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Ben Kingsley

18/04/2016
Blog post by Ben Kingsley

When is the right time to buy residential properties

Here in Empower Wealth, we are often asked, “When is the right time to buy residential investment properties?” And the question is really back on you in terms of how is your financial circumstances? Are you in the position that you can afford to buy now and hold on to the property for the long term? Because I want to show you something here as I illustrate it. Imagine if we bought a property say in five year time and the value of this property increases over time. But let’s say hypothetically that we can actually buy that property now. Ok, so we did our numbers and we did our budget and we are seeing this type of growth story. Now, it is not this opportunity cost that people lose. So, often people would say, “Oh, I am just going to wait for the kids to get into high school” and they keep deferring it. They think we didn’t lose much because property prices haven’t move much here but ultimately overtime, they are going to move more significantly so it is really important to understand that the opportunity cost isn’t here, it is actually up here. If that’s our retirement target date, that’s where we want our value to be.

And the second part of this conversation actually talks about the actual performance of the property in the property market. So if I were to just quickly take this off and we have a look at here.

We don’t want to get into a market that is going on a flat line. We want to get into the market where we are going to see some financial returns quickly.

So imagine if we got into the property market at this price point and for roughly five year, the value remains flat and that’s about borderless investing. There are lots of other how to videos where we talk about buying interstate and looking at other market places because wouldn’t we like that story to be more like this story as opposed to the flat line story? So it is really important to understand that.

So let’s recap, you know in terms of time the market that’s all about whether you can afford it now and looking at your household budget and we all know that the household budgets are going to change. But if you can map out your cash flows then the reality hopefully is, that you may be in a position to move earlier rather than waiting for all that time to get into the market because we all know as we wait, it is going to get more and more and more expensive to actually get in. So look at those numbers and understand that, that is time. So it’s making sure that we can afford to get into it and looking after it.

The second point is the timing so in recapping, it is about timing the market and that comes down to this asset selection story. We want the value of our property to be growing, we don’t want it to be flat lining. So making sure that we select the right asset in the right location at the right time. Just remember knowledge is empowering if you act on it. I hope you enjoy this how to session.

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