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      25 Jun 2017

      Which market - which strategy?

      Did you know that there are many different property investment strategies, with each strategy best suited to a particular type of market?

      The property education industry is largely unregulated, so that when housing prices are on the rise, there’s also a dramatic increase in the number of so called ‘experts’ hitting the spruiker trail, making unbelievable claims about their ability to help us get rich quick.

      But what happens when the market turns from growth to stagnation, or even decline? These overnight sensations quietly disappear from public view, handing the stage back to other experts who have been in the business longer and can offer real investment solutions even when no overall growth is to be found.

      The housing market goes through many different stages

      Even though prices don’t always rise the housing market still offers investors many different and sometimes highly complex investment strategies, such as quick flips, renovating, buy and hold, timing, cash flow, options and development, each of which works best in a particular type of market, but may not work at all in others. It’s this diversity that enables experts and educators to concentrate on just one strategy which they can then promote as being effective at a particular point in time. The table below demonstrates how this works:

       Housing market performance     

       Investment option             

       Strategy to achieve result

       Low growth

       Increase value  Renovate or develop

       Erratic growth

       Buy in growth areas  Find the next hot spot

       Improving market

       Long term growth  Buy based on past performance

       Good growth spreads 

       Medium term growth

       Find potential ripple effect suburbs

       High growth

       Short term growth  Flip and trade off the plan

       Prices falling

       Look elsewhere  Invest in booming overseas markets

       Bottom of market

       Reduce buying price  Predatory buying, find stressed owners

       Stagnant market

       Income from rent  Long term rental guarantees

      There’s little point in looking for stressed sellers in booming markets

      There’s little point in marketing and teaching a system that finds stressed owners or teaches you how to engage in predatory buying practices when the market is going gang busters, interest rates have fallen and banks are freely providing housing finance, although this is exactly the right time to promote a method which flips and trades of off the plan properties

      There’s also no point in flipping and trading when prices are falling

      On the other hand, after a period of rapidly rising interest rates, tight housing finance and falling prices, a system teaching predatory buying practices is highly effective and stressed owners can be forced to part with properties at a fraction of their real value, yet this would be the worst possible time to adopt a strategy for buying off the plan properties to flip or trade.

      The right strategy to adopt is the one that suits the prevailing conditions

      I do not endorse flipping, trading or predatory buying as they have little to do with property investment, but while they’ll fail at the wrong time they will certainly work at the right time, and this is true of almost all the strategies available to investors. There are however, some lessons we can learn from the property investment strategy cycle.

      It is essential to use the strategy most suited to prevailing market conditions and right now there’s a host of people urging us to get on board, not to miss out, because most eastern capital city housing markets have been booming. Yet this advice ignores the fact that if a market is hot, it’s probably too late and clever investors will be looking elsewhere for areas with growth potential. Secondly, ask yourself where these same people were six years ago when the news was all doom and gloom.

      The best information comes from trusted, experienced experts

      Property investment is the most expensive form of investment there is and we are fortunate that there are experienced and proven information providers you can rely on who have been in the business for many years. The stakes are far too high to be entrusted to some fly-by-night operator who will disappear back into the woodwork as soon as growth slows.