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When is the right time to buy?

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  • When is the right time to buy?

    Hi all, my first time on . Thanks to Marc for helping me sort out some problems. Finally I can put faces to the names . :-)

    Logic tells me that in general NZ is at the peak of it's P cycle and that waiting for values to drop would be a sensible decision. One bad thing about this is increasing interest rates right? The advise given out on this site never seems to mention" wait and see". Why? Books I read about setting up Prop portfolios never seem to talk about the disadvantages of buying at the peak-- it's all buy buy buy, get your assets and aim for a return.

    Can anyone enlighten me? What philosophies do you guys have?

    Cheers Jab

    The Jaberwoky.

    The only silly question is the one you didn't ask.

  • #2
    Hi Jaberwoky

    Welcome to Property talk.

    I am a believer that any time is the right time to buy IP's. At this time the property cycles seems to have peeked and means that investors will need to look harder to find the good deals.

    Rising interest rates are just one of the factors to consider when deciding what makes a sound purchase.

    You don't know how great things are until you loose it.


    • #3
      Welcome aboard Jaberwoky

      A great starting question that has often been discussed...

      As you read past posts you will find a lot of sound advice on this subject. Particularly recommend reading some of Orions posts. He also does a bit of a lecture tour. (not a bad speaker, very serious young man, challenges you to review your own goals.... Yes I enjoyed his input).

      In short his theory is along the lines of "to hell with the property cycle. If the figures fit they fit. All expenses and repayment of the mortgage should be met by the tenant," Hard to argue with that.

      He is also the author of a book "NZ Real Estate Investors Secrets". This book outlines the strategies of 10 NZers. A good read.

      Another good poster to look for is Kierin Trass, Hybrid ....

      He has a web site and has written a book "grow rich with the property cycle".

      He has outlined how to use the property cycle to your advantage. An excellent read. Shows what to look for in each of the property cycle stages (including the bust part) and how to apply it to your goals.

      Conversely I have enjoyed asking questions on this site the forumites are great.

      Glen is good for Property management advice(Is he ever...). The knowledge he imparts is based on his personal experience as a Property Manager in Nelson. He should write a book.

      Murray gives good advice on accountancy.

      And Muppet is font of knowledge on where to find anything.... Have a look at his last post... Links to everything everywhere.

      Hopefully the guys mentioned above are still talking to me after this post. The same goes for the guys I didn't mention. A lot of good contributors.

      Anyway I hope this gives you something to start with....

      Counter cyclic means always swimming against the tide

      Manawatu Property Investors' Association


      • #4
        Hello Jaberwoky

        When the property market reaches its peak, it is usually the number of sales that fall rather than prices. This is because most sellers do not HAVE TO sell their property. If they can’t sell the property for the price they want, they take it off the market. This reduces supply and can stop prices from falling, which is why property prices have rarely fallen over the last 30 years.

        However some people will have no option but to sell, and this can present good buying opportunities, especially to well organised property investors. It also means that average prices can and do fall at times. Different areas will be affected to different degrees, so it pays to know the area you are going to purchase in very well.

        It is difficult to judge if, when and by how much house prices could fall in a given area, which is why many investors simply raise their buying criteria (drive for bigger bargains or seek opportunities to add more value) so they are less affected should prices fall.

        One of the main drawbacks of falling property prices is that it reduces your equity and makes it harder to borrow funds for future purchases. If you have really pushed your equity limits through aggressive purchases, then falling house prices could see the bank having a hard look at your situation and require you to reduce your loans. Without any cash reserves this usually means selling properties. You may then find yourself in the unenviable position of HAVING to sell your property. Never a good position.

        If you have good equity and cashflow, the next few years would be a good time to build up a few properties at a rate that your financial, personal and psychological (risk tolerance) situations allow. You will probably have to counter criticism from friends and relatives and ignore media headlines for the next few years, which can be tough. However many people who have recently done well out of property were the ones who started to invest in 1998 at the end of the last cycle. They took a long-term view, went against general opinion and reaped the rewards.

        Make sure you develop a plan of what you want from property and how your going to achieve it, as this makes the whole process a lot easier.
        Andrew King,
        Too many tenants in your property? Hire a sleepout from Cabin King and increase the rent
        NZ Property Investors' Federation


        • #5
          When the property market reaches its peak, it is usually the number of sales that fall rather than prices.
          This morning while organizing old magazines I happened to read this same comment Andrew wrote back in the Feb 1999 issue of Residential Property Investor, when the peak of the previous cycle was over. So a good idea may be to read those old issues of Residential Property Investor (owned and later sold by Andrew), if you can still find them. It is not flashy but offers many good ideas on property investment that can still be used today.


          • #6
            Like any investment, the best time to start depends greatly on your term of investment. If you're looking to buy and sell then you'd need to be a lot more picky than if you were looking to buy and hold long term.
            You can find me at: Energise Web Design


            • #7
              Cheers for your input guys,

              Think I've got some reading to do.

              Thanks again


              The Jaberwoky.

              The only silly question is the one you didn't ask.