The new breed of property investor: DPN’s Sam Khalil

A quick study of the latest property data shows that a new type of property investor has definitely emerged. We still have the other traditional kinds: like the classic, slow build investor who has built up a portfolio over decades. Then there’s the mum and dad investors who are carefully looking to dip their toes in the water after getting on top of their mortgage. However, this new breed is different.

It’s a weird amalgam: first home buyer/investor/renter. They’re the people who simply can’t afford the place of their dreams. They’re struggling with the heated urban market, especially Sydney or Melbourne. Yet they’ve scraped together a deposit and recognize the value of getting something, anything, before the market once again rises. So they’ve bought a property out in an area where they don’t want to live, usually the outer suburbs, and they are renting and living somewhere else. This is especially a phenomenon of younger couples who want to send their kids to a certain school or have a love for a certain area. For example, couples who rent in beach side Sydney or a desirable family friendly suburb in Melbourne like Camberwell or Bentleigh. They can’t buy into these places but want to live there. They can see the value in buying a place out in the sticks, but certainly aren’t thinking in terms of portfolios or multiple properties.

They’ve become unwitting, unplanned investors. Let’s call them the reluctant landlords. They’ve replaced the owner/occupiers. The owner occupiers were a classic force in Australia right up till recent times. They saw a property as long term and would quietly suffer economic downturns, feeling sure that their ultimate plan of property appreciation would eventually happen. As they generally were in it for the long haul they were never prone to alarm about sudden market twinges. However, they’ve started to disappear as first time buyers simply struggle to get into the market. So reluctant investors/landlords have their own long term approach. Priced out of their own desired area they plan to invest in a medium-short term rapid growth suburb as investors. They generally don’t plan to be doing this for too long. Their hope is to perhaps do up the property, rent it out then resell it after one-two years and take advantage of the heated market to buy the house they’ll remain in. It’s like a two phase strategy of the owner occupier plan.

Most of them are twenty somethings or thirty somethings, either renting or else living with their parents while they save up. Except instead of buying a house for themselves they’re buying an investment property.

The reluctant landlords often feel uncomfortable as investors or renting out their property. This is because it’s not their long-term goal. Consequently they can sometimes make bad decisions, such as selecting an inferior property manager or not vetting tenants properly. They also may make other poor choices like identifying a suburb that is likely to rise as an investment area but not being aware of costly strata or title issues. Essentially they’re amateur investors and prone to making mistakes.