Investing during Covid-19

Here’s what Luke Harris, The Property Mentors CEO and author of Property Fit, has to say about how to invest successfully during a pandemic.

WEATHERING MARKET SHOCKS

The world may be in the grips of one of the biggest challenges of the past century, but Luke Harris says it’s not the first shock the housing market has faced – and it won’t be the last.

“Over the past few decades, many will remember the stock market crash of 1987, the recession ‘we had to have’ in the early 1990s, the tech bubble of 2000, September 11 and then the Global Financial Crisis,” he said.

“All of these shocks, from an economic perspective, were seen at the time as ‘the end of the world.”

“But look at all these big events and what property prices did – they recovered.”

SEIZE THE DAY

In 2020, while much of the market was in panic mode waiting for the dust to settle, Harris expanded his portfolio.

“I thought that prices were pretty good, so I decided that if I could pick up a few good deals, I would,” he said.

And he did - purchasing nine properties, including six apartments, two commercial properties and a house he plans to develop in the future.

He said having plenty of experience under his belt allowed him to remain calm and confident, and to ride out the storm.

“More importantly, I’m prepared for these situations and ready to move when the opportunity is ripe, rather than sitting on the sidelines waiting to see what happens,” he said.

The key to successful property investment during a pandemic, or indeed any market upheaval, is to stay calm and not let indecision distract you from your long-term plans.

“That’s exactly how I position myself so that I can keep my eyes peeled on maximising opportunities,” he said.

THE BEST TIME TO INVEST IS NOW

Harris said Australia had weathered the pandemic brilliantly, and the property market was “back full throttle”.

“We have moved into a period of cautious growth from a state of recovery in the March 2021 quarter, off the back of successful government stimulus packages including JobKeeper and HomeBuilder, as well as the continued rollout of COVID-19 vaccines,” he said.

Harris said there has never been a better time to get into the property market or continue to grow your existing portfolio than right now, while interest rates were at record lows.

“Unlike the decades behind us, many investors don’t know what it feels like to pay upwards of 20 per cent interest rates, as was the case during the 1980s, or even the historical interest rates averaging around 7 per cent,” he said.

TAKE A LAYERED APPROACH

Harris says it’s important to have a diverse portfolio to spread the risk.

“The key is to not have all your eggs in one basket – spread them around,” he said.

“Also, as I have always said, don’t just have eggs! If something happens to you, your tenant or your financial situation, you need some level of cover.”

Harris advocates a ‘layered approach’, which includes:

• Insurance for landlord protection, lost rent, tenant default and malicious damage
• Income protection
• Financial buffers

“Look at the potential risks and ensure that you have the best protections and buffers in place to ride out any shocks,” he said.

PREPARE FOR THE UNEXPECTED

The hardest part of investing is not the buying, it’s the ‘keeping and maintaining’, according to Harris.

The property market will always have its challenges, whether its interest rates, building issues, compliance, changes to tax rules and government policy, or something else.

However, the fundamentals remain.

“If you have the right property fit, you can achieve the life you desire. It won’t happen overnight, so you need to be patient,” he said.

And of course, there will be more market shocks to come – the trick is to be prepared.

“If you’re aware of what’s possible, your best defence is simply to adapt,” he said.

It was also important to remember that, like the property market, even the best-laid plans can change.

Nothing beats good, old-fashioned experience – and failing that, the helping hand of a mentor for guidance.

“There’s only so much planning you can do, but essentially, true mentoring is about having someone to lean on and share the good times and the not so good, the moments of success and the moments of fear,” he said.

“As a successful investor, you get better at navigating and adapting over time – as long as you don’t lose sight of the bigger picture and your long term goals.”

Originally published in Australian Property Investor.