Is Now a Good Time to Buy an Investment Property?

They say timing is everything, and in real estate this certainly can hold true, but it all depends on what your objective is. Timing is often the primary focus of real estate entrepreneurs, who make a very big deal about when to buy, and when to sell. And indeed timing is very important if you are going to be in the market for only a couple of years? if you overpay just slightly for a property, and the market doesn’t behave itself, you’re in trouble.

As investors though, the focus needs to be on paying fair value for a property and buying in the right market. Buying at the right time is a secondary consideration. If you pay a fair price for a good property in a market with the potential for growth and you are holding it for the long term, timing becomes much less of an issue.

And let’s face it, no one has the ability to see into the future, and to pick the bottom or top of the market. A strategy which involves time in terms of duration, and which focuses on buying a fair value property is much more integral to the success of a property investment than just trying to get the timing right.

Once you’ve decided to invest long term, and pay a fair price for a quality property in an area where you have decided there is growth potential, timing becomes a secondary consideration. That’s because there’s an inverse correlation between the term of the investment and the need to get timing right. If you hold a property for 10 or 20 years, timing becomes less and less important.

The classic example of this is your typical mum and dad, who bought a property 30 years ago for $30,000. Even if they’d overpaid by 10%, and it was really worth $27,000, today that property is worth $600,000? so the fact that they’d overpaid becomes irrelevant. Time has reduced the importance of timing.

Timing does matter, but what you really need to consider is how long you’re going to be holding onto a property. If you’re an investor, don’t fret about timing. If you’re an entrepreneur, fret about it because it can really hurt you.

As long as you’re paying fair value then time takes care of the rest. If you’re overpaying then it’s obviously going to take much longer to make up for that mistake. So the focus should be on fair value, not on getting the timing right.

One of the negatives of excessively worrying about getting the timing right is the bargain-hunting mentality, because it often leads to inaction, and an unnecessary delay of a purchase.

The bargain-hunting buyer expends huge amounts of time and energy looking for the cheapest deal, and two to three years later no property has been purchased yet, because they are still trying to squeeze out a bargain every time a property comes up. Meantime, the market’s gone up 10% and the bargain hunter has missed out on growth in the market.

Now we’re not going to tell you to ignore everything we’ve said about holding for the long term, but it should be said that no amount of time can save you if you’ve entered into a market you haven’t properly researched. Buying fair value and holding for the long term is the essence of no-frills real estate investment, but first and foremost, be aware of the market you are entering into.

You must be armed with as much knowledge as possible in order to make a good decision. If you don’t have the time to do the necessary research, find someone who can advise you. Holding for the long term is an excellent strategy for an investment as illiquid as real estate, however, it’s not always going to save you if you’ve chosen the wrong market to buy in.

When it comes to timing, the message to investors is clear: don’t focus all your valuable time and energy trying to forecast the troughs or peaks of the real estate waves. A long-term investor understands that real estate on average increases at or faster than the rate of inflation, and that paying fair value for a property in a carefully selected market is what matters.

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