How to Tell When It’s a Good Time to Buy Real Estate
What do ducks and the most successful people in the real estate industry have in common?
The solution is rather straightforward: they will take action only when they are confident and well-prepared to do so. So even though it was a somewhat anticlimactic example, it does teach you an important lesson about investing in real estate: you need to make sure that all of your ducks are in a row before you begin!
There is a good chance that, at some point or another, you have experienced the uneasy feeling that you could have been investing in real estate at the wrong moment. That’s fantastic! It indicates that you are treating one of the most important investments in your life with the seriousness it deserves.
However, if you simply focus on queries such as “is this a good time to purchase a property?” and “when is the greatest time to buy a property?” you will overlook the most important aspect in a successful voyage through the world of real estate investing, which is you and your current financial status.
Helen Collier-Kogtevs, an expert in real estate, has weighed in on the ongoing discussion on whether it is better to time the market or spend more time in the market. She argues that spending more time in the market is preferable. We have also included an overview of what to look for when purchasing an investment property and the indicators of a real estate boom for those who are skeptical about the market. Finally, we have created a checklist that will assist you in becoming more like a duck by ensuring that your finances are in order and that you are properly positioned for success in real estate investment.
Let’s go quacking!
Expert Helen Collier-Kogtevs on whether it is better to time the market or spend more time in it. Also included: What to look for when purchasing an investment property and the indicators of a real estate boom. Helen Collier-Kogtevs is the founder of Real Wealth Australia. She believes that investing time in the property market is more reliable than timing the market.
The longer you hold, the more money you will make and with patience, it will always reward you. Keeping ownership of your real estate increases the likelihood that you will receive a satisfactory return on your investment. The ultimate objective is to achieve financial independence and security. Getting your financial house in order is the most important thing you can do right now. Now is the time to assess whether or not now is the right time to invest in property.
Timing the market vs time in the market
In case you don’t already know, Helen Collier-Kogtevs is a superstar property investor and the founder of Real Wealth Australia. The following is what she has to say regarding the controversy around timing the market as opposed to staying in the market for the appropriate amount of time:
Time is of the essence to me while trading. However, there is a danger involved in timing the market. If you don’t live and breathe the real estate market and have a deep, abiding understanding of its cycles, there’s a good risk you’ll make a mistake while analysing it. Therefore, it is my opinion that it is preferable for people to enter the market, negotiate the best price for the best home that is suitable for their circumstances, and then simply give themselves time.
Issues with timing the market
It is common for beginner property investors to make the mistake of believing that the only way to profit from real estate is to buy at a cheap price immediately prior to a boom in the market. This is an incorrect assumption, but it is one that is common among inexperienced property investors. Nonetheless, this is not the only way that one can profit from real estate investments.
It is possible to make a lot of money by timing the market, especially if you have a natural talent for spotting real estate booms and a family history of being wealthy from real estate investments. On the other hand, for the average Joe and Jane, focusing their attention on the market and investing their time there is the best course of action because it is less complicated and more reliable.
When it comes to spending time in the market, real estate is exceptionally forgiving due to its wonderful forgiving nature. The longer you keep your position, the more money you are guaranteed to make. Therefore, if you are patient, it will always provide you a return on the money you invest in it.
The irony is that if you are always looking for the best price at the most advantageous point in the real estate market cycle, you are much more likely to miss out on some fantastic investment opportunities.
Because of the nearly always retrospective nature of analyses concerning booms and busts in the real estate market, this is something that needs to be mentioned. Because of this, there is no way to determine whether you are currently close to the market’s peak or the cycle’s lowest point at the present moment. Therefore, when you’re always waiting for things to settle down, you are obviously missing out on investment properties that would have been good additions to your investment portfolio if you had bought them. However, because you are waiting for things to settle down, you are missing out on these properties.
The benefit of hindsight is unquestionable. I will always be able to tell you when the bottom of the market has been reached, but in the present moment, it can be quite challenging to determine when the bottom of the market has been reached.
Why is time in the market a safer way to go?
When we questioned Helen about the reasons for her steadfast trust in the significance of timing in the market, she told us the following anecdote in response to our enquiry:
I still recall my very first piece of real estate investment, which was a townhouse. We purchased it for $300,000, which was the asking price. Because this is something that happened more than a decade ago, everyone around us at the time was like, “You did what? You paid how much?’ You can call us insane, if you want.
