Forums / Property Investing / Creative Investing / Investing In A Declining Market

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  • Profile photo of Wct01Wct01
    Participant
    @gavin1111
    Join Date: 2015
    Post Count: 19

    Hello, what does everyone think would be the most profitable investment strategy to suit the current economic environment (eg: Perth WA where property prices & rents are declining)? Up to this point, I believed renovating would be the preferred wealth creation/cashflow strategy but I’m not too sure anymore and I’m open to all ideas or investment philosophies. Thanks.

    Profile photo of AzaliaAzalia
    Participant
    @azalia
    Join Date: 2008
    Post Count: 55

    I would like to hear suggestions too

    Profile photo of Sam OliverSam Oliver
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    @samoliver
    Join Date: 2015
    Post Count: 2

    Before I start I want to point out I am no expert but have done extensive research as I too am in the same position.

    Most of my research points to you, the buyer, being seemingly unreasonable in the offers you present. It is a buyers market. The sellers are aware of the speculated “impending doom” and want out. Highlight the fact that coming in at the list price is only transferring risk to your end and offer low. Some site recommend not coming in at anything over 60% of the house value to protect yourself however I think that offers that low will only annoy real estate agents…

    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    Why invest in a declining market?

    There are multitudes of markets in Australia – keep jumping across to the next viable option.

    I would say the most of our most successful clients have built their portfolios this way – moving around between markets. Let’s call them Nomadic investors. :)

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
    Email Me | Phone Me

    Investment Focused Finance Strategist - servicing Australia-wide

    Profile photo of aretmaretm
    Participant
    @aretm
    Join Date: 2003
    Post Count: 9

    Not being rude, Give an example of what’s worked, a real case study of one of your successful clients. time held etc. We’re all here to learn.

    By the way Corey I do like the article on limited equity you have written. Very succinct indeed..

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Agree with Corey – you can define the property market as being on the decline or increase. There’s thousands of markets within the country – there are sub markets within each capital city.

    I wouldn’t limit yourself to investing in the one location either. Identify areas which are on an upswing (reports such as Herron Todd White’s month in review are a great source of info http://www.htw.com.au/Month_in_Review/Month_in_Review_2015/September%202015/Month_in_Review_September_2015.pdf)

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
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    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of aretmaretm
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    @aretm
    Join Date: 2003
    Post Count: 9
    Profile photo of LiamLiam
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    @lblanden
    Join Date: 2015
    Post Count: 17

    Wealth of information you guys are :D

    Profile photo of xdrewxdrew
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    @xdrew
    Join Date: 2010
    Post Count: 479

    Heck … two years ago I invested in Detroit and walked away with a significant gain in a city where most people are swallowing their pride and walking away from their properties.

    So you may ask .. with outrageous rates .. lousy infrastructure and a high crime rate .. where do you invest in a tough town?

    Well for me .. it was still the same game .. its all about UNDERVALUED property.

    You see .. there is lots of decaying stock .. and you might have guessed .. no-one wants that . . too much expense for no reward.

    And lets be real about it .. the rates in Detroit are quite terrifying. Not to mention the expectations and inspectors .. Corrupt AS !

    But like any city it has undervalued property. Recently Abandoned or undermanaged A1 stock sits there and starts to rot. If you catch it in the early stages .. you got your charmer to renovate.

    So hold on .. how does this feed back to Australia circa 2015 ???

    What if I told you we are at the START of the next boom in property for all the WRONG reasons?

    You see .. the rules for property are simple .. people want it .. and they want it good .. and they want it in a nice position .. and they want it as flexible as possible.

    And the property to take note of .. is good clean developing suburbs. Not the old run down 18th century veneers with shabby interiors waiting for a bulldozer to fall in love with it .. the ones where people have lived in the houses for 20+ years .. they were built on reasonable blocks .. and the area has decent facilities .. or the POTENTIAL for decent facilities.

    You see .. i’ve been following property for a long time .. and when someone tells you that a suburb called Caroline Springs is a venture when its on the wrong side of town and close to some of the worst burbs in the city … is a good investment .. i listen with my half ear and learn to dismiss it quickly. And guess what .. totally right !

    And when someone raises property prices with me c2002 with investing in Southbank being a consideration .. vs Dandenong .. I say .. yeah well .. i’m in the business of making money not waiting for expensive tenants and body corp to eat my lunch.

    People come for the hard sell .. but they STAY for the lifestyle … and thats what you should be chasing in your property folio.

    By the way .. coming back to my Detroit invest .. the returns PA were 44% when I purchased it .. the expense was reasonable (it DID cost me) .. and the margin of profit was threefold .. 400% on what I paid.

    Look at the places where people WANT to go .. and they’ll still be good .. five to ten years down the track.

    If you listen to the gossip you’ll hear declining market. If you walk with your ear to the ground and listen for what the market wants .. what the people are paying for .. DID YOU SEE THE BOX HILL INNER CITY SALES RECENTLY? then you’ll know where your dollars should be spent.

    As long as there are sales .. its a market. Good or bad .. you just gotta pick wisely.

    Watch for cranes on the horizon .. always a good measure for me.

    Profile photo of PropertyGutsPropertyGuts
    Participant
    @propertyguts
    Join Date: 2010
    Post Count: 57

    I just heard a Hot Tip from a bloke who described himself as a “Nobody, From NO Place, Going Nowhere’.
    – buy a unit, in 18 months time, between Sydney City and airport.
    As there will be a temporary oversupply (bargains) in what will always be a good market

    Profile photo of Wct01Wct01
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    @gavin1111
    Join Date: 2015
    Post Count: 19

    If the market is flat or declining, how does an investor get beyond their first property and on to the next? In times when prices were going up, investors would buy a property, wait for prices to increase, have it revalued and borrow on the increased equity to fund their next property purchase – and they just keep repeating this process based on rising equity. If the property market is flat or declining, how does one go from their first property to their second and to their third and so on?

