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Article in the Sunday Times about Kieran Trass and his property cycle.
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Article in the Sunday Times about Kieran Trass and his property cycle.
Peddling the property cycle
SUNDAY , 01 AUGUST 2004
Kieran Trass tells ROB STOCK his competitors are following his new sales pitch for investors.
The new catch-cry of the property seminar circuit is "making money with the property cycle".
That's not surprising, says author and property seminar guru Kieran Trass. After years of pumping out the message that property is a one-way bet to wealth, his competitors have woken up to find they need a new sales pitch.
The property boom is clearly over, some commentators are predicting a crash, and investors are leery of claims that property is a route to quick riches.
Where once there was a flow of willing recruits to property investing (and the costly weekend courses and expensive house-finding services), there is now only a trickle.
Trass believes his competitors have found that new pitch by imitating his analysis of the property cycle, which he is promoting in his new book, Grow Rich with the Property Cycle, released by Penguin tomorrow.
"They have all jumped on to the property cycle band wagon," says Trass, whose Hybrid Group of companies runs seminars, sells properties, arranges finance and even sells a property investing board game.
"Their adverts haven't worked so they've had to change them. They've recognised what that Trass fellow's got is a bloody good idea."
The idea of the property cycle is not a new one (indeed Trass trademarked his property cycle clock more than two years ago).
Many investment markets have cycles of boom, slump and recovery - Trass is careful not to use the word bust.
The property cycle is attractive because it provides a framework around property investing, which means instead of there being times to be in or out of the market, there are simply different strategies for managing a portfolio of properties through the different stages of the cycle.
The implications for seminar and property investment businesses are profound because it gives them a convincing story to market their services at any point in the cycle, even when the market is slumping.
Trass' model of the property cycle outlined in his book is split into three phases: boom, slump and recovery.
Each phase, he says, has three phases within it, though the length of any phase is far from constant or predictable.
That means property investors must work hard to monitor the economic indicators (Trass gives his chosen indicators and sources to follow them), that Trass believes are the keys to understanding the cycle.
So what does the wise investor do in each of these phases? The following is a gross simplification of Trass' view:
The boom phase: At the beginning of a boom the wise investor targets cash-flow positive investments in lower to middle socio-economic areas. In the middle of the boom, wise investors will see that investment opportunities are drying up, though value can be created, for example, through "do-ups" or splitting older properties into two rentable units. In the final phase, greed dominates the market. Wise investors consider selling their most at-risk properties, reducing debt, perhaps freeing cash to invest in other investment vehicles. They will also then have cash to buy when others are selling later.
The slump phase: Throughout the first, second and third phases the wise investor has an eye out for good buys, such as in mortgagee sales, but otherwise is a reluctant buyer. As at any time during the property cycle, the wise investor is buying only cash-flow positive properties.
The recovery phase: Wise investors enter an aggressive buying pattern at the start of the recovery and, if they have played the previous two phases well, will have the means to do so. The most successful will buy properties in upper socio-economic areas that deliver positive cash-flow. As the recovery enters its second phase, they will continue this pattern, but entering its third phase it is becoming noticeably harder to buy affordable property in the best areas. That means looking for "do-ups" in those areas, or looking in middle-income areas where the recovery is spreading.
The No 1 question Trass says he is asked is: "Is now the right time to invest in property?"
But in recent months many people have a new favourite phrase for him. He says: "I'm sick of being told by people that they are waiting until there are real bargains out there."
Trass believes the media has convinced much of New Zealand that a bust is coming and house prices will crash.
That will create plenty of bargains, amateur investors tell him, and property investing will once again be like plucking apples from a tree. But that is not going to happen, Trass says. They have been sold a model of the property cycle that is distorted and extreme.
But whereas a crash isn't on the cards for Trass, the cycle will roll on, and is now clearly in a slump phase.
There are other certainties, says Trass. They include the inevitability that as long as the property cycle exists, many investors will be driven by greed to buy at the top of the market, and then driven by fear to sell at the bottom.
