If you’ve been procrastinating about whether to buy property, here are some important reasons why you shouldn’t wait around much longer to take the plunge.
Since the May election, there have been several pivotal changes that signal the tide has turned for investors.
For one, there’s more political stability. The government has put incentives in place to encourage first home buyers and make property more affordable. Bank regulator APRA is relaxing some of the harsher lending criteria that was put in place at the height of the boom. There’s also talk of more interest rate cuts.
And while I’m not one for getting too hooked on“the perfect time to buy”, what’s more important is understanding where your market is at in the property cycle. In many states, the current cycle is presenting a raft of opportunities for astute buyers to buy properties that have already undergone significant price declines.
The property clock
Let’s just take a quick look at where we’re at on the property cycle. Try to work out where your local market is at on the cycle.
Looking at the diagram above, you can see there are many property markets currently hovering around the bottom of the property cycle, somewhere between slump and recovery. While no one can accurately pick the magic bottom of the cycle – when the upswing will kick in – when it does happen, competition will heat up suddenly. That pushes prices up, hysteria creeps back into the market… and so the cycle begins again.
There’s an undeniable window of opportunity that exists right now for savvy buyers. However, you can’t just wing it. By following all the steps in my Cosmetic Renovations For Profit course, you’ll capitalise on the market conditions, and buy the right property to renovate, at the right price.
6 Benefits of a Soft Market
Now let’s look at why a soft market is the best time to buy, renovate and hold.
1. It’s a buyers’ market
The reality is that it’s a buyers’ market across most of Australia at the moment. That means:
- less hysteria and less competition for the properties you’re interested in;
- sellers are much more realistic with their asking price;
- less auctions (which always favour the seller) and more properties selling by private treaty.
Keep in mind that markets can switch from a buyer’s to a seller’s market with alarming speed, so waiting around for prices to bottom out is a risky strategy. No-one has a crystal ball …
2. Sellers are more open to special conditions
In challenging markets, when buyers aren’t in bountiful supply, you have a much higher chance of getting vendors to agree to special conditions in your Contract of Sale. Think extended settlement and / or immediate access to get into the property and get a headstart on your reno (before you officially settle). Get a vendor to agree to special conditions in a red hot market? I don’t think so.
3. Manufacture instant equity instead of relying on capital growth
If you’ve done all your due diligence and purchased wisely, then you can expect long-term capital growth. But with a smart cosmetic reno, you instantly boost the value of your property – today, not in 2 years’ time. It’s about being an active, not passive investor.
4. You’ll immediately get Higher Rental Yields
Renters are obviously going to pay more for a well-maintained, well-appointed and nicely presented property – all of which you can achieve with a quick cosmetic reno. And you’ll find it easier to find the right tenant. So straight away, you reap the benefits of your spruce-up. In time, the renovation will pay for itself. When you achieve higher rents, it helps turn your negative cash flow property to a breakeven or ideally, positive cash flow one.
5. Tradies are more negotiable
When times are quiet, tradies are more open to price negotiation and taking on smaller jobs. In boom times, when they’re flooded with work offers, they’re more focused on lucrative jobs and will jack their prices up for ones they really can’t be bothered with. In a soft market, you’re more likely to get a competitive price.
6. Retailers are more negotiable
It’s no secret that retailers are struggling at the moment and there are some great discounts around for all your fixtures and fittings. That means you’ve got a better chance of bagging bargains that ultimately drive your renovation costs down.
I’d go so far as to say that renovating is a recession-proof strategy, because the whole underlying premise is to add value to a property, regardless of what the market is doing. So what are you waiting for? Get cracking!
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