"Following each of these crises, I emerged still holding my portfolio of properties and not living in the poorhouse."
The time to buy an investment property is whenever you can afford it
When is the best time to buy an investment property? This is a question I’m asked a lot. Is it when interest rates are low? When the property market is going through a downturn period? In winter?
The simple answer is: whenever and as often as you can afford to.
During my 25 years of investing in property, many “experts” have told me that a given time was not the right period to buy. There was always some excuse. In the 1980s it was the recession and high interest rates. “The economy is in dire straits,” I was told. “Tenants won’t be able to pay your rent.” What about the fact that people could not afford to buy so they had to rent? No one ever mentioned that.
In the mid-'80s tax legislation changed and many of the benefits associated with negative gearing were abolished. Again, people talked down the pros of property investing, saying it was pointless without the tax refund. In the early '90s, the story changed again. Low inflation meant property investing was dead (apparently). Later in the '90s we had the Asian financial crisis, then the introduction of the GST, then the global financial crisis more recently. If I had listened to all the naysayers I would never have bought any property or indeed continued to build a large portfolio of my own.
I can tell you one thing: I glad now that I did. Following each of these crises, I emerged still holding my portfolio of properties and not living in the poorhouse. How I did I survive in the face of unstable economic times? Some say it was luck, that it was a fluke to have bought all those properties when they were cheap.
In fact, my properties weren’t cheap at the time. I always negotiated well and bought smart, but I also regularly paid market rates for properties that I knew would outperform the average. And lucky? No way. It takes a great deal of commitment, not luck, to stick to a plan and buy property when no one else is.
And even today, with the market in Melbourne going through a slow period, investors still seem to be shying away from property investing when, in fact, right now is a fantastic time to buy. Why would anyone want to sell in a flat market? For most, it’s because they have to for their own personal financial reasons, not because they think they are going to make a killing. So, for investors, that can often mean lots of distressed sales so, of course, lots of bargains.
If you are in the financial position to act now, in 10 years’ time you, too, will look back and be amazed at how cheap property is right now. We can all think back to times when we thought prices were ridiculously high and remember thinking that people were paying way too much. But look at how the market has moved along. If you look at a property that sold for $500,000 in 2002, that property would most likely be worth over $1 million now. Was it expensive then? Is it expensive now? You’d be surprised at how your interpretation of “expensive” changes.
Building wealth is achieved through borrowing, buying and keeping residential property for the long term. It requires time – not timing.Melissa Opie, aka “The Property Lady”, is a multi-award-winning buyers’ advocate, bestselling author and managing director at Keyhole Property Investments. The team at KPI act for investors and owner-occupiers Melbourne wide from $400,000 to $5,000,000. You can follow “The Property Lady” on Twitter.