Timing and Sleeping

Good Morning Folks

Judging from the emails that I received during the week, my last blog about the doldrums in the residential property market seems to have made an impression on at least a few of you. I’m only moderately apologetic for the lecture that a couple of you took a little personally. Please console yourself that if I didn’t care, I wouldn’t bother to get so energised on your behalf. Or bother to spend my time blogging it. Please understand that I want you to succeed. Got that? Good.

During one email exchange with a member who will remain nameless, I wrote the following response that seems to have made sense for said member so I thought that I should share it.

The set up: Member was unsure about the importance that I am claiming for the next few months for residential property investors. We had a short exchange that wasn’t going anywhere until I responded with this:

‘….. Perhaps it will make more sense if I put it like this: Imagine for one minute that you are an investor in the stock market instead of the property market. You will be studying stats and reports to try to work out which shares will increase in value after you have bought them. You may even invest in software designed to do that for you - to get the edge on your competition - to ensure you buy shares that will increase in value, before anyone else spots the trend. You could be spending a lot of money to ensure you get that edge. There are very expensive software programmes designed to read stats and buy shares a matter of seconds or even split seconds before your competition. All to safeguard your investment and guarantee that you only buy shares that will rise in value. Even then there is no guarantee – they could drop in price.

Now relate that to the property market that will exist for the next few months. Yes, MONTHS - get it? In stock market time scales you now have an eternity to make your purchase before the market starts to move again. And you know that it will. You don’t need to spend time studying stats or one penny on software to tell you that. It will rise as surely as night follows day. Eventually at a rate better than 10% a year. And the best bit - you will be doing most of it with someone else’s money.

Come on XXXXX, if the penny hasn’t dropped yet, it never will. I rest my case.’

In fact I think at that point the penny did drop for the member in question and I hope that by sharing this, some of you hoverers with the right funds and credentials will realise that there is no time to waste. You should be taking advantage of the current flat spot in the graph before it continues on its upward trajectory again in the New Year.

‘Nough said on the subject. If this has convinced just one of you to make your move very soon, it will have been good use of my time and this space.

I was going to leave the blog there but cannot ignore the big property news of the moment – Dubai. There will be a lot of closet experts surfacing in the next few days and weeks telling anyone who cares to listen that they prophesied this debacle. It’s already started. And while I never claim to be an expert at anything, I will state that I have declined offers to invest in the state since about 2004 – which I suppose puts me on that list of closeteers.

The reason that I wouldn’t invest was because I couldn’t see how the growth rates could be sustained as the investment companies were claiming. This is precisely the same thinking that makes me buy at the furthest point on the spectrum from the Dubai profile. Even the commercial properties that I have bought are small and cheap with measurable track records. Just as I teach in Module Two, I research as many stats as I can to assure myself that there is a positive track record for properties with a particular profile at a particular price in a particular location. It’s not a foolproof science, but to date, every property that I have bought is in positive equity with tenants paying rents every month.

When I considered Dubai, I could not find stats to provide the security that I want so any investment would have been a gamble. And it’s quite possible that I would not have paying tenants much longer. In fact, had I bought property in 2004 and sold (say) two years later, I would now be claiming that it was a good place to make a fast investment. But I didn’t and I’m very pleased about that even though in retrospect, the gamble would have paid off - but then hindsight always has 20/20 vision.

Does Dubai provide a lesson to all of us? I hope so. There are Eldorados in property markets all over the world and in your next street, but identifying them then getting your timing right to invest, is the real science. Since I have no psychic powers I have to employ simple systems based on provable facts, relating to logical growth patterns etc. Perhaps I have missed some fab opportunities to invest in high-earners in recent years but to date my methodical, cautious investment method suits me fine because the invaluable bi-product is that it enables me to enjoy a good night’s sleep.

Have a goodweek y’all.

John