Best time to invest

[fudosan]

I know that, as many have said, as long as the numbers stack up, it is always good to invest. However, I tend to think the best time (less effort and less risk) to invest is during market slump, for the following reasons:

1. Rent may be or near its bottom, so the downward risk in INCOME is minimum.
2. If a long-term fixed mortgage is used, the upward risk in EXPENSE is minimum.
3. Because there are far less buyers, you can take the time to do your due diligence.
4. As Kieran points out in his book, during market slump, you can buy quality properties closer to the city centre.

So what do we do during the boom times? Rents and property values are up, and so is the NZ$, so that is the best time to travel overseas and enjoy a good holiday. What do you think?

[Aston]

NOW is the best time

I know that, as many have said, as long as the numbers stack up, it is always good to invest. However, I tend to think the best time (less effort and less risk) to invest is during market slump,

My Father always said that "NOW" was always the best time to invest in property and I have also taught the same to my Son. Never wait for the slump, just keep investing. If you're only buying during the slump, you'll only ever be able to have half the amount of fun.


If you time the market correctly Fudosan, you'll be the first person in history ever to do so.

Aston.

[RentMaster]

I think if you are looking to buy, renovate and sell again, then market timing is a lot more important. If it looks like prices might be dropping, then you could loose quite a bit.

But rental properties tend to be a long term investment. So timing is less critical. You may gain or loose 5% in your first year depending on the market, but the long term average tends to even out the short term bumps.

[Propoholic]

I agree with Fudosan.

Aston wrote:

My Father always said that "NOW" was always the best time to invest in property and I have also taught the same to my Son. Never wait for the slump, just keep investing.

That is contradictory to the fundamentals of prudent investing:- 'time in the market and timing the market'. Saying, "Now" was always the best time to invest in property is like a boxing trainer instructing his boxer to throw his best punches and be most active in every round. A strategy like that plays into the hands of the experienced opponent who will wait for the opportunities to appear in rounds 7 - 12. The boxing promoter will always say that "Now" is always the best time to invest because he takes his cut win or lose. There are a lot of boxing promoters in the property investment industry at the moment.

If you're only buying during the slump, you'll only ever be able to have half the amount of fun.

You'll have twice the fun during the slump....didnt you know?

If you time the market correctly Fudosan, you'll be the first person in history ever to do so.

Counter cyclical investing is not about timing the market correctly by picking highs or lows but being aware of the different oportunities in the various phases of the cycle. The slump phase may last 12, 18 or 24 months and it is this period where there is the greatest concentration of opportunities for investors. This is where the general public wont touch property with a barge pole and Susan Wood is interviewing people leaving for better pastures.
Fudosan wrote:

As Kieran points out in his book, during market slump, you can buy quality properties closer to the city centre.

Yes and at yields similar to or better than being achieved in lower quality areas during the peak of the boom.

[fudosan]

Interactive Property Management did a reseach into rent cycle from 1992 to 2004. Interestingly, it coincides with the property cycle. For example, rent of 3-br in Auckland Central suburbs peaked to 338 pw in 1996, then dropped to 316 in 1999, and again peaked to 403 in 2003.

[Dean@Massiveaction]

I agree Now is always the best time to buy as long as you understand your rules. Saying some times are better than others is saying there are only distressed vendors in certain phases, or bargains are only available in certain phases. All that changes is the amount of effort required to find the good deals in certain markets. I built a pos cashflow portfolio well below valuation in the middle of our biggest boom. It just takes more effort. Never be put off buying, why wait to retire, do it NOW!!
Take some action NOW, you'll out perform 94% of teh market!!

[kolzee]

Fudosan, if you're interested in market cycles take a look at the migration statistics in relation to the property market....IMO it's the best indicator and is forecast reasonably accurately too!!!

[fudosan]

You are right kolzee. Specifically it's the cycle of immigration not NET immigration (i.e. immigration minus emigration) that closely parallels the property cycle. I noticed this pattern quite a while ago. It has been correct since '74 (only exception is '87).

[Propoholic]

Hi Dean

Pooomba wrote:

Saying some times are better than others is saying there are only distressed vendors in certain phases, or bargains are only available in certain phases.

No one has ever suggested that on this thread???? What has been suggested is there is a higher concentration of distressed vendors or bargain properties in certain phases of the cycle. As has been stated previously:-

The slump phase may last 12, 18 or 24 months and it is this period where there is the greatest concentration of opportunities for investors. This is where the general public wont touch property with a barge pole and Susan Wood is interviewing people leaving for better pastures.

Pooomba wrote:

All that changes is the amount of effort required to find the good deals in certain markets.

Exactly, why not weight and prioritise your buying to periods where owners are exiting the market, there are few buyers on the ground, there is an abundance of sellers and real estate agents are finding it tough. This is all about leveraging your time and resources! Why go to Disneyland in the Summer season and stand in the long queues for every attraction(and then get turned away) when you can arrive in the off season and walk directly into every deal, I mean ride! No one is saying dont go to Disneyland in July but based on information available to us we can make an informed choice and position ourselves for an easier experience and more profitable outcome.

Never be put off buying, why wait to retire, do it NOW!!

What does that mean??????that's straight from the seminar circuit! That's all very well for the more seasoned investors who have a bit of fat behind them, you and I can do whatever deals we like at the moment(at the peak of the market) and if it turns out that it wasnt so prudent timewise it probably wont matter. I think it is totally irresponsible to be pushing "do it NOW" to new investors without explaining the pros and cons of investing in a softening market. The historical information and stats are out there, why not present more of a balanced view, it will only assist all concerned!

Take some action NOW, you'll out perform 94% of teh market!!

Buy at the current market peak and you'll out perform 94% of the market?? How does that work, prices may soften in the medium term and rents in central Auckland are currently softening. I know a case at the moment of a couple who have purchased a 1brm B&T unit in Epsom. After being relet recently the rent has been reduced by $40.00 pwk, it is no longer +ve cashflow. This deal looked great on paper but due to rental decline, $2000.00pa (-15% rent) has been wiped instantly. A $2000.00pa reduction may not be so much of a concern to the more seasoned investors but for first timers it may be a scenerio that they havent budgeted for and cannot budget for.This rent softening is due to the fallout from the inner city apartment stock. Leonie Freeman (Interactive Property Management) highlighted at the recent APIA meeting that city fringe rents were being affected by the softening apartment rents. In addition they were finding that the best quality inner city apartment rents were also being dragged down by the rest of the stock.

Naturally,the likes of Bob Jones is very in tune to market movements and has a focus on depressed market opportunities and recognises that there are times when it is prudent to do nothing, except for going on holiday. I dont see why first time investors should be advised to treat residential property investment any differently?

'Now is the best time to buy' is straight from the sales and seminar circuit.

[whitt]

Well Propoholic has beaten me to most the comments I was going to make.
In a article I wrote awhile back
http://www.propertytalk.com/content/view/257/82/ refer finance section of article
I referred to many of the points raised. It is wiser as you leave a boom to not be maxed out in your borrowings. That gives you some extra safety barrier should market flatten or rents drop slightly ( which historically they do and is happening now in AKL).

If you are a big time investor you possibly have done well out of a boom and may have spare capacity available. So anytime can be a time to buy if it meet your buying rules.
But for alot of average investors who are close to max they could be safer waiting for market to flatten and give it time as Propoholic stated.