Investing For The Long Term

Australia’s love affair with residential real estate appears to be going through a rocky patch. Just two years ago we were being treated to salacious headlines such as “Nice earners, no sweat” with the body copy screaming that our home was making us over $700 a day tax-free.

The acronym that was all the rage then was FOMO – fear of missing out – and investors plunged into an already overheated property market.

But all booms are followed by busts – it’s inevitable – and by October last year the headlines had changed dramatically. Then we were told that Sydney was experiencing the “biggest fall in house prices for 25 years,” with “experts” of the view that much worse falls were to come.

Now we have a new acronym: FONGO – fear of not getting out! All those lemming-like “investors” who couldn’t wait to plunge into an overheated property market less than two years ago are now jostling each other to be first to leave the room.

So what’s an investor to do?

First, keep in mind that buying growth assets such as property and shares should be looked at as a minimum 10-year investment. This gives you time to ride out the inevitable property flat spots and share market falls.

Anybody who bought a good parcel of shares or a prime piece of real estate 10 years ago should now be sitting pretty. Ignore the inevitable talk of doom and gloom and look for bargains if you have resources available to buy. And remember that you only make a loss if you are forced to sell when the market is going through a bad patch. What’s the point of selling now and converting a paper loss to a real one?

As always, the key to success in real estate is to buy an undervalued property with potential for improvement, in a top location. These bargains may take time to find, but they are well worth the effort..

I am still optimistic about good real estate. Whenever we grey-haired investment veterans get together and reminisce about the past, one statement always comes up: “If I still owned today all the real estate I have bought and sold during my lifetime I’d be a multimillionaire.”