"It's not Timing, it's Time" Jan Somers

I feel it is still valid in the context it was used, I think a few people are using the quote to apply to situations where it was not intended to be relevant.

We all know that property isnt always the best asset class to be in, at different times in the economic cycle different asset classes will give better returns.

I think the quote is more about taking action than anything else.

What if you have a choice of giving thousands to the ATO or thousands towards a property? It's a dilemma I am in - do you buy even if it's expensive because otherwise your money will go to ATO and you have nothing?

Schnugg

Sim said:

....
One of my biggest weaknesses is a tendancy to "overengineer" solutions to problems. In almost all cases, a simple solution works just as effectively, and quite possibly more effectively than a convoluted or complex solution.

Don't dismiss simplicity !
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Completely agree. I’ve learnt form experience if it sounds/looks complex and convoluted there is 95% chance it is wrong or at very least not the best possible solution (I am a software engineer). Also, I observed amazing people’s behaviour to over-complicate, unnecessary improve already good recipes and fix something that is not broken not only in IT but almost in every area including RE investing and especially share trading. I am guilty myself, but fortunately with years things are getting better.

As Sim said – Don’t dismiss simplicity!

Hi all,

So it's timing not time according to some!! Lets see if we can put some of it into perspective.

If you had bought an average property at the very height of the last boom(1990 Melb) and held it to this day, you would have a compound growth of a bit over 6% pa.

Lets say you are a smart timer and held off buying at the peak of the last boom. By 1994 you are saying to yourself how smart you are as you didn't buy any property. By 1997 there is a small rise in prices, but being the canny investor you know that as soon as interest rates rise again property will again stagnate(besides the asian crisis is only just biting and the stockmarket is extremely volatile). By '98-99 you just know that y2k could cause a meltdown, then later we have the gst.

So when was the best time to buy?? How did you know?? Obviously the poor punter who bought at the peak of the last boom(WHEN THEY COULD AFFORD IT), paid down the loan, refinanced at cheaper interest rates, bought again in the mid 90's, paid down the loan, refinanced at lower interest rates, bought again in the late 90's, paid down the loan...
Well they must be just suffering from all those properties, if only they had timed the market!!
If you think Jan's plan is for the novice I suggest you go and read the book again, to see the true brilliance of the simplicity.

bye

Bill hindsight is a beautifull thing.

Anyone could pick a point in time thats suits their view and run with it and be totally correct based on that time frame used in their example ;-)

Thats why I chose the present time period including the last 9 months when it was blatanetly obvious of a strong uptrend ending/ peak) plus I can remember that far back and its relevant now.

Acey's post summed it up....

Bill.L said:

So when was the best time to buy?? How did you know?? Obviously the poor punter who bought at the peak of the last boom(WHEN THEY COULD AFFORD IT), paid down the loan, refinanced at cheaper interest rates, bought again in the mid 90's, paid down the loan, refinanced at lower interest rates, bought again in the late 90's, paid down the loan...
Well they must be just suffering from all those properties, if only they had timed the market!!
If you think Jan's plan is for the novice I suggest you go and read the book again, to see the true brilliance of the simplicity.

bye

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Hi Bill,
A bit hard to pay down the loan if it is interest only. And if P&I, review how much principal you eat into within the first 5 years.

You correctly state that it is hard to pick the top of a boom. However, relative yield is a good start.

There is also a limit to how negatively geared most of us can be. And many have been stung by negative gearing and poor cg when an interest rate rise comes along, or job loss, or divorce. These things aren't cool topics on a pro property forum, but they happen. My point is that negative gearing isn't the best strategy out there. And buying at the top of the boom often means negative gearing for longer and deeper.

Hi all,

Ted, you have got to be kidding....

" Anyone could pick a point in time thats suits their view .... blah blah blah"

I deliberately picked the worst possible time to highlight my example, not the best time!!

You obviously don't understand what Jan has written, nor have you bothered to reread it.

Bruce, There were not many +ve cashflow properties in the 80's due to high interest rates, but investors who followed Jan's plan back then seem to have done allright. You have also missed part of the real magic of the strategy, as presented in the book.

bye

Sim said:

I actually disagree that property investing has been "popularised". Well, naturally we have been in a boom and every man and his dog is into it right now, but I suggest you wait a few years and see how many people are keen real estate investors then. Property is definitely out of favour with the masses right now - and I suspect it will continue to be so for a while unless interest rates drop again suddenly.

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I agree with this. I continue to do my own random polls around the office, friends and family and all talk about the bubble bursting and that they wont consider investing in property. The ones who have say one PPOR and one IP see the IP as a "money taker", they are so negative geared they find it hard to see the benefits and may sell for that reason. I dont think investing has been popular over the past 5 years during the boom and I dont think it is popular now. I think there are many fence sitters who talk like they are experts on economics and trying to pick a peak and trough and it just isnt that easy.

Superted said:

Anyone could pick a point in time thats suits their view and run with it and be totally correct based on that time frame used in their example ;-)

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Bill, I am trying to understand your point of view...are you saying that it is timing or time or both? From my point of view, I think it is a little of both but mostly time.

