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Time is one of your best friends - February 2018

By Jason Low, Manager - Client Relations & Strategy, propertybuyer

My grandfather would often use the phrase “If only I knew back then what I know now - listen very carefully and watch closely those that have gone before you Jason and have succeeded”. Dear old Pop was ninety-six years of age when he passed and would remind me of this insight right up until his last days.

Learning from those who’ve had the experience, made the mistakes and learnt from their lessons from the past to become successful is one sure way to accelerate your growth whether it be emotional, physical, financial or professional.

Over the past twenty-one years as an avid and passionate property investor, I have spoken to a countless number of Grandfathers, Grandmothers and old timers who were and still are very successful property investors, who learnt from the ‘hard school of knocks’ on how to make their fortunes through property.

What were the common threads of advice they all had to offer?

The time in the market supersedes trying to time the market.

With many who have done well in property, you will find that they all have something in common. They have held onto a large portion of their portfolio over the long term. They don’t chop and change constantly by selling up within the first couple of years of owning the property. They had their finance organized and ready to go. They knew what they needed to buy, they had planned it well and had a strategy in place to acquire the ideal property that was going to deliver the long-term growth required to meet their objectives. When the opportunity arose they pounced with certainty, knowing full well that their property purchase was going to blossom over the long term into a money tree.

They didn’t deliberate, procrastinate, wait for the market to hit the bottom or wait for the planets, stars, moon and sun to align. They weren’t frozen in fear from the negativity surrounding them, this included the media. They moved swiftly on a property that was going to be in demand both now and in the future - they went for it and then stuck it out. 

They weathered the storm of the peaks and troughs, the swirling interest rates, the changing unemployment landscape, wavering consumer confidence, the changing political environment, the constant servicing of the property and then allowed the nature of compounding capital growth to do its thing throughout the property cycles.

As an example, in 1970 the medium property price of Sydney was $18,700. Today in 2018 it’s $1,058,000. In 1970 Mosman’s median property price was approximately $65,000 and today in 2018 it’s $3,825,000, that is close to a 6000% increase. Do you think those buying back in 1970 had the insight that their properties would reach such dizzying heights forty-eight years later? Perhaps not! At least you can now tell your Grandchildren what happens to property prices over the long term. This might be just the incentive they need to get them thinking about property sooner rather than later.

Sure, not everyone can afford a multimillion dollar property today, however this buy and hold mentality is relative. Purchasing a property in a location that has the right fundamentals for capital growth for $200,000 is far better than sitting on your hands attempting to predict the market and its direction. Warren Buffet (one of the wealthiest men on the planet aged eighty-seven) said “Someone's sitting in the shade today because someone planted a tree a long time ago. The best time to invest is several years ago. The second-best time is now”.

I knew of someone who had a $300,000 budget in 2011. They were convinced that the market in Sydney was going to fall off the face of the earth that year. They procrastinated and deliberated, they didn’t buy back then and still to this day still have not purchased a property in 2018. Unfortunately, they have cost themselves approximately $450,000 in equity. That equates to six years’ worth of wages for the average Australian. When you put that into perspective. (Ouch)

This individual fell into the “drama cycle” trap that the media so craftily and cunningly spin. They said, “Harry Dent has been quoted to say that house prices will fall in 2012 by 40%”. In 2018 we can safely say that was a non-event as the property prices went up 50% not down 40%. Unfortunately, this one sentence cost many property investors dearly. As I write this article I’m looking at the top 20 worst predictions about the property market dating from Jan 2012- June 2013. If you would like me to email you a copy feel free to contact me. Then you can see for yourselves just how unnecessarily destructive the media can be and just how inaccurate their predictions in fact are. The writers of these articles are journalists, they are not property professionals. They are tasked to create sensationalism, which need to result in the selling of newspapers and advertising. So, do your sums, don’t bit off more than you can chew or get in over your head, buy well, buy right the first time and sit tight.

As we have seen, the time in the market is of critical importance and so is to a lesser extent the timing of the market. If you had been following the property market especially in Sydney and Melbourne over the past five and half years, you will have witnessed that in a hot market both superior and inferior grade properties were increasing in value and at a rapid rate of knots. When the market was red-hot throughout 2014-2016 or thereabouts you may have discovered that a studio, on a main road, facing south, with no privacy, in need of a serious renovation and with a member of the bandidos bikie gang living next door had twenty groups through for the first open home. When it came to auction day, you had fifteen registered bidders with the final purchase price exceeding the reserve by $175,000. Was this good timing? I would say not.

Now that the market has cooled and the inexperienced, emotionally charged buyers have gone back into hiding, there is no better time to scout for the next great property opportunity. Another Warren Buffet quote supports this idea. “Success belongs to those who leave the herd and run in the opposite direction”.

In summary

  • Follow the lead and advice of those who have experience and gone before you to achieve success.
  • Time is one of your best friends in the property market.
  • Be prepared and confident to act fast once the right property surfaces.
  • Do your sums, don’t bite off more than you can chew. Buy well, buy right the first time and sit tight.
  • Don’t follow the herd. Run in the opposite direction.

Don’t get caught up in the drama cycle of fake property news and predictions

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