Whether you’re a property investor or a comedian (or a comedic investor?) if your timing is off you won’t be in business for long. Show business can be hard certainly, but when you’re buying an investment property
, picking the wrong time to jump into the real estate market can cost you more than missing out on a gig with The Comedy Club
So how can you tell when to buy your next investment property? There are certain signs to look for to discover when a market has reached the bottom, and once you know those signs and understand what they’re saying, you can be confident of your next move.
A commonly held wisdom shared by individuals investing in real estate
is that property prices tend to double every 7 to 10 years. This is very often the case.
Consider, however, that growth in a property market is not always linear in fashion. In fact, it can often be represented by a dip, a sharp rise and then quite a flat.
As a property investor, our goal is to get hold of the market, just as it's leaving the bottom and ride it to the top. When it gets to the top we either refinance, or sometimes we might even sell to capitalise our money.
Here’s how to tell when a market is heading towards recovery:
Keep an eye on capital growth within a marketplace - either in general areas or perhaps even drill down into suburbs. When you start to see 2.5% growth per quarter and it totals up to 10% per year, that means the marketplace has started to move forward.
When you take a closer look at this growth, you’ll realise that this trend usually happens during the time between the bottom of the market until right before it begins to flatten out. This happens in about 1 to 3 years.
In cities such as Sydney, Brisbane and Melbourne the rise can be even steeper than other markets. This is why it’s advisable to let the market achieve its first 5 to 10 percent in the first year before buying your next investment property
in these kinds of locations.
From the outside looking in, consider what local investors are doing. If they are disappointed with the market, and despondent with its performance take note.
When they’re not buying in their own backyards, it’s a good time to start looking around. As outside, out of state investors come into the area, they start to stimulate economic growth - including some capital growth as well.
Auction Clearance Rates
Finally, take a look at auction clearance rates. When they begin rising above 50%, know that people are looking to buy. It’s at this point when local investors will start to come back into the local market - putting upward pressure on the market and really fuelling growth in the area.
Sam Saggers is CEO of Positive Real Estate and Head of the buyers agency which annually negotiates $250 million-plus in property. Sam's advice is sought-after by thousands of investors including many on BRW’s Rich 200 list. Additionally Sam is a published author and has completed over 2000 property deals in the past 15 years plus helped mentor over 2200 Australian investors to real estate success!
Read more expert advice articles by Sam
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.
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