Is There Opportunity In A Property Correction Sunset?
Ok, let’s say there is a big correction in the Australian housing market. Let’s say there is a “bubble” and it bursts. Is this necessarily a bad thing?
I have direct experience that says it may not be.
“What experience?” I can hear you ask.
Well, let’s see. I’ve got property in Florida, USA, where the market crash hit like an incoming SCUD missile attack. Remember the Global Financial Crisis (GFC)? Well, Florida was the poster child for this calamity.
My first reaction was mild panic. But then, after the dust settled, I started looking for the seeds of opportunity planted somewhere in the disaster.
I analyzed the situation rationally.
What happened to the property values?
Yes, they went down - way down. My properties were probably worth only half of their pre-market crash values.
But what happened to the rents?
Nothing, they stayed more or less that same.
What happened to the number of tenants looking for rental properties?
If anything, the numbers went up.
I put my hand to my chin and let out a big, “Hmmm.”
Then I started considering options as follows:
Should I sell?
I could. I would probably just get my money back as I bought these properties well before the GFC and prior to the price run-ups. Not an exciting option.
But, why sell? The properties are happily rented bringing in a nice cash flow. Rents are not dropping. The rental market seems to be holding up just fine.
No, selling is not the way to go.
Grab my Cheque Book
But, what other options did I have? What would be a good move to counteract this downturn? I put on my thinking cap.
I took a look at the house prices compared to the rents and came to a startling but obvious conclusion – this is a great time to buy!
The houses are selling at the same prices I paid over twelve years ago and yet they are getting a higher rent than twelve years ago. The deal was good twelve years ago, but it’s even better today!
So I packed my bags and headed to Florida. I took my chequebook and began looking for property. It didn’t take very long on the ground to spot several excellent properties, properties getting great returns, well over ten percent.
I now have those properties in my portfolio. They’re generating a nice additional cashflow. My cashflow situation is a lot stronger than before.
So, the downturn in Florida turned into an opportunity to strengthen my property cashflow position.
Not all was smooth sailing. There were some bumps along the way. But, the result was worth it.
So, a similar downturn in the Australian housing market could mean some amazing opportunities for people looking to enter the housing market and/or expand their property investment portfolio.
You just need to be ready to act when the time comes. And, you need to set yourself up so a downturn doesn’t hurt your current setup.
I guess the bottom line is this … to be successful in property investing you have to position yourself to take advantage of both rising and falling markets.
I don’t know if I qualify for the title “successful” property investor, but I’m working hard to position myself for success, to position myself to win in both a rising and falling market.
As property investors, what else can we do? What other options are there?
I don’t know anyone who can predict the future, so hoping for the market to behave one way or another seems pointless. It seems to me the best approach is to look for and find the seeds of opportunity in any market; be it rising, flat or falling.
What do you reckon?
Dave Ives is a property investor and author. He lives in Alice Springs. To hear more from Dave, download his Free E-Book, ""How I got Started in Property Investment"".