Property Investment

Property investment


The property market has done a downturn. Prices are crashing around your ears. So does this mean that you should get out of property investment? No this is actually a golden opportunity to increase your property portfolio. When you are buying property it does not really matter whether the market is up or down unless you are considering selling in the short term. If you are holding long term then you have to accept the market fluctuations with an inevitable upward trajectory over the years. If you can buy at the lower end of the cycle that is the best time to buy but very often it is hard to tell precisely where the market is at.

If the market is experiencing a severe downturn it is a great time to be buying because there will be a large number of bargains. Just check the foreclosure lists and mortgagee auctions. You can pick and choose and buy at rock bottom prices. A word of caution, however, do not get too negatively geared because this is how most investors get themselves into trouble in the first place. Go for positive gearing. In other words make sure your rental income equals or exceeds your outgoing including mortgage repayments. If you have other income you may be able to stand an extra $100 or more per month to top up the mortgage but try to avoid it. There is nothing so good as sleeping easy at night knowing that the mortgage payments are taken care of. Negative gearing is ok if you have a really good income and a tax problem.

If the property market is rising rapidly you can be confident that the value of your investment is increasing. That is where your profit is and you should be able to sell relatively easily if necessary. However, that was when the market was buoyant but now the reality is that the market has dropped and you need to be able to hold long term without any worries. It may take a few years before we hit healthy real estate selling conditions again, let alone a property boom.

Meanwhile , concentrate on positive gearing and steadily increasing returns. This is a long term game and always has been. Look at property investing from a business perspective and do the sums before you buy. You need a decent return on investment and you need the rental return to cover or nearly cover the mortgage expenditure.

Having said all that, there is no getting away from the fact that with good research and due diligence the down and depressed market presents serious investors with the best opportunities to build a portfolio of profitable properties for long term gains.

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