Making the decision to invest in property during booming conditions is an easy one, as your potential profits seem virtually assured. But when the market abounds in uncertainty, making those decisions can be far more challenging.
As we always say, investing in property is not like buying a bag of lollies for $5 and if you don’t like them, you can throw them away. A property is usually the biggest financial commitment most people will make in their lifetime, so they need to get it right.
They often don’t know how to do that, and they’re terrified about making the wrong move. The continual talk, talk, talk of uncertainty unsettles people and shrinking borrowing power has them waiting for ‘more stable or certain’ times, which may never come. So how do you combat this and take action towards your property goals, so you’re not permanently waiting in the wings to make your big move?
Here are our thoughts on taking action and making proactive property decisions in any market – along with the big impact that not investing could have…
Property is such an emotive asset class that it’s easy for investors, even those with experience, to get caught up in the hysteria in a cooling market and head for the hills. The reality is that not only is property less volatile than the share market, steadily growing in value over time despite the occasional market correction or slump, it’s also the asset you’ll have the most control over.
You can buy it, sell it, renovate it, knock it down and rebuild it, rent it out or live in it – or a combination of the above, depending on what best suits your current circumstances, financial goals and the state of the market.
If you buy well, it shouldn’t matter what the market is doing at the time of purchase – so ensure you do lots of research. If rental yields are what you’re after, look into cheaper properties such as units within reach of the CBD and places such as universities that will be easy to rent out to students and commuters.
Just be certain to avoid areas that are highly dependent on volatile industries, such as mining – things can go pear shaped very quickly in these towns, as the last few years’ have revealed in Western Australia.
What property investment decisions would we have made that we didn’t consider at the time? What would we have done differently (isn’t hindsight a wonderful thing?) and would we be rich beyond our wildest dreams (steady-on, let’s be realistic)?
If you continue to sit on your hands, confused about property investing for another 10 years, you could be missing out on the opportunity of a lifetime.
Imagine you’d had the cash and motivation to invest in a property in Sydney in 2008, when the market flattened out thanks to the GFC (not unlike the conditions today)… and then you benefitted when it boomed? We recently spoke to an investor who was in that exact situation. After inheriting a decent sum from a relative, he contemplated buying an investment property, but decided against it as he thought, based on his minimal research, that the market was going down the toilet.
The median house price was just $520,000. The median of that suburb today is $1.1m. Had he bought back then, held the property and decided to sell it in 2017, he would have a cool $500,000 in profit behind him. Needless to say, he’s now kicking himself and wishing he had taken the plunge all those years ago.
Today’s market is similar – low confidence, stagnant growth, incessant fear-mongering in the media – but if you buy well, with a sound strategy, you could use these conditions to your advantage and begin building a lucrative property portfolio.