When is the best time to invest in property

The power of compounding returns comes into effect the longer you hold your investment Time is your friend

Do I try to time the property market OR is it a factor of how long I hold my investment for?

For those of you that are always waiting to “see what happens”, and then turn around and say “I should have!” for you the answer is really simple “IT IS NEVER!”

If you are one of the 20% of the worlds population who want to take control of your own financial destiny, then the best time to be investing in property now or now.

It is almost impossible to time the market, yet almost predictable to achieve significant returns on your investment based on the “time you spend in the market.”

Property markets have their ups and their downs, we all know that and by the time you buy into media #’sh1t, the market has already climbed or dropped and your timing is out. Read more on that here.

What drives property markets

Government Policy :- home owner grants, tax deductions, depreciation, gearing policy, lending policy etc

Employment :- when unemployment is high, fewer people can afford a mortgage and when employment figures are healthy more people can afford a mortgage or to invest

The Economy :- drives consumer confidence or lack there of whilst impacting one your ability to sell or buy property

Consumer Sentiment :- also a byproduct of the economy, when the economy is poor, sentiment is low and on the adverse when the economy is strong, consumer confidence is high, more jobs about, more money and demand for property rises significantly

Interest Rates :- look at the current massive impact low interest rates has on property values and adversely when they increase, less people can borrow and the market slows down

Supply and Demand :- again historically low interest rates increased peoples ability to borrow which in turn increased demand that resulted in a run on capital growth and in a cycle with low demand, prices correct and or stabalise

Population Growth :- Australia is on a population growth mission (Covid aside) and an increase in supply compounded by insufficient supply has also ensured property price increases and capital growth. There is no plan to slow population growth

Demographics :- locations with higher income averages, higher employment, household structure, low crime rates etc will outperform locations with lower socioeconomic factors

The above generalisations (and other market influences) or a combination of some or all of them influence property markets and will provide a general indication of a property market cycle. Right now in Australia market indicators are pointing towards continued growth albeit at a slower rate through 2022.

The past two years have been historical (globally), and one should not count on them reoccuring when planning your investment. Plan your investment using average market growth indicators and then spend time in the market holding that investment for a duration of at least 7 – 10 years.

How long should one hold an investment for?

Compounding returns is one of the eight wonders of the world and in any investment vehicle, your first few years the graph is pretty flat, especially taking into consideration your entry into the market costs. From your fifth/sixth year onwards the graph heads northwards and the longer you hold it, the more significant the power of compounding growth influences your investment.

At a consistent 5% growth per annum, your capital value of your investment will double every 15 years and at 7% pa growth, it will double every 10 years on the back of compounding returns.

How much have I invested?

Breaking your investment down into it’s simplest form

When investing in property and using leverage (banks money) and the property has a value of say $650,000. How much would you say you have invested?

Most would say $650k of course. Yes or Yes?

Others would say “I only invested 10% deposit and borrowed the rest, so I only invested $65k of my own money.” And that would be correct.

So if I only invested 10% and borrowed 90%, my $65k could be working for me at about 40% per annum. Who here has given consideration to looking at it this way?

Time in OR Timing?

So is it a matter of timing the market, watching what will happen in 2022 or “investing and spending time in the market” which will help my $’s work hard for me allowing me to take more control of my own financial destiny?

In Australia, there are multiple growth drivers to offer investors the opportunity to take advantage of the current market we find ourselves in today and going forward.

The economy is relatively healthy, employment strong, interest rates still at historical lows, consumer confidence is healthy, banks are still keen to lend, vacancy rates at incredible lows, rental yields continue to strengthen all healthy factors to soundly underpin your investment into the property market.

And if property does correct at a time in the future and you don’t plan to sell, so what … the rent your tenant is paying will not correct, it will either hold firm or increase. And when you hold for a longer period you will experience an increase in your capital.

By the way, banks lend against your total income, not against capital growth. Equity improves your ability to draw down your deposit, but without sufficient income, the banks will ask you to come back at a time in the future.

For every year you wait to see what will happen, this is every year you miss out on potential capital growth and rental income

For every year you wait to see what will happen, this will ensure you pay the tax man his full dues when you could have paid it to yourself. And with a rise in land value and building costs, you are almost guaranteeing you will be paying more for your investment the day you do enter the market.

For every year you wait to see what will happen, is another year you miss out on the eighth wonder of the world “COMPOUNDING GROWTH”.

And for every year you wait to see what will happen will guarantee that you and your next generations will retire with less $’s when you combine the above factors which all influence, drive and underpin your investment.

Read more here.

Who is in control of my future worth?

Finally “ONLY YOU and the thoughts you choose to have about property investment, have the ability to take control of your own Financial Destiny.”

If you have a deposit or access to equity for a deposit and you choose not to do anything OR to take action either way you will be right.

Holding property for 7-10 years mitigates risk and has the propensity to ensure that property investment is a low risk profile investment vehicle. Where else can you invest say $65k and have this $65k working for you at around 40% pa?

Ask us how ….

Leave a Reply