This question is on the lips of many first time investors, and it is one of the most common topics for discussion for property investment strategists when they first meet investors. The answer depends greatly on the individual circumstances of the investor, their financial position and their long-term strategic plan for wealth creation. Because investing in property should seen as a 10 to 15 year commitment, there is no “magic” time in the market to invest.
Why “Bargains” Matter Less Than A Long-Term Strategy
For the vast majority of investors buying an asset as large as a property is not an insubstantial purchase, and no one willingly invests expecting to lose money over the long-term. It’s natural to be cautious, especially if the property market seems to be fluctuating. The issue for investors is that if they waited for the “ideal” time to purchase property they’d probably never take the plunge at all, and you’ll find lots of people who regret not buying into the market at certain points because they felt that there might be a better time to invest or to bag a bargain.
While natural, this indecision when it comes to residential property investment may be misplaced. True capital growth for property occurs over a 7 to 10 year cycle, and largely ignores ephemeral changes such as falling or rising interest rates and monthly median value movements. Instead, smart investors do their research and take advantage of bigger picture longer-term demographic and economic trends such as the move towards apartment living and the increasing numbers of renters in inner city urban locations.
Professional investors – those with substantial property portfolios – know that there is no definitive “right” time to get into the market. They make the decision to invest based on their own personal circumstances, meaning that they are financially able to afford to do so and it fits with their overall 10 to 15 year investment strategy. This is not to say that buying a property during a downturn in the market when prices are deflated or there are genuine bargains on the market is not a great idea to maximise your future capital growth. However the key to making successful property investment decisions is to base them on:
- Your ability to afford an investment loan, ongoing expenses such and property management and strata fees while maintaining a sensible contingency fund; and
- Longer-term economic and demographic changes and trends that indicate areas for strong growth in the future. Taking a bigger picture view also requires knowledge of the property market, and experienced property investment strategists such as Ironfish can provide you with extensive research that will help set you up for future success.
Ultimately the key to a starting or building on a successful residential property investment portfolio is to choose a time when you are financially ready, and when you are most able to create a sensible long-term strategy for building a successful property portfolio.