How to succeed when buying property
Despite what they say on the news, making money through property isn’t easy. Buying a property, however, is simple enough for most to accomplish.
When looking to buy, if you do what many property buyers do, you’ll get the same results as these property buyers get – and that’s getting stuck with properties that don’t appreciate in value for years to come because they paid a premium when buying.
On the other hand, if you understand the following truths about real estate, you’re more likely to buy a property that will reward you with solid capital growth over time.
Property markets has its ups and downs
The value of well-located properties increases over the long term, often doubling every 10 – 12 years. But there are times every property cycle when values stagnate or even declines – sometimes for a number of years.
And then there are short periods when the value of your properties will fall a little due to flow on effect of unexpected global market drivers like a pandemic! This is out of your control.
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Go fishing when other hunters are hibernating
Being a countercyclical buyer isn’t easy. Most buyers are overly optimistic during booms when they should be cautious and pessimistic during downturns when they are surrounded by opportunities.
The biggest issue when buying during a boom is competition from fellow buyers. Recent history shows, when Australians get in on the property buying frenzy, unreasonably high offers start getting tabled for property’s that can be classed as average as FOMO sets in.
Property gurus have no idea where market is going
While in the long term our markets are driven by fundamentals, in the short-term human emotion and crowd psychology play havoc with the best laid forecasts.
Then every few years an unknown X factor comes out of the blue to surprise us - sometimes on the upside, but more often on the downside.
Everyone’s a property expert
Strategic property buyers buy themselves time in the market by having financial buffers in place to see them through the ups and downs of the property cycle.
Keep your eye on the big picture and the long term and avoid being distracted by the white noise and the fake news. The majority of market news is not only useless, but it is harmful to your financial health.
Most of what is taught about property investing is theoretical nonsense. Very few of the current property educators are independently rich from property. That’s why they’re selling $995 courses on social media instead of enjoying early retirement.
Rather than listen to the get rich quick stories, it’s worth listening to those who talk about mistakes they made when starting out in property, maybe it will help you avoid making the same mistakes.
Consumer debt is bad for your borrowing power
Many home buyers still get caught out when they apply for a mortgage and get told that they can only afford to borrow $X when their budget points to a much higher capacity. The culprit, existing credit card(s), short term personal loans and ‘Buy Now Pay Later’ accounts.
I am not saying all debt is bad. Taking debt to buy an appreciating asset is what I would consider a good debt so, if you are looking to buy or refinance, cancel or reduce your credit card and ‘Buy Now Pay Later’ facilities before you apply for a home loan.
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This article via Property Update does not constitute advice; readers should seek independent and personalised counsel from a trusted adviser that specialises in property, a tax accountant and property design specialist.