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You Can Rent For A While

When demand for property surges and prices skyrocket, people seem to become desperate to buy, as if the gravy train has left the station and they are running behind it on the track, clutching desperately at the railing of the caboose.
 
Of course, when the market goes down, people want to sell before they lose more money. It is a herd mentality, the fear of being the only one to get stuck and looking foolish. In these situations, people inexplicably ignore the advice of people in the real estate industry or economists and instead take as gospel the opinion of old Joe next door.
 
But, as any savvy investor - and not just in property - knows, a market in a downturn provides a perfect chance to buy for cheap.
 
Likewise, when the market grows, it’s a better time to sell. Just ask the man known as the world’s greatest investor, Warren Buffett, who has made billions from such a philosophy.
 
Property prices move in cycles. After every growth phase comes a correction, where prices fall slightly, before recovering and growing again. Different towns, capital cities and states around Australia are often at different stages of their property cycles simultaneously.
 
Sydney and Melbourne are currently in a growth phase for example, while Perth is on the way down from a peak and Brisbane has bottomed out and should rise into its next growth phase within the next year.
 
If you happen to be in a hot market, you may have noticed that it is easy to sell, but harder to buy your next property afterwards.
 
Therefore, if you want to move homes in a hot market, consider selling and then renting for a while until the market cools down.
 
For starters, you can often afford to rent in areas where you would find a mortgage too expensive. Prestigious suburbs have low demand for rentals so anyone leasing a house out in such areas knows they will be doing it for a lot less than their mortgage repayments.
 
The next advantage is that whenever repairs are needed, your landlord foots the bill. He or she does all the worrying and organising plumbers, electricians and exterminators, while you can just shrug your shoulders and wait for the work to be done.
 
All up, renting for a couple of years and banking the money you made from selling is like taking a holiday from the stress of a mortgage. You might find you get to do a few more fun things, like go out for dinner more, take a holiday or even just keep some extra dollars in your pocket.
 
You can then wait for the market to fall into its next trough before buying back in and when that time comes, you will also be refreshed in the knowledge that it's not the end of the world if it takes a little longer to buy than you hoped. 


Tim McIntyre is the senior real estate reporter for the Daily Telegraph and News.com.au.
Over the past decade, he has attained widespread knowledge of Australia’s many unique property markets and is an authority on all things buying, selling and investing.
His commentary appears every Saturday in the Daily Telegraph Real Estate lift out, as well as online at news.com.au.


www.news.com.au/realestate

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