    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    If the market is flat or declining, how does an investor get beyond their first property and on to the next? In times when prices were going up, investors would buy a property, wait for prices to increase, have it revalued and borrow on the increased equity to fund their next property purchase – and they just keep repeating this process based on rising equity. If the property market is flat or declining, how does one go from their first property to their second and to their third and so on?

    And that is exactly why you would generally shy away from a declining market. Catching falling daggers is dangerous business. There are people who will try to pick the bottom, which is a fair strategy, but still in the early stages before you’ll see significant upswing to allow the portfolio to leverage and grow further.

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
    Email Me | Phone Me

    Investment Focused Finance Strategist - servicing Australia-wide

    Profile photo of Wct01Wct01
    Participant
    @gavin1111
    Join Date: 2015
    Post Count: 19

    Does that mean we should not invest in property in a declining/flat market?

    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    Property across Australia doesn’t move in a uniform up or down, there’s different markets and markets within markets – so you’ll see many investors actually consider other cities/states when their market goes through a down turn. ie right now we’re seeing a lot of Sydney clients looking at Brisbane/Adelaide as they believe the Sydney market has peaked/going to have a correction.

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
    Email Me | Phone Me

    Investment Focused Finance Strategist - servicing Australia-wide

    Profile photo of MTRMTR
    Participant
    @marisa
    Join Date: 2004
    Post Count: 663

    Ok, this is an older thread September 2015.

    Let me qualify I am from Perth so I have on ground knowledge of what is happening in this market. Its a falling market and has continued to fall from late 2014, I would never ever recommend any investor buy in a falling market this is the easiest way to lose money because we have no idea how low it will go. What you perceive as a bargain today could be the opposite tomorrow.

    The problem as I see it in Perth today October 2016 is we are suffering because of huge job losses, our economy is down the gurgler, until business confidence picks up we wont see growth in this market.

    If you are buying a primary residence then this is a different story, blue chip has still not come back from the crash in 2007 but there are certainly great buys $1M++.

    Happy investing

    Marisa
    MTR:)

    Profile photo of andrew_randrew_r
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    @andrewrr
    Join Date: 2016
    Post Count: 2

    If you can predict the future trends, it makes perfect sense to do so. If you do not, then stick to professional advices, or you risk losing some of your money.

    Profile photo of fxdaemonfxdaemon
    Participant
    @fxdaemon
    Join Date: 2013
    Post Count: 114

    Has anyone successfully done consistent value add in a declining market and still come away with good
    manufactured growth to continue the investing journey?

    Is it still a worthwhile option in a declining and/or bottoming market or is it throwing good money
    after bad one?

    Any other more effective options?

    I am not asking the question on the basis that one intentionally and consciously buying into a falling
    market, but more on the basis of getting caught out couple years after buying and market begins to turn.

    Thanks
    FXD

    Profile photo of MTRMTR
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    @marisa
    Join Date: 2004
    Post Count: 663

    I would be interested to know if anyone has made money in a falling market, I only know investors who have lost money and could not sell so they have to hold.

    I think its a huge risk developing to manufacture growth in falling market.

    I am seeing this in Perth at the moment, developers building apartments but there is an oversupply and values have dropped at least 10%+ and buyers have choice, but there is an oversupply of stock.

    In falling markets your feaso is run on the figures from purchase date, unfortunately its like catching a falling knife, the end values will only be determined on completion and in a falling market you could lose 10%+ and that could be all your profit, so going into the red… ouch.

    Profile photo of Ethan TimorEthan Timor
    Participant
    @ethantimor
    Join Date: 2016
    Post Count: 282

    If the market is flat or declining, how does an investor get beyond their first property and on to the next? In times when prices were going up, investors would buy a property, wait for prices to increase, have it revalued and borrow on the increased equity to fund their next property purchase – and they just keep repeating this process based on rising equity. If the property market is flat or declining, how does one go from their first property to their second and to their third and so on?

    If the investor buys, quickly increases value and refinances or sell, then the market being flat isn’t an issue.

    In a declining market, a hit to the profit will occur. If it’s not a big hit, the investor may be able to still proceed to the next property.

    Yeah, rising market is the easiest 😂👍😎

    Cheers,
    Ethan

    Ethan Timor | Aligned Finance Pty Ltd
    http://www.alignedfinance.com.au/
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    Active Investor & Broker; Based in Northern NSW, servicing Australia wide; Author of '34 Proven Ways to Maximise Your Borrowing Power' (download free from our website)

    Profile photo of BennyBenny
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    @benny
    Join Date: 2002
    Post Count: 1,366

    “and in a falling market you could lose 10%+ and that could be all your profit……”

    Those I have heard who develop won’t get out of bed for 10% return. Usually 20% minimum and climbing.

    Still, if they got caught badly, even if just a 10% drop in values they might hold, leading to higher Interest costs which could erode their profits even further…..

    So, yes, even a 10% drop could prove to be significant. Still “falling knife” stuff – one can only hope that they are smart enough to “cut their losers dead”. A small profit after a 10% drop is way better than holding, and paying ongoing Interest (into the red?) over the next year or two!!

    ;)

    Benny

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