Patience is a virtue. It’s an old saying, but one that is timeless when considering Australian real estate markets.
Property is not the type of investment class where you can triple your money overnight. Nor will it allow you to lose all your money in one go.
But there’s a difference between the good and bad types of patience. You don’t want to be so ‘patient’ that you never actually invest because you’re always ‘waiting for the right time’.
Rather, property investing becomes a long game once you’re in. It involves coming up with your goals, getting a strategy in place, executing the right purchases and then sticking to your guns while you let it all unfold.
The right patience
Property markets move in cycles that have growth phases, correction phases, plateau and recovery phases. History shows the cycles repeating over and over, with every growth phase taking values to a new height. So the longer you own property, the more it will eventually be worth.
Many Australians get stuck because they want the perfect house straight away. They borrow to their full capacity and then spend their lives mortgaged to the hilt and slaving away to make their repayments.
Contrast this with B.Invested founder Nathan Birch, who started out small, investing in affordable properties with positively geared rental income and using equity gains as deposits on more properties. Nathan invested like this for 10 years before purchasing his own permanent place of residence.
He showed patience while he waited for the market to do its thing and build enough wealth so he could build his own dream home unencumbered.
Not only did he do so, but he has also accumulated more than 220 properties in his portfolio, which have made him considerable wealth and generate enough income each year to pay themselves off and allow Nathan to live life on his own terms.
Long term investment horizon
Building a successful portfolio requires a long term view. First, think about where you want to get to. Do you want 10 properties? 20? 30? 50? Do you want to retire by a certain age and live off the rental income your properties generate?
Once you have your answer, you can plan your strategy to get there. Engage finance and legal professionals, invest in educating yourself and set smaller milestones along the way.
You might say ‘I want to buy 2 properties a year for the next 5 years’ and then you can focus on what you need to do every year, every month and every week to achieve that.
You can celebrate each smaller milestone reached as another achievement, a stepping stone on the way to your big picture goal.
Embrace market fluctuations
When you are patient and focused on the long term, you can see market fluctuations as an opportunity rather than a threat.
The majority of people seem to want to buy when the market is at its peak and sell when it’s in a correction phase, because they worry the market will keep rising or falling and they will either miss out on buying or will lose too much money if prices go lower.
A savvy investor however, will see market troughs as an ideal time to pick up a bargain on a property with the right fundamental strengths.
Or a market peak may be the perfect time to either access equity to invest further, or to sell one property to pay down debt on others or leverage into new opportunities.