I thought SuperTed was saying that basically anytime was suitable which is my sentiment as well. I think trying to pick market peaks and troughs is too difficult and basically just time in the market should afford the investor sufficient benefits of "dollar cost averaging" except with property. Depending on what your threshold is for either negative, neutral or positive gearing, work out what you can hold and hold it. I dont have Jans book with me right now, but she advocates buying say one property a year or a property whenever you can afford it and then have a suitable period of time (and sufficient capital growth) sell a couple to pay down debt and then live off the rest.

Can you clarify what your opinion is, I would really appreciate that.

Thanks

Kind regards

Corsa

Bill.L said:

Bruce, There were not many +ve cashflow properties in the 80's due to high interest rates, but investors who followed Jan's plan back then seem to have done allright. You have also missed part of the real magic of the strategy, as presented in the book.

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Bill, those who could buy in the high interest rate days were cashed up.
As I inferred, negative gearing has a low ceiling for most of us. High interest rates, or low yield (as at the top of a boom) make that ceiling lower.

Corsa, you don't have to accurately pick peaks and troughs to do better than dollar cost averaging. Simply comparing yields to other asset classes gives a big head start. You can be assured that most IPs yielding less than 3.5% today are not going to demand higher prices that would drop this yield. You can fool some of the investors some of the time, but not all of the investors all of the time.

thefirstbruce said:

Corsa, you don't have to accurately pick peaks and troughs to do better than dollar cost averaging. Simply comparing yields to other asset classes gives a big head start. You can be assured that most IPs yielding less than 3.5% today are not going to demand higher prices that would drop this yield. You can fool some of the investors some of the time, but not all of the investors all of the time.

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Hi Bruce

I think that is what I said, you shouldnt have to pick peaks and troughs to do better than just investing periodically over time.

So essentially "timing the market" is not as important as "time".

I think we are on the same page though

Cheers

Corsa

Hi all,

I obviously haven't made myself clear enough.

I am a fan of Jan's method of time in the market as proposed in the book "More Wealth from Residential Property".

But there is more to it than just buying and holding, it's in the book!!

With apologies to Jan, the quick summary goes as follows.
1/ Save deposit, buy PPOR.
2/ Accelerate payments to pay off loan in short period of time.
3/ Buy IP (when you can afford it!!)while continuing to pay same % of wage off loans.
HINT HINT HINT "If you have paid off your PPOR, guess which loan now gets paid off!!!"
4/ Buy further IP (when you can afford it!!!). Keep putting in % of your wage to reduce debt.

If prices go nowhere for 5 years, your equity has still increased by reducing your loans. Eventually even with stagnant prices, due to inflation, rents will rise and so will your wage. The property/ies will become/go even further cashflow positive. You will then be able to purchase further property as you can afford it.

The only timing involved is when you can afford it!!

Bruce,
There were plenty of people who bought in the high interest days of the 80's, and they -ve geared(when the govt allowed). You would get an 6-8% yield(average city house) when rates were 13-14%(and that was before the boom at the end of the decade).

bye

It's obvious really, but the reason you invest has a major influence on whether you believe in time or timing.

If you are on a good salary and the banks are eager to lend to you why not invest other peoples money? You are farming the tax deductions so time is all that matters.

Others, including the self employed, often don't have a tax problem (unless not paying enough is a problem) so they must examine all their investments more critically. As a buisnessman I do this automatically and have the option of a tax effective investment in my own enterprise anyway, so I want positive cash-flow from day one. Such cash-flow is not available in safe markets now so I choose not to buy property now ie I'm attempting to time the market.

Thommo

Hi Everyone.
I haven't re-read Jan's book because I lent it someone who I have lost contact with and haven't yet bought another copy. I can't remember, was Jan's "It's not Timing, its Time" strategy based on a 'buy & hold' strategy? Because based on my limited experience with doing a 'reno to sell' compared with 'buying to hold', the timing was more crucial when having to take into account the time period between the point of purchase and sale. I found timing crucial for the reno and advantageous for the buy and hold(but not as critical to wealth creation).
When looking at it from my experience (which I must stress is limited) the validity of the "Its time in the market and not tming the market" largely depend on the strategy, one is wanting to employ.


Cheers,
DOC.

From the comments so far, it seems we are all focusing on entry.
Does anyone think timing might be more pertinent for exit?

thefirstbruce said:

From the comments so far, it seems we are all focusing on entry.
Does anyone think timing might be more pertinent for exit?

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For many of us who are "buy and hold", an exit is a rare event.

But it is something which happens.

Either-
.A property does not perform (and does not look like performing)
.A property performs so well you're much better off selling now
.Or, the profit from a sale can help to go from a small deal to a big deal (as in Cashflow)

thefirstbruce said:

From the comments so far, it seems we are all focusing on entry.
Does anyone think timing might be more pertinent for exit?

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I think if you're into timing , then both are important.

Obviously the reason for timing , is that you think there is a time where you can optimise your returns in property , and then when the market goes to sleep , you can put the money to better use elsewhere.

Obviously you can draw down your equity , but that relies on increasng debt , and that is something that some people are not comfortable with.

See Change

Few strategies are optimal all the time.

So time your timing strategy & be prepared to abandon it when it's no longer the right time.

Cheers,

Aceyducey

Hi all,

In regard to all the optimists(and savvy investors on this forum), I'll still say that it's time in the market not timing that is important for most. Providing that we continue to have inflation of ANY level. (Deflation could be bad, and disinflation is just a stupid word invented by economists so should be ignored).

bye