Are we focusing a tad too much on BOOMS?

Been reading a lot about people waiting to ride a boom and holding off until they see clear signs of boom boom boom imminent. They are also expecting to get boom increases in value every time. But is that really what happens? And is it realistic for all markets to grow that way? Goes without saying, buying at the 'perfect' pre boom time would be ideal as prices are not too competitive when you get in and then its not long before you see dramatic rises. But is this reasonable for every purchase?

If I apply that strategy for most of my own IPS, I don't think its ever worked that way. Generally we've looked where we feel there is good value for money, looked at affordability, looked at where the state is on the property clock, looked at what the market sentiment was, looked at historical growth, vacancy rates, supply/demand, stock on market, discounting. add value ability - and then if it looked like there was value to be had, we just pulled the trigger after doing our DD. We never thought that 'lets buy here and now because a boom is around the corner'. I think we probably would have missed many good deals if we had that approach. We have really focused on VALUE when we made a purchase. While no one wants to buy when a market is at 3oclock (approx.) on the property clock, do we really need to wait to try and time it perfectly every time? Well from my experience It just hasn't really worked like that.

Most recent example. Brisbane. If we waited longer for more signs of market movement we would have missed out on some very good inner and middle ring suburb properties. We did our assessment on the area about 3 years ago and felt there was good value for money, even though the 'add value' potential was not 'quite' there, but close enough. So we pulled the trigger. And its going to yield an exceptional return in time. Yes there may be 'opportunity cost' but IMHO I have found that its easy to say 'opportunity cost' but then actually finding and getting into the opportunity you 'may' have missed is another thing altogether. But it does need to be factored into, I agree.

My main point is for people (newbies) who are trying to time every purchase perfectly, I would suggest to look for value in all the major markets in Australia and perhaps pull the trigger a little earlier at good prices IF you feel there is overall VALUE in the deal. No guarantees but its seems to have worked for us. No one right way that's for sure and what may suit one person's situation may not another. Main thing is to keep an open mind.

 

Yes

 

A woman of few words for the first time !

 

Lol....very funny

 

Yes

 

You two must be twins...

 

Wise comments... I think when your starting out your a little clouded by trying to make the right decision that rewards you with boom type returns to accelerate your future acquisitions.

Definitely know that crossed my mind many times and still does today

 

Agree. We all want the rewards asap, the bigger the better. Just sometimes more often than not it takes some time in markets going sideways or with minimal growth .

 

You raise some salient points and I have very much appreciated reading your expertise on this forum. A few q's though:

Did you use the HTW clock or are you speaking more broadly?

Were you trying to buy counter-cyclical to the clock?

Were you trying to buy for or against sentiment?

 

@Jamesaurus You raise some salient points and I have very much appreciated reading your expertise on this forum. A few q's though:

Did you use the HTW clock or are you speaking more broadly?

I look very briefly at that. Market sentiment is a difficult thing sometimes and some guess work is involved. I like to look at sentiment on PC, sentiment in the media and sentiment from many players on the ground. If I do all those 3 things well it will give me a very good idea of where I should be focusing on for my next buy.

Were you trying to buy counter-cyclical to the clock?
I always try to buy 7-9 o'clock approx. I want to identify value suburbs by looking at distance from the CBD, and then what neighboring suburbs are selling for. Is X suburb is identified as a good suburb and is 10km from the CBD and median house price is 500k, and Y suburb is 11.9km from the CBD and median price is 420k. Straight away I see potential value in Y suburb and start investigating more Due Diligence. Also buying something with add value potential is a must for me based on my strategy and risk profile.

Were you trying to buy for or against sentiment?
Sentiment is good but it also needs to correspond with where the market cycle is. At 12 oclock market sentiment is exceptionally good. Every man and his dog is buying. Does that mean I will follow that sentiment? No. Because of where the market cycle is. At 7oclock market sentiment might be warming up, value is identified in a state and then in particular suburbs. So with increasing positive sentiment and value areas identified, now we are talking

Sorry for the long ramble.

 

I like that process of looking at nearby suburbs with potential to catch up.

I found it interesting you take into account the sentiment of PC... i suppose not a bad proxy for aus investor sentiment... wonder if there could be an algorithm created for how many mentions of a particular suburb on the forum, or indeed form all mentions in social media like the "buzz index" does with stocks?

 

I find market sentiment on PC (especially by some of the experienced opinions I respect), is often a reflection of a wider market sentiment/trend they themselves have identified.

 

Just to let you know on the QT @MTR is a female time lord

 

do you think there's value in every market no matter how bad it looks, Such as Perth? I heared people say they won't buy in Perth until it shows signs of improvement.

 

Hi @Leo2413

Well said but I couldn't apply the logic to current market, may be its due to lack of experience.

Appreciate your views on buying an IP in Melbourne west (15 KM from CBD) with sub division potential with the view to hold for CG for next 5 years or so. I am concerned at the moment as Melbourne is at the end of boom cycle. If your view is not positive on Melbourne market, which maker/ suburbs do you suggest. Thanks in advance.

 

I'm not intimately in touch with the development markets there. Try @melbournian Also read this thread. VIC - Melbourne Rezoned - ACZs, NEICs, RGZs GRZs etc

All comes back to your goals, strategy and risk profile. For me, I am not buying anymore and just finishing developing the stock I have with JVs and then starting more of the stock I bought in Brisbane few years back.

If your looking to buy an IP for growth, If were talking Brisbane it may be worth doing some DD on Chermside, Tingalpa, Geebung, Keperra, Arana Hills, Ferny Grove, Stafford Heights. I think these are some areas which may have some gems in there. Older home, generous sqm, add value potential, relatively close to the CBD. Good value imo.


I mean look at this one. 12.6km from the CBD, large 782sqm. sold $517k. I don't know the finer details of the house as I just pulled it up 3 seconds ago on REA but surely there is value there.

5 Leonarda Drive, Arana Hills, Qld 4054 - Property Details

 

Thanks Leo, Yes I am in touch with Melbournian and read the above article couple of times. The only concern is that if any upside left in Melbourne properties before I buy on 4-6 weeks time. I am concerned that I am may be buying at the peak with no growth potential and will paying the huge out of pocket mortgage repayments until next boom comes due to very low yields. If markets softens/ slow, cant even sell I think. It's worst scenario but nervous. This is leading me to think about Brisbane. Just reading and reading all PC threads. Appreciate your and any of the experts guidance.

@MTR, @Westie I believe you are experts on the subject and appreciate your thoughts.

I had a quick look at those Brisbane suburbs and looks great. good size, reasonable price, closer to CBD and reasonable yields.

 

Nah mate, me no expert on the subject. I just keep a very keen eye out and learn from the experienced. If there are questions specific to the NW/SW/West parts of Melbourne, I can answer them.

Personally, I believe there's little value left in most of metro Melbourne. You may find some hidden gems, but they're hard to come by and quickly snapped up. Even in Werribee for instance, say you buy for $500k, rent's going to be about $220-$350/week (give or take some more). The lower end of the rental range is for areas on the northern side of Synnot St (the Market Rd area), higher rentals in the areas closer to Pacific Werribee, Werribee SSC etc. Now run your maths.

Head further out towards Geelong. Still value to be had in some spots.

 

I like this, this is how I have been invest too. The lower the clock the bigger the upside! Developers might have a different clock for development though. The downside is the waiting time for the impatient as it takes years for a bottomed out market to boom.

 

I think some people's expectations are way out of wack with the reality of markets and cycles. Too many people get caught up on 'perfect timing' that they miss out in the end. Personally I think 'approximate timing' is a lot more useful and realistic.