Property Investing for Dummies - Australia by unknow

Author:unknow
Language: eng
Format: epub
Tags: Australia, Business & Economics, Investments & Securities, Non-Fiction, Real Estate
ISBN: 9781118396711
Google: -fsRmtblL9wC
Publisher: John Wiley & Sons
Published: 2013-01-14T00:00:00+00:00

Mastering Sellers’ Markets and Buyers’ Markets

Some real estate investors make the mistake of not continuing to research the economics of their real estate markets after they’ve made their investments. Even if you plan to buy and hold, you need to pay attention to the market conditions. The criteria we advise you to consider in making decisions about which markets are the best for investing are dynamic — they fluctuate.

Savvy real estate investors monitor their markets and look for the telltale signs of real estate cycles. These cycles present opportunities for expansion of your real estate portfolio or repositioning from weaker markets to stronger markets, because not all areas experience peaks and troughs at the same time. That’s why you need to know and track the timing of sellers’ and buyers’ markets.

Real estate cycles

Real estate is cyclical and successful real estate investors always remain aware of the real estate cycles in their areas. But first, what are buyers’ and sellers’ markets?

A buyers’ market occurs when the current owners of property are unable to sell their properties quickly and they must be more flexible on the price and terms.

A sellers’ market is almost like the classic definition of inflation — too much money chasing too few goods. In this case, the goods are real estate properties, which are in high demand, with buyers lining up for the chance to purchase them. When sellers are receiving multiple offers within 24 to 48 hours of a listing or you see properties selling for more than the asking price, you’re in a strong sellers’ market.

Real estate traditionally experiences cycles as the demand for property leads to a shortage of supply and higher rents and appreciation. That leads to the building of additional properties, which, along with changes in demand due to economic cycles, usually results in overbuilding and a decline in rents and property valuations.

However, not everyone agrees that real estate cycles are relevant to residential real estate investors. Some property spruikers claim investing in homes and apartments is recession-proof because people always need a place to live. Although that’s partly true, we think that the economic base of the community where you invest does have a direct impact on all aspects of your operations — occupancy, turnover, rental rates and even quality of tenants.

For example, when times are tough, residential tenants will improvise with some taking in housemates in order to save money. Some renters are even willing to move back in with mum and dad or another relative when their personal budgets don’t allow them to have their own place.

Can real estate investors who track these real estate cycles make investment decisions based on this information? Absolutely. Timing the real estate market is how many successful and knowledgeable real estate investors increase their real estate investment returns. Read on.

Timing real estate markets

Although the length and depth of real estate cycles vary, they do have clear highs and lows that real estate investors need to consider.

In some real estate markets, double-digit annual appreciation has occurred over the last five to ten years.

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