Don't get caught in the herd mentality of investment property buying: Terry Ryder

Terry RyderDecember 7, 2020

The first thing a property investor needs is a strategy. Without one, everything an investor does is likely to fail, fizzle or fall flat.

 
The impression I get from my contact with consumers, and from the buying behaviour I observe in the market, is that few people have any kind of plan.

 
The approach employed by most real estate consumers is “me too”.

 
In one of many frenzied articles coming out of Sydney lately was the comment of one consumer who was getting into the market because he was afraid that if he didn’t do it now he would never be able to.

 
Those were the thoughts of someone without the first clue about what is going on in real estate – and without anything resembling a strategy.

 
He probably read something like Australian Property Monitors senior economist Andew Willson predicting Sydney’s median house price will top $700,000 by year’s end. Or a journalist writing in The Sunday Telegraph that Sydney was “on the verge of a huge spring property surge”.

 
Or Robert Gottliebsen (not a property expert but that’s never stopped anyone pontificating on real estate) predicting the “mother of all dwelling booms”. Or Saul Eslake (an economist who is also not a property expert and who has a poor track record on predicting anything) tipping an investor-driven property recovery. Or Charlie Aitken of Bell Potters Securities (also, obviously, not a property specialist) forecasting a “genuine residential property boom”.

 
As I wrote earlier this week, most of this frothing-at-the-mouth rhetoric is coming out of Sydney, which appears to be having its first real growth phase since 2004, and mostly from people who are not real estate specialists.

 
We have seen similar behaviour from property buyers in Perth this year. People have been piling into the market with no game plan other than “we’d better act fast because everyone else is”.

 
This is the herd mentality, the thing that drives most behaviour in real estate, running on overdrive.

 
People with a plan and a healthy research habit would have bought in Perth late in 2012 or early in 2013, before the stampede started.

 
If you’re interested in real estate, you have to do better than the “me too” people. If you’re serious about buying, for any reason, you need to be informed. And, above all else, you need a plan – one tailored to your end game.

 
It starts with a clear objective. Next comes the strategy to achieve the goal. Then should follow a process of research (which means more than absorbing media headlines) to become informed about markets and to aid decisions on what, where and when to buy.

 
I would guess than maybe 1% of the people out there in the market have done anything like that.

 
The rest will buy in a frenzy and sell in a panic – and wonder why real estate investment hasn’t made them rich.

Terry Ryder is the founder of hotspotting.com.au and you can contact him at ryder@hotspotting.com.au or twitter.com/hotspotting.

CORRECTION: This article has been updated since initial publication due to an error in an previous article by a Property Observer staff member. This prior article referred to Saul Eslake tipping a property "boom" compared to his actual comments tipping a property "recovery".

Terry Ryder

Terry Ryder is the founder of hotspotting.com.au.

Editor's Picks