And I will be the first to say that, as a novice investor, I kind of thought, “Oh whiz, I’ve done the wrong thing here. I can’t believe how much I overpaid for this home! In any case, I finally decided to sell it for $860,000 after some time had passed. Have I incurred any financial losses? No. Have the owner’s years of perseverance in keeping hold of the property resulted in a lucrative return on investment? Absolutely!
And this is the reason why time spent in the market almost always prevails. This is how you can ensure that you always receive a healthy return on your investment. Considering that the yearly median growth rate for property in Australia was 5.9 percent prior to the implementation of COVID, maintaining ownership of your real estate increases the likelihood that you will receive a satisfactory return on your investment. The ultimate objective is to achieve financial independence and security.
Additionally, this enables you to focus all of your attention on the most important thing: determining whether now is an appropriate moment for you to make a purchase.
How to tell if it’s a good time for you to invest in property
If like Helen, you are someone who places value on the passage of time in the market, the only thing that stands between you and making an investment in real estate is the question of whether or not your finances are strong enough to support such a move.
So how exactly can one feel secure while making financial investments in real estate? Getting your financial house in order is the most important thing you can do right now.
I’d much rather have an investor spend a little more for a suitable quality property that suits their strategy, financial position, and risk profile than have them make a risky investment and end up stressed about whether or not they can afford to sustain it financially over time. I’d much rather have them pay a little more for a suitable quality property that suits their strategy, financial position, and risk profile.
When it comes to the latter, the length of time a property spends on the market will be contingent on the owners’ capacity to maintain the property over the long term and through a variety of market fluctuations. For an investor, there is nothing worse than being in a constant state of financial stress while also worrying about whether or not the property will pay off in the end.
For this reason, it is a good moment for you to invest in real estate as long as you are entirely secure in your financial situation. This is especially true if your property investment plan is centered on timing in the market.
Financial checklist before buying an investment property
- Learn the true extent of your borrowing capacity as well as what you can reasonably afford.
- Have your pre-approval in place.
- Learn the ins and outs of your monthly income and expenses in order to get your personal finances in order.
- If feasible, combine your debt.
- Create a strategy to reduce the amount you use your credit card. For example, cancel cards you don’t use.
- Have a system of saves that includes a cushion so that you don’t wind up spending all of the money in your savings account on deposits. For example, if you have owned real estate in the past, you may consider setting some of the equity from those holdings away as a safety net.
- Obtain the most advantageous loan arrangement from the beginning. Do not attempt to rationalize subpar options in order to get an appealing home.
Do you check off all the necessary boxes? Then you are prepared to purchase the next property in your investment portfolio.
So… is now an excellent time to buy a property?
We understand it; saying that there is never a bad time to invest in property is a bit of a cliché, and it doesn’t offer you the complete picture. However, we still want to reassure you that there is never a bad time to invest in property.
The idea is that when you have your finances in order, keeping the property and spending time in the market will make practically any investment a good investment. Even if you invest in something risky like the stock market, this is true.
We are still fully aware of the fact that you are able to improve your return on investment via careful study. This does not simply mean acquiring real estate at a greater price; it also means buying a property that will attract renters interested in living there.
When you’re an investor, you want to make sure that your property is rented out all 365 days of the year.
Because of this, it is important to strike a good balance between spending time in the market and conducting extensive research and having a basic idea of how the industry is performing.
So, how can you determine whether or not this is the perfect moment to buy a home? And what exactly should you be on the lookout for when purchasing a home?
Helen has discussed with us the indicators that may be used to determine whether or not the market for real estate is in a good stage.
Checklist: is now an excellent time to buy the property you’re considering?
- In recent times, have prices in the suburb decreased or increased? This is most certainly the oldest rule there is, but as we discussed before, it has the potential to be a profitable investment in the future. Even though prices are going down, you shouldn’t pass up an opportunity to purchase a good investment property if you have the financial means to do so.
- Is the number of people who rent their homes in the area somewhere around 30 percent? This is an unmistakable indication of whether or not the area is one that renters are interested in residing in. If you’re looking at a percentage between 25 and 26 percent, that’s normally acceptable since it indicates there’s opportunity for development. However, if the proportion is between ten and twelve percent, this is an indication that it may not be appealing to prospective renters.
- How do people feel about the market right now? An increase in the percentage of items sold at auction and an increase in clearing rates are both signs that property values are about to move. Of course, this varies from district to suburb, but a typical neighbourhood in Melbourne, for instance, would have between 1000 and 1200 auctions each week with a clearing rate of between 70% and 75% during regular business hours.
