Your Investment Property forum is the place for positive industry interaction and welcomes your professional and informed opinion.

3 ways to botch your investment strategy

Notify me of new replies via email
Your Investment Property | 02 Oct 2014, 10:52 AM Agree 0
There are many ways investors can make mistakes. And being aware of what can go wrong is the best way to avoid catastrophes occurring.
  • Jeremy Sheppard | 07 Oct 2014, 08:50 PM Agree 0
    If "overheated" means "...people are increasingly paying too much for property", then I'll take an overheated market any day.

    If buyers only ever pay fair market value, then capital growth never happens. Capital growth occurs in markets where buyers are typically paying more than what a property is worth, effectively paying “too much”. The greater the degree to which they pay "too much", the more growth occurs.

    If on the other hand every buyer were to pay below market value, then we’re talking about a market experiencing negative growth. The more under market value buyers pay, the greater the degree of negative growth.

    Yes, it is hard to buy into a market in which demand exceeds supply. As Helen says, stick to your strategy and persevere, don't look for easy markets.
  • Sceptical | 08 Oct 2014, 11:44 AM Agree 0
    Jeremy, I think you just encouraged folks to jump into a "Speculative Bubble" - there is a difference between paying the right price in a growing market and paying too much in a bubble. Steady and sustainable growth happens when investors pay what the asset is "worth" (even if its worth more than what another investor paid the year before), and a bubble happens when investors are paying too much. In case you need a refresher, here's a definition of a speculative bubble from Investopedia:

    A spike in asset values within a particular industry, commodity, or asset class. A speculative bubble is usually caused by exaggerated expectations of future growth, price appreciation, or other events that could cause an increase in asset values. This drives trading volumes higher, and as more investors rally around the heightened expectation, buyers outnumber sellers, pushing prices beyond what an objective analysis of intrinsic value would suggest.

    The bubble is not completed until prices fall back down to normalized levels; this usually involves a period of steep decline in price during which most investors panic and sell out of their investments.

    May also be referred to as a "price bubble" or "market bubble".
  • Steven | 09 Oct 2014, 07:00 PM Agree 0
    Better to buy in Hackham suburbs of Adelaide where you can get 7% rental yields, or in south Brisbane Logan areas (7.5% yields) than in Melbourne at the moment
Post a reply