While driving to Burnie airport, we suddenly found ourselves caught in one of those fierce storms that occasionally lash the north-west of Tasmania. The main road was blocked by fallen trees but because our plane was departing in an hour, we decided to try a lesser used road to find a way through. In the middle of the forest we were stopped by another fallen tree which had blocked the road completely. We were trapped and would surely miss our flight. While debating what to do, we saw a truck pulling up on the far side of the tree.
A bearded bush man got out of the cabin and without saying a word, took out a chainsaw from the back of his pickup truck. He made towards us, pulling the starter cord of the chainsaw, which sprang into life with a menacing roar. We were terrified, but instead of slicing us into pieces as we feared, he started on the fallen tree, quickly cutting it into logs which I then helped him roll off the road. When we finished, he introduced himself as Brian. He said that he spent most of his time in the wilderness, prospecting and timber felling. “Out here, I always carry a chainsaw, an axe and a gun.” When I asked him why those three, Brian replied, “My chainsaw takes care of obstacles such as this tree, so I can get out of trouble almost anywhere, but if I’m really stuck in the bush, I can use my axe to build a simple shelter and cut firewood, while with the gun I can shoot some food.”
We caught our flight back to Melbourne with just minutes to spare, and on the way, I reflected on Brian’s bush wisdom. I realised that his strategies of surviving and even thriving in the bush apply as much to the property investment market as they do in the wilderness of Tasmania.
Brian’s chainsaw was his strategy for managing risk, in the same way that property investors need to be aware of and ready for potential risks. We should ensure that we are investing in an area with reliable services and that the locality is not subject to flooding or bushfires. We need to talk to local experts, such as the police or the postman about potential trouble spots. We also must check the potential for overdevelopment, which could result in supply surpluses and prices falls as a result.
Brian’s axe gave him the ability to improve his situation by building a shelter and cutting fuel for a fire. He said that within hours his axe would enable him to be protected and warm, no matter what the weather could throw at him. Property investors can do the same by investing in areas which have the potential for capital growth. This is essential to the success of any property investment. We need to find out what industries support the local economy and whether they are growing or declining. We should check to see if there is likely to be employment growth in the area. Are people moving in, and if so are they buyers? What types of properties will they prefer?
His gun gave Brian the means of getting food. “I’ll never go hungry as long as I can rustle up some game in the bush and I can sell the skins later.” For property investors this equates to rent, which gives us the cash flow to meet our holding and maintenance costs. We should always find out the cash flow potential of any area by asking property managers about the types of households who are renting and whether their numbers are growing or declining. We also need to ask them whether they have a waitlist of potential tenants looking for rental properties, (which is good) or a waitlist of vacant properties waiting for tenants (which is bad).
If Brian used the same strategies of managing risk, securing growth and obtaining a regular return in the property market as he did to survive and thrive in the bush, he would be a very successful investor indeed.