Thoughts on real estate investment

Id prefer this sd well ie wait just a bit to see signs of sustainable movement rather thsn the absolute bottom. Waiting means you wont pick the absolute bottom, but it should be near enough to still warrant significant gains. Waiting , imo, reduces risk. Eg how do you know if its just a momentary adjustment or a sustainable turning the corner.

 

This is precisely it for me too.

 

The answer basically is mathematics and economics. An understanding of both will enable to to buy with confidence at an apparent low. The approach of waiting for a 15% or so recovery off bottom is fine if you lack this skill but you really are missing out on really sweet gains following that approach. And remember if you are buying with leverage the positive effect of buying at rock bottom significantly amplify the value you get from your deposit and the subsequent capital gain.

You might also find, in some markets at meaty they buying during times of rock bottom of macroeconomic cycles enables you to lock in absolute best lending rates. Again giving you a massive compounding advantage over time.

 

One of the best posts I ever read on propertychat......thank you

 

Buy at 7 o'clock.

 

I have never understood this indicator, there are many suburbs and yields will vary in one state. Can you please give a real example

 

I buy when I have time to search and invest my time into the buying process and also when I have sufficient funds.

Once I have a budget I'll seek out what kind of investment I need so I don't stall the portfolio.

It's a dynamic process I think. With personal income, cash flow, how much time you can invest in property etc.
I think as long as you're always moving forward - slowly or quickly, it's still a positive direction and that's all that matters.

Timing the market requires a lot of attention to certain markets within markets which a lot of people don't have.
I'm still undecided if I should use a BA for my next property.(haven't used one before).

 

absolutely agree with you
just bought 2 and dont want to stall but hardly have time to look at all the markets

 

Nice thread.
The world is a big place with many opportunities if you look in the right places

MTR

 

Mensa of PC like you would see the right places@MTR at this market conditions

 

I am still in the Melb market, sold and buying and developing
Currently also in the USA market, bread and butter areas using strategies we can not use here as we don't have the population to support this... will explain more down the track, I will start a thread later.

MTR

 

Maybe I'm misinterpreting what you are saying but I actually think investing just because you have funds can be increasingly dangerous. Indeed the times when you (and others) have funds might actually be the worst time to invest. A good example is all those mining workers who were cashed up and thought they were doing a good thing investing their cash in mining towns. Now they are both out of a job and sitting on massive losses. Had they been patient they could have saved all their cash and now be buying distressed properties with almost no buyer competition and a huge amount of forced sellers ...

If you can retain your funds and with patience deploy them when the time is right, you can do much better at both avoiding risk as well timing to get upside.

 

Do enlighten is what this mathematical equation is that allows to identify absolute bottoms...i didnt know one existed...

 

this sounds amazing interest rates being lowest ever. and so many distressed properties with almost no buyer competition. where is this place?

 

Look at property in almost any mining town in oz ...

 

great location low risk why not..

 

Can you get tenants though?
And will there be any future demand?
Ok to buy something that was 1mill at 200k but it may not increase in value in the future and you may not be able to attract tenants. I'd stay away.

My sister bought in Wagga one of the cheap parts. She bought it cheap but since a lot of other people want to sell to, you can only sell it cheap. There might be 6 or more months or property for sale in the area at any one time. No one is buying and you're at the mercy of the market. Don't expect to be able to sell a property in a mining town or depressed/low demand location quickly unless you almost give it away...

 

Provided you believe that demand for mining resources will recover it sounds like Wagga may be a great place to buy. As for no rental income, you would need to factor this into the holding cost. So say, for example, you figured resources recovery would start in 2 years and peak in 7 after that, and say you figured you could get 5x what you paid for a property now at top of next peak, then you might well be quite well off investing now in an unrentable place (and use current conditions and sentiment to push for a really low price). I have in the past invested in cities during times of very negative sentIment (Hong Kong, Berlin, Gold Coast), also considered (but did not) in Portugal. Your access to capital ability to invest in a market where everyone wants (or has no choice) but to exit is really your single most powerful weapons as a strategic value investor.

Gold Coast was very much in peak negativity between 2010-2012. Everyone seemed to want (or need to unload). Most were saying "never again", etc. To me this was the perfect buy signal, especially because I foresaw the longer term transformation underway.

As for being "at the mercy of the markets", not sure what you mean - anytime anywhere you invest you are at the mercy of the markets. And as a value investor the markets are in fact your biggest friend, as over time they always revert to reflect fair value.

 

Location underpinned by strong a strong local economy is the most paramount thing (in my mind anyway). I say this because all of the other good stuff (jobs growth, infrastructure spending, population increase, development opportunity) all flows on once an area has a solid local economy.

Be it a city of 5,000,000 like Sydney or indeed a regional city of 55,000 like Wagga Wagga, a multi-diverse, sustainable local economy is where all the goodness begins and where opportunity for success in property investing is so ripe.

There are myriad other factors sure (another that comes to mind outside of solid economics is 'land scarcity or abundance' as this is a strong influencer for property supply/demand also), but seek out areas that offer economic prosperity for the safest investments, at least whilst starting out.

As you get more experienced and grow your portfolio you can start to take calculated, educated risks if you choose (either in the pursuit of strong Capital Growth or stronger Yields, or rarely, sometimes both).

 

Some places are much more boom-bust than others.
My places in Sydney I'd have a buyer within a month, (even in slow periods people still buy) but in other locations properties will just sit on the market because there are simply no buyers. I'd hate to be in desperate need to sell and to not be able to find a buyer.

I would not risk buying something where there is no tenant demand. Country towns can shrink.

Ps. I'd still stay away from apartments in the Gold Coast... there's too many of them. And when there's too many of them people have too much choice when they buy. Which mean if you are going to try to sell, or if strata fees jump/special levies are required (for whatever reason... for example, roof membrane failure, lift replacement, major plumbing works required... i've had all those...), you could be stuck.

If you have a big portfolio already, you could cop it all on the chin and it might not be the end of the world. But for an investor just starting out, it could cause a premature end to their investing career.
My sister with the Wagga property completely missed the Sydney boom... her Wagga property would still be worth the same as she bought it for 5 or more years ago. If she had the same money in Sydney (maybe a Parramatta unit, it would have been around $250k at the time), the investment would probably have doubled, and her equity gone from say 40k to 300k. That's big bikkies for someone starting out.

That's why I look for growth. It's no good having your money tied up somewhere with no growth. Time is money.