Rates are falling and lower than ever before. This can be very tempting if you are looking to buy, and were unable to do so when rates and property prices were higher.
The risk here is making a purchase to fit the budget and borrowing criteria you now meet. The danger is losing focus on the specifics of the outcome you seek and what the market you look at can realistically deliver.
It’s a great advantage to buy when the rates are low, hower don’t waste the benefit and opportunity by buying unwisely.
Again, it’s back to understanding the fundamentals. It is important you do this in the correct order.
What is your purpose in buying the investment?
- When do you wish to see the fulfillment of this and what form will it manifest for your purpose. This can be a number of things.
- You may require an annuity income of a certain consistent level.
- You may want capital appreciation you can liquidate for a specific purpose
- You may want both capital appreciation, debt reduction and cash flow
In order to meet the end goal, you need to identify it first, before you purchase the vehicle you intend to deliver the goal.
While high growth and strong yields are an obvious desired outcome, it’s important to understand different properties deliver different outcomes for specific reasons.
Understand Property Cycles
Cycles are good news as they are predictable. The difficulty is knowing the length of each section of the cycle. Cycles tend to occur in waves with the growth period known as the boom, and the contraction period known as the slump.
A range of factors affect the growth and contraction of cycles. They impact the supply and demand balance.
These include:
INTEREST RATES
POPULATION GROWTH
VACANCY RATES
JOBS CREATION
ECONOMY, CONFIDENCE AND SENTIMENT
MONETARY REGULATORS POLICY
So you can see there is much to consider to pull together and tailor a purchase that meets your criteria.
If you currently own a property, its equally important to review your situation. Are you on track? Has your end goal changed or moved? Are you getting the most out of your current structure or do you need to re evaluate?
Having an industry expert to brainstorm with you is the best way to ensure your new purchase or existing portfolio is able to deliver for the duration. Remember, property is a long game.