- Is the property equipped to meet the needs of tenants? Of course, tenants will each have their own unique set of search criteria, but one thing that’s important to the vast majority of them is being close to amenities like public transit, stores, and schools.
- Examine the reports that the government issues every three months. They are always going to be able to tell you whether or not you are in a boom, recession, downturn, or any other type of economic situation.
Talking to real estate professionals can also provide you with a sense of how the property market is currently performing.
Regardless of which method you believe in (or whether you believe in any of them at all), the most important thing to think about is whether or not now is a good moment for you to make an investment in real estate. If you make sure that you have all of your financial matters in order before you make a purchase, you will significantly increase your chances of being successful. Again, this is true regardless of whether you are a believer in the concept of time in the market or a market timing expert.
Do you anticipate making a purchase of a home for investment purposes during the next several months? When looking for guidance on investments, it could be a good idea to get in contact with the professionals.
How to Avoid a Dud Investment Property
Purchasing an appropriate piece of real estate for financial purposes might feel like a quest. In addition to organizing your financial situation, you need to look for a fantastic site that has a lot of potential for the value of your investment to rise over time. Then, once you’ve located the perfect neighbourhood for you, the next step is to seek for the ideal investment property… and make sure it won’t turn out to be a waste of your time.
Numerous real estate buyers have been dissuaded from making purchases because they are terrified of the dangers that come with (unintentionally) investing in a property that turns out to be a dud due to the dread of acquiring a dud property. But allowing fear to prevent you from acting is one of the 59 worst investment blunders, according to Helen Collier-Kogtevs, one of the foremost property educators in Australia. She says this is because fear prevents people from taking action.
Fear is produced within people nine times out of ten due to a lack of awareness, education, and escape planning, which is ultimately what leads to them being freed from their predicament. After receiving correct training and being knowledgeable regarding all of the factors that lead to profitable property investing, individuals eventually cultivate the self-assurance necessary to recognise how potentially low-risk investing in real estate may be. This is due to the fact that education and awareness are necessary for achieving success in property investing.
Simply said, you shouldn’t let the worry that you’ll buy a bad home stop you from investing in real estate. Obviously, there is always some form of danger involved when one invests their money. But if you do your homework and arm yourself with the information you need to buy a home in which you have complete faith, you will be able to reduce the amount of risk involved to an acceptable level.
Warning signs of a dud property
It doesn’t match the search criteria of tenants in the area
When purchasing a home for investment purposes, you should do so with the intention of renting it out in the foreseeable future. After all, the last thing you want is for your house to be unoccupied for several weeks at a time because it does not meet the requirements that prospective renters in the region are searching for.
Therefore, you should give it some serious thought before purchasing an apartment on the second story of a building that does not have an elevator, especially if a significant number of the people who rent there are in their golden years. You might want to rethink moving into that wonderful apartment with just one bedroom if the houses in the neighbourhood with three bedrooms are the ones that are renting out the quickest. You may lessen the likelihood of making a bad investment in real estate by conducting market research on the preferences of prospective renters in the region.
Repair & maintenance will cost you more than a renovation
An ideal property is one that does not require a significant amount of repair or maintenance work. Be aware of purchasing a property that will need you to spend more money on necessary repairs and upkeep when you might, in fact, be saving more money with a renovation. This is especially important if you have not yet put aside a budget for a planned renovation.
Be on the lookout for flaws with the structure, water damage, and evidence of pests. Things to think about include:
- Is there damage to the wall, such as cracks?
- Is there any sign of moisture on the flooring or walls here? Is there any evidence of mold?
- Are there any telltale signals that there is an infestation of pests?
There is never a bad time to invest in property. Even if you invest in something risky like the stock market, this is true. However, it is important to strike a good balance between spending time in the market and conducting extensive research and having an idea of how the industry is performing. A typical neighbourhood in Melbourne, for instance, would have between 1000 and 1200 auctions each week with a clearing rate of between 70% and 75% during regular business hours. An increase in the percentage of items sold at auction and an increase in clearing rates are both signs that property values are about to move.
Whether you are a believer in the concept of time in the market or a market timing expert, the most important thing to think about is whether or not now is a good moment for you to make an investment in real estate. Get in contact with Real Wealth Australia for guidance on investments. An ideal property is one that does not require a significant amount of repair or maintenance work. Instead, be on the lookout for flaws with the structure, water damage, and evidence of pests. In addition, you may lessen the likelihood of making a bad investment in real estate by conducting market research.