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 the USA. In Florida, where the market crash hit like an incoming SCUD missile attack.
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 started to review 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.
Consider Options
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. Rental market seems to be holding up just fine.
No, selling is not the way to go.
Grab my check book
But, what? What would be a good move to counteract this downturn? I put on my thinking cap.
Then 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 for the same prices I paid over 12 years ago and yet they are getting a higher rent than 12 years ago. The deal was good 12 years ago, but it’s even better today!
So, I packed my bags and headed to Florida. I took my check book and started looking for property. It didn’t take very long on the ground to spot several excellent properties. Properties returning great returns; over 10 percent.
I now have those properties in our portfolio. They’re generating a nice additional cash-flow. My cash-flow situation is a lot stronger than before.
So, the downturn in Florida turned into an opportunity to strengthen my property cash flow position.
Not all was smooth sailing. There were some bumps along the way. But, the result was worth it.
Opportunities?
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. 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?
