Obviously the best time to invest was a couple of decades ago. If you did, your properties would be worth a lot more than what you paid for them. But if you didn’t buy in the 90’s, whens the next best time? Well once you have enough money for a deposit, here is a way to figure out the best time to jump in the market.
A nifty little indicator on when to buy property is to look at what property developers and experienced investors are doing. Most people when buying property, look at what the crowd is doing and fall into the ‘crowd mentality’ – if a bunch of people are buying, then I better do it too, so I don’t miss out. But rather than watch the majority, keep an eye on the property developers, because they are experienced, committed and have more to lose than you, so they try very hard to not make mistakes.
But what do developers do? Developers have a cycle within the standard property cycle of: Boom-Stagnation-Crash. Experienced investors, tend to stop buying about the peak of the market when property hysteria kicks in, because prices are getting out of hand, and the returns on investment properties are lower. They stay out of the market for about 18 months after the peak of the boom, to allow for the market to get back to a point where prices have stabilized.
Once prices have stabilised investors pick up their activity at the end of the ‘price stabilisation’ phase and sweep in and purchase the excess supply in the market. This creates an ‘urgency’ and home-buyers get back into the market, and we quickly head back in the ‘Boom’ phase, which means investors get out of the market!
So maybe you should follow suit. Don’t get swept up in the hysteria of the boom: rather than purchasing in the boom, this maybe the perfect time to befriend an experienced investor or developer and learn their tricks. Or you can use this time to work on your current properties and develop your investing education.
What about you, when do you purchase your investment properties?