Always better to buy above the median

There is no right or wrong, its about making money at the end of the day that's all that matters to me. I actually never look at how much over or under the median a property is, its about the deal, what do they say... fall in love with the numbers etc.

My guess is the article is taken out of context, or the guy is serious silly, or then again perhaps his selling something, no not that one again...LOL

 

Totally agree. I have always believed work the deal and not the property. I don't see 'homes' when I view them, only deals.

 

or the "$" sign

 

Me too.
I have purchased dogs in State Housing areas and doubled my money because Government was rezoning the area, once people realised this it went crazy. I just made sure I sold them off prior to this market tanking..

 

Fair to say that I've seen people purchase across a range of price points with all sorts of result.

A few years ago clients bought into Glen Waverly at $700k and now own houses worth $1.5M. I've also seen people buy at the top end and then the value stagnates for a decade.

At the low end I've seen people make equity very quickly and I've seen others watch their properties drop in value as the local economy declines.

Purchasing at about the suburb median price, a little more or a little less, tends to work well as long as it's a suburb that's in reasonable demand with good fundamental growth drivers. Buying at the extreme ends of the price spectrum tends to leave you more venerable to the extremes of economic fluctuations and general sentiment. Sometimes for better, often for worse.

At this point in the general market cycle, I think buying at the higher price points is dangerous. Affordability also plays a big part. Most people on todays incomes simply can't afford a $1M mortgage. People buying in the $1M+ price points are usually selling something else and bringing a lot of cash to the purchase.

In the last 12 months I've had a lot of owner occupiers buy $1M - $1.5M properties with $500k loans. I can only think of 2 investor clients at those price points and one of them will make the property their PPOR in a few years.

Plus or minus the median price point tends to work well, but there's caveats on that statement. You need to understand why you're purchasing in any given location and understand what's driving the value in that purchase.

 

Way to go!

Timing strategies can generate a nice bucket of money if you get it right, but with reward comes risk. Quite a few people make huge money in Moranbah and are probably very pleased with themselves. Others ended up as fluff pieces on Sixty Minutes.

 

Buy & Hold - Timing the market can be tricky business, but averaging over time all property would roughly go up the same amount otherwise there would be absolute bargains out there.

Buying for reno, development & flick is a different ball game.

Buying median should mean you have a larger rent pool to choose from.

 

Deal$

 

LOL, I keep banging on this, but seems people think its too hard, yet I am not a brain surgeon, if only

 

You're right. Most people just tend to follow the heard, rather than looking for opportunities before they happen. I think there's a little luck in seeing opportunities - right time, right place. If you're actively looking and doing the work, it's amazing how lucky you can be.

 

Luck plays a huge part for sure.

You can also jump into rising markets but if you are not cashed up ready to shoot the trigger you wont stand a chance because there are too many people wanting what you want and they are ready to fire.

 

I agree and to be honest, we need this. That's what makes it such a poker game. Its not an equal playing field.

 

I knew money was the only thing that mattered to you!

 

Not at all! Some places (I can think of a regional place) don't move or do minimal growth over time. But some city locations seem to move upwards all the time. To me its all about supply and demand.

 

Yes it's a general statement, that is why I say "Averaging over time" obviously there are ebbs & flows in all markets.

 

..but averaging gives average results just my opinion, and takes much longer to reach end goal.

Timing is not hard, generally you have 3 years in a boom cycle, you will know when a market is rising, problem is people don't believe it so they end up buying at peak.

MTR

 

Problem with houses above the median is when it comes time to value them you will always get headaches with valuers who don't understand what they are looking at..

 

I read Jan's book several times, the first back when I was 18. It was formative. All of the above posts are about maximising or optimising returns. That is fine but it wasn't Jan's point in the book. Her point was about reducing risk. Buying below median but not the very bottom shockers that have major or structural issues was her strategy for reducing risk. She spent more time in that book talking about basic low risk properties and avoiding trouble than about claiming to "beat the market" or "negotiate amazing deals". She often stated that she didn't ever really outperform the market, just acquired normal suburban type properties, at or just below median, in a range of areas, and waited. She was very safe and very conservative. She also stated she tried major renos etc and it wasn't her style so she avoided them.

These days her book may not sell a million copies because it doesn't have enough sex appeal. But it still works. All my best personal properties have been below median, with some value add incorporated, this is my own slant on her theories. That is what I seem to be drawn to and good at. I have seen others succeed with higher priced or luxury properties and there is nothing to say that can't work.

It is just that Jan's original strategy (for the benefit of @Bran the OP) is still entirely valid, and in my view VERY low risk. This is because (Jan's explanation not mine) there will always be more people by definition who can afford to buy or rent decent homes below median in any given area. Luxury properties rise more in bull markets and fall more in bear markets because the top end of town have their wealth expand faster (ie when stock market booms who is gonna benefit, not the bottom end) and in extreme downturns they lose money faster and their homes become fire sale assets.

Not everyone will agree it is the best way to buy property for them personally, but after almost 20 yrs I am yet to see it be properly disproven as a strategy for mitigating risk.

 

If you'd been reading this forum and it's predecessor for the last 15 years , You'd know there's a whole range of people who've been consistently timing different markets repeatedly.

Buy and hold is the mantra of developers trying to flog off their stock at the wrong time of the market .

Cliff

 

Very well said.

It's the psychology of the herd. Will never change unless human nature can change.