6 ways to win in any property cycle (eBOOK)
Many things in life work in cycles – time, seasons, politics, the economy. The real estate market is no different. Perth’s property market also moves from booming periods to quieter ones, and there are a few things you can do to make each phase work in your favour.
During a boom it can be relatively easy to make money in real estate, but you have to be careful not to overpay, especially near the market peak. In a quieter phase you can buy in at lower prices and savvy investors develop key strategies to ensure they come out on top.
Our six go-to strategies for success in any property cycle are:
#1 – Be ready
With many sellers keen to cash in on a boom, there is usually a good selection of quality properties up for grabs, but they get snapped up quickly. In a stable market, the best properties are still snapped up, while the average homes take longer to move.
While many people assume a quiet market means an abundance of ‘bargains’, there are in fact fewer really great opportunities available for buyers, which means competition for the good properties can be fierce. So it is critical that investors are ready to pounce or they’ll miss out.
*And to be ready, you should have your finances, purchase structure and special conditions organised in advance.
#2 – Understand market drivers
In a hot market, there is less need for investors to understand what is driving the market.
Many investors do well – even without much knowledge of the market – but when average growth levels return to normal, selecting superior properties is more difficult if you don’t understand what’s causing growth and where.
#3 – Know what tenants want
In a quieter phase of the property cycle there is often an increase in the number of rental properties available – due to the surge in property investment during the boom phase.
This may mean it could be trickier to attract good tenants for your investment property – the only way to get around that is to understand what they want and offer it to beat the competition.
#4 – Do your homework
Most suburbs perform well in a boom cycle, making it relatively easy to do well, but growth can plateau in many suburbs for a period after that.
You need to arm yourself with plenty of quality research to help you avoid duds and find the gems.
Ask yourself questions like:
- What, if anything, will drive growth in the area you’re keen on?
- What part of the suburb is best?
- Which properties will be most attractive to tenants?
And yes, it takes time. To guarantee above-average results, about 80 to 100 hours of work is required in research each time you buy.
#5 – Get your head around yield vs growth
In a boom period, rentals often don’t increase as quickly as property prices. Rental yields then reduce, which means it’s harder to get positive cash flow, though capital growth is easier to achieve.
In a softer market, a cash flow strategy can work if rentals don’t fall because your buy-in prices are lower. If rentals are under pressure, your cash flow may suffer a little for a while, but to compensate you’re getting in the market at a low price, ready for the next cycle.
Adding value is the best way to manufacture your own capital growth in a quiet market and if done right you can end up with a much improved cash flow for your efforts.
#6 – Know what you want
In any cycle, it is imperative that investors know what specific investment opportunity they are chasing.
All too often investors aren’t focused enough and leave themselves open to becoming sidetracked.
In any market, it’s much better to look at what wealth strategy and property type is best for you – buying new?, buying older?, apartments or houses?, subdividing and adding value? – and then stick to it.
“Panning for gold is easier
when you know it’s gold you’re looking for.”
If you’re keen to learn more about how to win in any property cycle, why not complete our Getting Started form to get the ball rolling.
Or, if you’re already contemplating how to tackle Perth’s property market, why not download our free Get Ready to Invest in Property eBook here.
It takes you through five simple steps to help you understand strategic property investment and how to make it work for you.
You will learn how to:
- CREATE YOUR WEALTH PLAN & INVESTMENT STRATEGY
- ASSESS YOUR FINANCIAL POSITION & FIND THE RIGHT LOAN
- RESEARCH THE MARKET & CREATE A SHORTLIST
- MINIMISE RISK & CONDUCT DUE DILIGENCE
- ADD VALUE TO INCREASE RETURNS
It will then give you a few insights into GETTING STARTED.
So if you’re ready to learn some great insights into getting started in property investment, download your free Get Ready to Invest in Property eBook here.
We think you’ll find it invaluable.