were expecting, and you should always have some savings to cope with issues like this.

The more savings, the better.

And not just savings.

The floods in far north Queensland reminded us how important insurance is, and the job losses in construction were a reminder to be fully armed with income and life insurance too.

Lesson 2. Invest for capital growth

Capital growth is where serious money is made.

Compounding growth on your property gives you the equity to invest again sooner.

And the sooner you invest, the sooner you have more properties going up in value for you.

Cashflow is nice, but as long as you can service your new investments, then you should target

capital growth over rental returns.

Don’t worry, the cash flow will come.

Lesson 3. The Australian residential housing market is crash-proof

Some people always insist that a real estate crash is coming.

However, as each year passes, the chances become more and more remote.

After all, we’ve just been through 13 rate rises in 20 months.

And house prices are higher than ever before!

The reason for this is simple.

Demand is outstripping supply by a huge margin. We have hundreds of thousands of immigrants relocating to Australia, and the number of houses we’re building is falling.

The supply shortage is at crisis levels, and our research indicates the pipeline for the next 3-5 years isn’t anywhere near full.

This is why house prices are virtually crash-proof, and why you can invest with confidence.

Lesson 4. Trying to time the market is a mistake

As I mentioned, house prices are soaring at the moment.

So sitting on the sidelines, trying to pick the perfect time to get in is a mistake.

You’ll miss out on too much capital growth if you wait.

There’s one caveat here, you should still be careful where you buy.

Some suburbs will grow faster than others.

Still, don’t sit on the fence and wait.

Get in.

And make sure you choose a location that is in the perfect spot in the real estate cycle.

Lesson 5. Location still rules

When we talk about average house price increases, that’s exactly what they are.

Averages across the board.

Some areas will go up by less, and others will go up far more.

Supply and demand aren’t uniform across the country.

Some States will have more demand than others.

Some will have less new supply than others too.

And vice versa.

The more you can break this down by state, and ultimately into suburbs, the more likely you are to find the top 1% of locations to invest in.

The fastest way to create wealth is investing in areas with the highest growth potential, and which are at the stage in the cycle where they are about to take off.

70% of the growth in a suburb happens in 3 years or less, so pick the suburbs that are about to move over the ones that have already moved.

Lesson 6. Create A Strategy Which Is Tailored For You

You wouldn’t wear a suit or a dress that was made for someone else without knowing something about them.

And you shouldn’t invest using a strategy that was tailor-made for someone else either.

Your ideal investment depends on you.

Your financial situation should drive this because your goals, your income and asset base, and even your personal situation are all factors in creating your strategy.

For some, it could be a large house on a big block, maybe even negatively geared.

Or perhaps you might need a higher cash flow investment.

Perhaps even an investment at a lower price point.

Either way, your next move is your next move, and the fastest way to get there is with a strategy that is tailored for you.

There you have it.

These are the 6 biggest lessons we learnt from 2023, and we’re keeping them top-of-mind as we move into 2024.