Property buyers advocate nails investing rules

Enough people have already written about what a flop The Block was, but the article that drew my attention was the one entitled: Eight property rules broken by The Block, by Mal James, from James Buyers Advocates.

He lists the following property investment rules:

Rule No. 1: You make your money when you buy.
Rule No. 2: Buy the best position you can
Rule No. 3: Consider your target market, before you start.
Rule No. 4: Don't overcapitalise
Rule No. 5: Amateurs don't make money on renovations - they make money because they are lucky that the market happens to be in an upwards phase.
Rule No. 6: Don't think short term with property unless you like excessive risk.
Rule No. 7: Choose local selling agents who are experienced at your price range, and choose ones that can deal outside the auction process.
Rule No. 8: Substance v puffery

I couldn't help but immediately see parallels between James' property investment rules and my own value investing rules.


If I where to take a quick stab at re-writing them for general investment, rather that specifically property, they would go something like this:

Rule No. 1: You make your money when you buy.
Rule No. 2: Buy the best quality you can
Rule No. 3: Consider your tax position early.
Rule No. 4: Ensure the investment's capital is re-invested wisely.
Rule No. 5: Amateurs don't make money trading - they make money because they are lucky that the market happens to be in an upwards phase.
Rule No. 6: Don't think short term with investing unless you like excessive risk.
Rule No. 7: Choose local investments that you understand, can visit, and can gauge local opinions on.
Rule No. 8: Long term performance v hottest investment of the day

That's pretty close to the original, but now far more generic.  Hopefully, each item is self explanatory.

The other interest concept of the article was the 1000 point rating system that James uses rate properties:

TVs, colours, furniture etc come and go.  If you view our online ratings you will notice that we give one point out of 1000 for stuff such as cabling and shower screens.  The other 999 points are for land, position and floor plan.  And if you've learnt one thing from The Block, hopefully it's that it is the price, property and positional fundamentals that really count.  On all three counts the contestants were doomed even before they started.

Sounds interesting.  Let's take a look.  You'll need to pick a property, and then click Show Rating Sheet to see an example. He basically ticks or crosses a number of items across the categories Growth, Land, Building, Position.  It's worth a look.

Controversy

Hang on a sec.  I've just noticed that in the original article (not the one I linked to above), the title was "The Block broke all the rules in the book", and there are NINE rules in the book, not eight, as in "The Eight property rules broken by The Block".  What gives?  Where that missing rule?  Ahh, there it is:

Rule No 8: Good Buyer Agents are of value.

Apart from Frank Valentic who is a smart operator with Advantage, the buyers agents who showed up to The Block auctions were just embarrassing. Our apologies – this is not how normal quality buyer agents represent the clients and just shows that when you put a camera in front of an idiot, they are still an idiot. Notice how you didn’t see quality buyer agents like Morrell and Koren there trying to buy rubbish or making a fool of themselves – they simply didn’t recommend The Block homes to their clients.

Was it the slightly defamatory remarks that caused the rule to be removed, or was it the rule encouraging buyers to use agents (that directly compete with the real estate agents, whose advertising pays a lot of media wages)?  Ha!!

Anyway, it was good to read some sensible investing advice, even if it was found in the strangest of places.