wHere to invest???

In this edition we are going to cover wHen you should buy and sell property. Yes we all know that we should buy in the low period and sell in the high but how do we know when this is???

This concept becomes even trickier wHen you are buying in different states which all have different property cycles.

The best way to reduce the likelihood of missing a buying or selling opportunity is research. Information on the property locations is generally free… if you know wHere to look and what to look for.

The key ingredient to look for in this information is affordability. When the general public can no longer afford the property prices, the bubble bursts, and in time when they can afford them, the cycle starts again. Incomes and interest rates affect affordability.  

There are a few factors that are beyond our control in knowing when you should be buying or selling like:

• The share market turmoil GFC
• Extended First Home Owners grant
• Unemployment
• Media putting fear into the masses

These are not definate’s but more a guide as many locations around Australia still increased in value despite all the above. This is because they fit in under our property criteria that we use.

 But, there are some that are in our control that can dramatically reduce the likelihood of missing the boat by knowing:

• The average incomes of an area or more importantly how much the mass of the population earn
• The normal family types, eg 2 adults 2 kids
• Buying in the largest audience range
• Banks lending capacities and Loan to Value ratio limits

In the investing world it’s a matter of knowing the capable return of an area and/or property, before ascertaining whether it’s a good investment and when to buy and sell.

So again, by understanding the average maximum income levels of an area, this helps you understand the maximum capital gain you can make, during the next property boom for that particular location.

For example, you could buy a property today for $250,000 and within 12 months it’s grown in value to $300,000. However, this may be the biggest gain you make on the property until the next boom in the area. If the majority of the population in the area consist of 2 adults, 1 child on a single income of $60,000 then they won't be able to afford to buy at prices anymore than $300,000. It's simple math… if you know this info.

So, you now know the time to sell (based on affordability), the next question is wHen to buy.

Using the same example and info as above, if an area declines in value to say $240,000 the same family type on a single income of $50,000 could afford this easily…

The second key trigger to this is yield. When the rental yields reaches 6% or close to, watch the investors come flocking… it's a magical percentage that sends the non research investor flocking to buy.

High population growth = supply & demand issues = housing crisis = increased rents = capital growth

Are you seeing a trend here???

Costs of reports = $0

Source; ABS data

Can't be bothered, call wHeregroup