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  1. #1

    Default Trading property flat market vs rising market

    My wife and are looking at property trading as our next plan.

    As we are beginners in the trading sense of property (own our own house and one buy+hold) we thought best to wait until a rise in the property markets as a rising tide can hide a multitude of sins. Buying in a flat market might catch us out.

    For those that started trading, what kind of market did you begin in? Would you have done it differently if you had your time again.

    Our plan is;

    Beginning flat market (such as now) - focus on paying down debt and improving current property

    End flat market- yields will be higher so look to purchase buy + holds

    Beginning rising market- delayed settlements, new builds, begin property trading.

    Middle/end rising market- sell off trades, quicker turn around trades.

    Rinse and repeat.

    Thoughts?

  2. #2
    Join Date
    May 2007
    Location
    Hamilton
    Posts
    3,635

    Default

    Buying in a flat market is easier. But big question is can you really add value? Or are you just reliant on the market to go up to make some profit?

    I feel there is 4 ways to trade.

    1) just get lucky with the market. I think a lot of new traders are in this camp. ie make $30k profit from renovating bathroom, kitchen, doing up a bit, but over this time the market also went up $30k.

    2) Buying well - I think these are the best traders as they make their profit at the start and decrease risk. If market falls a bit you have built in a buffer.

    3) Bigger projects like subdivisions etc. I like these as subdivisions generally add value. But they take time, which means you can get caught by changing market. 2 bedroom to 3 bedroom, those kind of projects.

    4) Really adding value - Personally I don't have the skills to actually add value through a renovation. I'm not hands on. My wife is great with colours and design, but still we would really struggle to add value through renovating, unless the market just went up. I actually don't think there is that many people who can really add value through renovating.

    Big question for you, what is your trading strategy? If you don't want to do bigger projects, I would concentrate on how are you going to buy extremely well? Work out some ideas on how you can do this and try? If you can buy extremely cheap, why not trade in a flat market? As long as you have a big market, ie cheaper homes to first home buyers.
    If you can really add value, then great, you buy really cheap, add some value and you will do awesome as a trader. But if you can't, if you do a quick tidy up, a few select items, you can make the property easy to sell, and hopefully as you purchased well make a reasonable profit.


    Last - it's all about the profit. That is why you trade and always keep that in mind!

    Good luck

    Ross
    More Profit from Property? TEACH ME MORE
    Ross Barnett - Coombe Smith Property Accountants
    Proud to give the best property advice for over 13 years.

  3. #3

    Default

    Quote Originally Posted by Rosco View Post
    Buying in a flat market is easier. But big question is can you really add value? Or are you just reliant on the market to go up to make some profit?

    I feel there is 4 ways to trade.

    1) just get lucky with the market. I think a lot of new traders are in this camp. ie make $30k profit from renovating bathroom, kitchen, doing up a bit, but over this time the market also went up $30k.

    2) Buying well - I think these are the best traders as they make their profit at the start and decrease risk. If market falls a bit you have built in a buffer.

    3) Bigger projects like subdivisions etc. I like these as subdivisions generally add value. But they take time, which means you can get caught by changing market. 2 bedroom to 3 bedroom, those kind of projects.

    4) Really adding value - Personally I don't have the skills to actually add value through a renovation. I'm not hands on. My wife is great with colours and design, but still we would really struggle to add value through renovating, unless the market just went up. I actually don't think there is that many people who can really add value through renovating.

    Big question for you, what is your trading strategy? If you don't want to do bigger projects, I would concentrate on how are you going to buy extremely well? Work out some ideas on how you can do this and try? If you can buy extremely cheap, why not trade in a flat market? As long as you have a big market, ie cheaper homes to first home buyers.
    If you can really add value, then great, you buy really cheap, add some value and you will do awesome as a trader. But if you can't, if you do a quick tidy up, a few select items, you can make the property easy to sell, and hopefully as you purchased well make a reasonable profit.


    Last - it's all about the profit. That is why you trade and always keep that in mind!

    Good luck

    Ross
    Thanks Ross,

    I imagine you see a fair few property traders in your accounting business? Are the successful ones the ones who negotiate well and buy cheaply? How do they go about doing this? Low ball offer everything, buy privately, mortgagee sales, etc?

    Thanks

  4. #4
    Join Date
    Mar 2007
    Location
    Auckland
    Posts
    3,060

    Default

    Don't forget that if you buy and resell on a rising market, quite a lot of your 'profit' has to go into buying the next property. So a substantial part of the profit is illusionary.

  5. #5

    Default

    Quote Originally Posted by flyernzl View Post
    Don't forget that if you buy and resell on a rising market, quite a lot of your 'profit' has to go into buying the next property. So a substantial part of the profit is illusionary.
    Fair point, didnít think of it that way until now.

    What would you do instead FlyerNZL?

  6. #6

    Default

    Quote Originally Posted by House Hunter View Post
    Fair point, didn’t think of it that way until now.

    What would you do instead FlyerNZL?
    Yes definitely. It's a catch 22. Sometimes it can be smart in a rising market to try to move sideways and not necessarily up.

  7. #7
    Join Date
    Mar 2007
    Location
    Auckland
    Posts
    3,060

    Default

    Quote Originally Posted by House Hunter View Post

    What would you do instead FlyerNZL?
    I have never been a trader, I stick to being a buy-and-hold long-term landlord.
    Over 27 years of landlording I have never ever sold an investment property, so I am probably the worst person to ask.

    Not that you are necessarily wrong, it just not my bag.

  8. #8
    Join Date
    Mar 2015
    Location
    Brisbane Wellington Auckland
    Posts
    831

    Default

    Quote Originally Posted by flyernzl View Post
    I have never been a trader, I stick to being a buy-and-hold long-term landlord.
    Over 27 years of landlording I have never ever sold an investment property, so I am probably the worst person to ask.

    Not that you are necessarily wrong, it just not my bag.
    Would you sell ?
    Eg
    1: earthquake rating
    2: see something you like to buy but lack equity
    3: change of investment type
    4: Interest rate back up to 24pc
    5:a silly offer from a potential buyer

  9. #9
    Join Date
    Mar 2007
    Location
    Auckland
    Posts
    3,060

    Default

    I bought for income.
    I have that income.
    Why would I sell when I have got where I want to go? - I am lazy.

  10. #10
    Join Date
    Mar 2015
    Location
    Brisbane Wellington Auckland
    Posts
    831

    Default

    Quote Originally Posted by flyernzl View Post
    I bought for income.
    I have that income.
    Why would I sell when I have got where I want to go? - I am lazy.
    Great going
    I wish I had your discipline
    If I did not sell I would own 66 properties today :-(


 

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