Over the years many people have asked me, is it a good time to buy real estate?
The short answer is real estate is a medium to long term investment. Nobody knows what the real estate market is going to do next. So don’t try to guess the market and make quick profits from real estate. The best strategy is to invest for the long term and wait. As the longer you are in the market the more likely you are to profit from real estate.
Of course, you will hear stories of lucky people who bought real estate and the property market boomed shortly afterwards. I was lucky enough to have that happen to me. However, for most people that would be just good luck and not due to them knowing anything about the property market.
However, having said that, there are some basic strategies that you can implement to improve your chances of profiting from property.
Firstly, I would argue against buying into a property market that has recently boomed and values have sharply increased. If the market has already boomed you are probably too late. You have missed the opportunity to make a quick capital gain.
However, when property market prices rapidly increase many people follow everyone else thinking that if they don’t buy now, they will miss out and it will be harder to get in later. There is some truth to this with real estate but generally if the prices have already dramatically increased you have missed the opportunity. You will be purchasing at the peak of the market which is the complete wrong time to buy property.
Usually after a property boom the market quickly settles down and prices remain flat for a long period of time. In fact, the volume of sales can rapidly fall away making selling properties difficult as there are few buyers in the market.
The absolute best time to purchase real estate is when the property market has been slow for many years and property owners are prepared to drop their prices to sell their property. Property owners are thinking that owning property is a waste of time as their property has not increased in value for years. Property owners want out and are prepared to “meet the market” with their selling price.
This is when I purchase property.
The secret is, the longer the property market is depressed the bigger and faster the boom, when it comes. If the property market has been flat for ten years or more, when the property boom arrives expect properties to increase 50% to 100% over a two-year period.
A good strategy is to never buy any investment property because you feel you have to be in the property market or you trying to reduce your tax burden.
The decision to purchase property must be based on sound economic and financial reasons and not be emotionally based. Usually, you are never going to live in an investment property so turn off your emotions when buying. Purchase a property that meets your financial requirements not your heart’s requirements.
Sometimes you may buy a property because it seems like it’s under-priced. This can often lead to making a quick profit and I have done that myself.
However, I would not recommend purchasing any investment property unless you can afford to keep it until it increases in value.
In conclusion, most experts will tell you to stick with one investment strategy that fits your personal financial circumstances. And when you take a long-term view with property, you will succeed.
