Many property owners don’t know how wealthy they really are and do not realize the potential they have to develop a property portfolio by using what is called lazy equity. Hear Michael Beresford from OpenCorp explain.

Michael Yardney shares the 4 most dangerous words in property investment

We are hearing about many more people having to sell a property under pressure. Maybe you bought a dud property or it could be that your life circumstances have changed. Real Estate guru John McGrath joins us to set out what you can do, if you find yourself in that position, to make the most of a bad situation.

A few weeks ago in the show, valuer Jonathan Millar told us that there are 8 risk factors that will influence a valuers report to a bank when they value a property. Derek wants to know what they are so Jonathan is back to tell us.

Talking about valuations, we tell you this week about evidence that shows that 1 in 5 valuations are wrong by as much as 10%.

Have you ever heard of the ‘sunset clause’ in a developer’s contact when you are buying a unit off the plan? That clause can allow a developer to cancel your contract in the event that the unit is worth more that your contract price. Hear more, and how you can protect yourself in this situation.

 
Transcripts:
Michael Yardney
Kevin:  I was attracted recently to one of Michael Yardney’s blogs on his blogsite, PropertyUpdate.com.au. It attracted me, and it probably did to you, too – “The Four Most Dangerous Words in Property Investment.” Well, it sucked me in, and they’re pretty good, too. I was laughing all the way through it, only because I’ve actually fallen into this trap.

Good day, Michael.

Michael:  Hello, Kevin.

Kevin:  Firstly, tell me what those four words are. I know what they are, but tell our listeners.

Michael:  “This time, it’s different.” “This time, we have a low interest rate,” or “This time, the stock market crash isn't going to affect us,” or “This time, the economy is not going to change things.” People would like it to be that way.

It’s some advice I learned early from one of my mentors, and I found to my detriment that I wasn’t paying any attention to it – thinking that this time it was going to be different. But you know what? History has a way of repeating itself, Kevin.

Kevin:  It certainly does. There are some great hints about where we’re going to go just by looking at the past, Michael.

Michael:  Very much so. While it’s not exactly a replica of the past, there are very many lessons you can learn from the past. Maybe we could go through a couple of those now.

Kevin:  Yes, we would love to have some lessons. What are they?

Michael:  The first one is booms don’t last forever. That’s actually pretty relevant for the moment. Everyone, during a boom, is optimistic and expects good times to last forever. That’s just the way our mind works, just as we lose our confidence during a downturn. But I learned the hard way many years ago, that property markets are cyclical. Each boom sets itself up for the next downturn, just as each downturn paves the way for the next boom.

I think over the next couple of years our buoyant markets are going to slow down, especially in Sydney and Melbourne where we have really gone a little bit too fast. Every upturn is followed by a downturn, which paves the way for the next upturn. I’ve found that most investors haven’t had their upside maximized, but they haven’t been prepared for the downside, either.

Kevin:  Yes, so the lesson there, Michael?

Michael:  The property market moves in cycles, and some markets work in different stages at different stages of the cycle. Each state is at a different stage, and within each state, there are multiple cycles, Kevin.

Kevin:  Yes, and be prepared for the next phase.

Michael:  Very much so.

Kevin:  What’s lesson number two?

Michael:  Beware of the doomsayers. Kevin, as long as I’ve been investing