3 ways to create a military grade investment portfolio and ones to avoid

Atlas Property Group Director Lachlan Vidler

Speculative activity in the market is increasing with property price growth causing some buyers to make bad financial decisions, according to a national buyers’ agency.

Australian Bureau of Statistics Lending Indicators show that the value of investor lending has surged by almost 70% over the six months to May, double the rate of owner occupier credit growth, which is likely drawing the attention of both the Reserve Bank and APRA.

Atlas Property Group’s reaction to the indicators

Atlas Property Group Director Lachlan Vidler said, “The total mortgage lending to property investors still remains below the 10-year average, the rapid increase may be a signal that some buyers are making bad financial decisions and speculating on future price growth.”

“The strong property price growth over the past year has already started to reduce, but some people may be buying thinking that the ‘good times’ will last forever,” he said.

“Unfortunately, they may find themselves buying at the peak of the market, or investing in an inferior dwelling or location, which can have serious long-term financial ramifications.”

A former naval officer and co-author of A Military Guide To Property Investing, Mr Vidler said speculation never had a place in strategic property investment, but was especially dangerous at present given the highly unusual market conditions over the past year.

“Few commentators predicted how robustly property markets would rebound yet the signs were always there that we were about to experience a market boom with cheap credit, low supply levels, and multibillion-dollars being spent on stimulus measures,” Mr Vilder said.

“Property buyers who recognised this early, and had the courage to act, have risen the wave of impressive price growth over the past year the most.”

Atlas Property Group’s approach to investment

Mr Vidler said strategic property investment was very similar to military principles because both required discipline, dedication, and courage to be successful.

“Property investment requires incredible discipline over a long period because, for most people, investing begins decades before they will be able to realise the benefits of their investments. Similarly, discipline lies at the core of all military activities and missions.”

“The barrier to enter the property market is higher than other assets like shares. We advocate for investors to take decisive action to incorporate property in their personal portfolio because of the leverage, reliability, and stability it provides investors for their money.”

Mr Vidler said that successful investors remain dedicated to their financial goal and strategy in the long-term and never suffered from “mission creep” to supercharge their returns.

“Savvy investors accept the fact that their portfolio may not generate a profit every single year because this is an unavoidable reality in the cyclic nature of the property cycle,” he said.

“They always remember that the most important days in the market are the day they buy and the day they sell. During the time in between these two days, as long as their suburb incurs more years of growth than decline, their property should be achieving an investment return.”

“Unfortunately, some investors may currently be considering ‘mission creep’ due to the robust market conditions over the past year,” Mr Vidler said.

“Mission creep is when they abandon their long-term strategy to chase higher rewards that also have substantially higher risks, such as buying in one-industry towns or speculating on continued price growth by purchasing in off-the-plan high rise developments,” he said.