If there is one query I am most frequently asked, it is “When is the right time to invest in property?”
Typically, the response is “yesterday” or when your cashflow can allow it. Since the property market has outpaced wage growth for at least four decades, betting against it has resulted in losses. However, I recognise that this response is not particularly beneficial and is not the direction the questioner is seeking.
The truth is that there is no one-size-fits-all answer to the query of when is the right time to invest in property. The optimal time to invest depends on an individual’s specific circumstances and objectives.
There are, however, some general considerations to keep in mind when making this choice.
- Your financial situation:
Are you in excellent financial standing? There are costs associated with purchasing a property and repayments to consider, while most properties will demonstrate that an investment may be almost cost-neutral after tax deductions and the ability to use negative gearing, in this current climate with higher interest rate and associated costs, you will still need a stable income and savings to demonstrate to the bank that you’re a good borrower and can cover the costs month-to-month before tax time.
- Market conditions:
Are current market conditions conducive to property investments? Are prices going up or down? Exists a substantial demand for real estate in the area you’re interested in? It is essential to consider the relevant property cycle in the Australian market in which you intend to invest, as not all markets are the same.
- Your investment goals:
What are your financial objectives? Depending on where you are in your investment journey, these can vary. Do you wish to generate a monthly income from rental payments, or do you seek long-term growth? How long are you willing to hold the property? What structure do you want to hold the property under?
- The property itself:
Is the property a wise investment? Is the location suitable? A property should be well-suited to the demographics of the suburb and, ideally, should be situated in an area or have characteristics that create scarcity and stimulate demand.
- The risks involved:
You’ve heard the saying, ‘no investment is without risk,’ so you need to consider what type of character you are. Are you happy to let your investment sit in order to allow it to grow over time, or are you the type to monitor the market weekly to observe incremental price increases in recently sold properties that are comparable to yours? Property investment is a long-term endeavor, so if you fall into the second category, you may not be prepared for the volatility and time.
- Your exit strategy:
What exit strategy do you have for this property? ‘Never’ is typically the best moment to sell a property in a prime location. However, we may need to account for unanticipated life changes, and it is typically simpler to sell a property that is easy for buyers to obtain financing for and is in high demand in the desired suburb. Also consider your tax position and other income.
The decision of when to invest in property is a personal one and everyone’s ‘right time’ can be different based on their circumstances. There is no correct response, and the best time for you may not be the best time for someone else. If you need help with your property strategy, please reach out to our Oran Park or Norwest office and our team of Adviser’s, Broker’s and Property specialist’s can assist you.
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The information in this website and the links has been prepared for general information purposes only and does not take into account your personal objectives, financial situation or needs. It is not intended to provide commercial, financial, investment, accounting, tax or legal advice. You should, before you make any decision regarding any information, strategies, or products mentioned on this website, consult a professional financial advisor or seek assistance to consider whether it is suitable and appropriate for you and your personal needs and circumstances.