He admits not even his book will change that, but an investor with a clearer understanding of the market cycle stands a better chance of success.
SUNDAY , 01 AUGUST 2004
Kieran Trass tells ROB STOCK his competitors are following his new sales pitch for investors.
The new catch-cry of the property seminar circuit is "making money with the property cycle".
That's not surprising, says author and property seminar guru Kieran Trass. After years of pumping out the message that property is a one-way bet to wealth, his competitors have woken up to find they need a new sales pitch.
The property boom is clearly over, some commentators are predicting a crash, and investors are leery of claims that property is a route to quick riches.
Where once there was a flow of willing recruits to property investing (and the costly weekend courses and expensive house-finding services), there is now only a trickle.
Trass believes his competitors have found that new pitch by imitating his analysis of the property cycle, which he is promoting in his new book, Grow Rich with the Property Cycle, released by Penguin tomorrow.
"They have all jumped on to the property cycle band wagon," says Trass, whose Hybrid Group of companies runs seminars, sells properties, arranges finance and even sells a property investing board game.
"Their adverts haven't worked so they've had to change them. They've recognised what that Trass fellow's got is a bloody good idea."
The idea of the property cycle is not a new one (indeed Trass trademarked his property cycle clock more than two years ago).
Many investment markets have cycles of boom, slump and recovery - Trass is careful not to use the word bust.
The property cycle is attractive because it provides a framework around property investing, which means instead of there being times to be in or out of the market, there are simply different strategies for managing a portfolio of properties through the different stages of the cycle.
The implications for seminar and property investment businesses are profound because it gives them a convincing story to market their services at any point in the cycle, even when the market is slumping.
Trass' model of the property cycle outlined in his book is split into three phases: boom, slump and recovery.
Each phase, he says, has three phases within it, though the length of any phase is far from constant or predictable.
That means property investors must work hard to monitor the economic indicators (Trass gives his chosen indicators and sources to follow them), that Trass believes are the keys to understanding the cycle.
So what does the wise investor do in each of these phases? The following is a gross simplification of Trass' view:
The boom phase: At the beginning of a boom the wise investor targets cash-flow positive investments in lower to middle socio-economic areas. In the middle of the boom, wise investors will see that investment opportunities are drying up, though value can be created, for example, through "do-ups" or splitting older properties into two rentable units. In the final phase, greed dominates the market. Wise investors consider selling their most at-risk properties, reducing debt, perhaps freeing cash to invest in other investment vehicles. They will also then have cash to buy when others are selling later.
The slump phase: Throughout the first, second and third phases the wise investor has an eye out for good buys, such as in mortgagee sales, but otherwise is a reluctant buyer. As at any time during the property cycle, the wise investor is buying only cash-flow positive properties.
The recovery phase: Wise investors enter an aggressive buying pattern at the start of the recovery and, if they have played the previous two phases well, will have the means to do so. The most successful will buy properties in upper socio-economic areas that deliver positive cash-flow. As the recovery enters its second phase, they will continue this pattern, but entering its third phase it is becoming noticeably harder to buy affordable property in the best areas. That means looking for "do-ups" in those areas, or looking in middle-income areas where the recovery is spreading.
The No 1 question Trass says he is asked is: "Is now the right time to invest in property?"
But in recent months many people have a new favourite phrase for him. He says: "I'm sick of being told by people that they are waiting until there are real bargains out there."
Trass believes the media has convinced much of New Zealand that a bust is coming and house prices will crash.
That will create plenty of bargains, amateur investors tell him, and property investing will once again be like plucking apples from a tree. But that is not going to happen, Trass says. They have been sold a model of the property cycle that is distorted and extreme.
But whereas a crash isn't on the cards for Trass, the cycle will roll on, and is now clearly in a slump phase.
There are other certainties, says Trass. They include the inevitability that as long as the property cycle exists, many investors will be driven by greed to buy at the top of the market, and then driven by fear to sell at the bottom.
He admits not even his book will change that, but an investor with a clearer understanding of the market cycle stands a better chance of success.
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