Being a research guru certainly helps, but Jeremy Sheppard, creator of DSRData.com.au, admits to still feeling the occasional nerves when buying an investment property.
He talks about his earlier missteps, his love for growth strategy and salsa dancing
What have been, in your personal experience, the best and worst things about capital growth strategy?
The best thing is obviously the wealth it creates. But, I’ll start with the worst things. I think the worst thing about capital growth is the waiting. In fact, early on I had no idea and I was impatient, so I tried to force the issue with renovations.
I never saw a reno deliver truly impressive returns – at least not for the effort I put in. Admittedly, I’ve only done about half a dozen renos. The DIYs really took it out of me.
But even the renos where I hired tradies to do it all have been stressful, and still very time consuming. That’s what I like about capital growth – there’s nothing like sitting on your hands getting wealthy rather than working hard for it. You do your research, buy and then simply get on with the rest of your life.
I was into cashflow too when I started, but those markets kicked me in the caboose later on. A couple more terrible lessons learnt there. I still cringe thinking about them. The best learning experiences for me have been my biggest mistakes.
You’ve got to keep your eye on a market after you’ve bought. And you’ve got to be ready to sell, especially in regional locations. I had this “buy and never sell” attitude. Wrong.
Do you still suffer from analysis paralysis?
Not anymore. I’m pretty confident now of what drives price growth. I know what I need to research to pick a winner. And I’ve got all my indicators lined up and tools to process a lot of data quickly, so it doesn’t paralyse me. When those indicators pop up, I’m not about to dawdle.
But I still have fear – ‘‘What if something goes horribly wrong?’’ I always get that. Actually, it’s probably best if that fear sticks around to rein in my enthusiasm.
What do you think is the most overrated indicator that investors use? Why?
Without a doubt, it is population growth. For years, investors and statisticians have misinterpreted its relationship with capital growth. The overall concept makes sense, but using population growth data falls down during practical application. The data is either too infrequently sampled or can’t zero in on a single suburb. Babies don’t buy houses, but contribute to population growth. Besides, it is a lag indicator, not a lead indicator. Most people visualise a queue of buyers wanting to get into a high population growth market. But they’ve already moved there – you’re too late.
I’ve found that some of the best markets to invest in have the lowest population growth.
What has been your proudest investment and the deal you wish you made?
My proudest investment is my first, in 2002. Ironically, it didn’t have the rapid growth other investments had. But, to me, it represents making a start. I still have that property.
There were some deals I missed out on that ended up being blessings. I put a deposit down on two properties in the USA, just before the sub-prime lending crisis in 2007. Prices plummeted soon after. Yikes.
Missing out on city locations by buying in regional locations is a regret. Although I had great growth picking the right regions, I had to eventually sell and reinvest the proceeds.
What are five little-known things about you?
1. I haven’t been in [investment property] for that long. I've only just seen the end of my first complete property cycle, in Sydney. I wish I was more in tune with the indicators back then.
2. I can dance salsa. I used to teach. I’m a bit rusty, but I still get out once a month to shake my booty.
3. I was born the son of a preacher man.
4. I drive an old car.
5. Despite how weeny I look, I do work out.
