3 Handy Tips to Invest in a Changing Market

Today I want to talk about the change in the property market — more specifically, the sentiment around Sydney and Melbourne. Let’s be honest, the last few years have been very generous to property owners and property investors in those two mainland cities on the East Coast.

But what we’re finding now is this real shift from, “When will I buy a property…” to “IF I should I buy a property…”

So I want to talk today about a few things you should think about when looking to invest in a changing market.

 

Number one: have a buffer in place.

The question is still often asked, “When should I buy my next property?” and the answer is really, really simple. It has nothing to do with market sentiment, nothing to do with finance — it’s all about when your cash flow allows.

If you’re taking the philosophy that we take — and it’s not a get-rich-quick scheme, it’s a get rich slow scheme — you’re playing the long game. So, really what you want to do is, you want to be accumulating good properties over time and holding them for the long term. If you’ve got a realistic buffer in place, and your cash flows allow you to buy another property, I’d suggest that you should buy the next property at that point in time, and ignore the headlines.

Yes, the lending landscape has certainly changed, but if you’ve sorted out your cash flows and you’ve set up your structure optimally with a buffer in place, there’s actually no legitimate reason why you shouldn’t be investing now.

If you were flipping, or you had a very short-term time frame, you’ve absolutely need a different conversation than this — but if you’re holding it for the long term to self-fund your retirement, there is absolutely no reason why you shouldn’t be considering buying now, even though the market sentiment has well and truly changed. So, tip number one: have that buffer in place.

 

Number two: there’s a real, rare opportunity to have a Flight to Quality.

It’s often hard to think about going forward into the future; but if you think about the most recent past — the really great conditions we’ve just had in Sydney, and what we also went through in Melbourne — imagine if you could rewind back to the GFC, or back to 2011 where, here in Melbourne, the market sentiment was down and you could buy really great assets. You would have it ready for when the boom came! And you would be sitting wonderfully pretty right now!

Instead, right now you have the opportunity to have this Flight to Quality — you can chase the A-grade properties. There’s much less competition on them in a market where there’s no boom and it’s easier to pick up these properties.

Here’s the catch: it’s easier, but it seems scarier.

But, I would also like to say — when the Flight to Quality opportunity exists, this is where you find out who’s been swimming naked when the tide goes out. So, who’s really got good portfolios? Who’s got good structure? Who’s got good properties? Now’s the chance for you to pick up a quality property where others might not be able to. So, number one: have a buffer. Number two: see it as an opportunity to pick up really great quality properties.

 

Number three: it’s a time to be opportunistic.

Everyone loves to pull out their favorite Warren Buffett quote, don’t they? Well, for me, it’s “Be fearful when others are greedy and greedy when others are fearful.”

You have a wonderful opportunity right now; but there’s a bit of fear in the marketplace — there’s a bit of “wait and see” going on. People are thinking, “Maybe I won’t act now.” Well, why don’t you be opportunistic? If you’ve got the buffer set in place and you’ve decided to chase quality assets… why don’t you just take that opportunity? Realise that this, too, shall pass at some point in time. In the future, the market will continue to grow and, when it happens, you will have a portfolio that is absolutely full of quality properties, which are all set up correctly. You can sleep wonderfully well at night!

What I’d say is, yes, the market sentiment has certainly changed in the big cities — but this is the time where the mind of an elite, professional investor is licking their lips, ready to get into the marketplace. Professional investors are gearing up to get great properties in preparation — as a preemptive strike; proactive accumulation — for what will inevitably come in the future, when the market turns and it starts to go strongly again.

So, my message is really, really simple: follow these three very simple principles during this change in market sentiment, and you could well and truly set up your self-funded retirement very well in this current market.