Ok,. Here’s the next Kiwi book review. This one is “Grow Rich With The Property Cycle” by Kieran Trass. I’ve done a chapter summary as I thought the book contained way too much detail to just glibly write;”he says x”. It’s a loooonnnnggg review although I’ve tried to keep it as short as possible while still including the chapter overviews 
Disclaimer: I get no direct reward this (monetary or other), I am not associated in any way with Kieran Trass (except for being a fellow Kiwi), all my opinions are just that, opinions & should be treated accordingly.
Book Summary:
A VERY detailed analysis of the market & what drives it based on his research & analysis of 1000’s (apparently) of his property portfolios. It’s the best I’ve seen on why property behaves the way it does, & is very readable. He uses NZ as a case study but explains how this model fits anywhere there’s a relatively free market i.e. Australia. A lot of this stuff is discussed on the forum but to have it all presented in one concise place is brilliant. Interesting conclusions on some stuff e.g. he sees interest rates as an influencer not a driver (have short term impact but don’t change phase of the cycle).
He explains the property cycle, the phases within it, & the strategies you can use through the cycle (“Wise Investor”) i.e. what types of area to buy & what to do with them. He focuses heavily on positive cashflow although he allows for some negative cashflow scenarios at certain stages. Along the way he debunks some myths, & provides a very interesting viewpoint that he backs up with his research. A very handy part of your toolkit & for those of you analysts who look at migration, population trends, GDP, etc, it’s a must-have. He is a proponent of both timing & time in the market. There are a few stories of warning used as examples, but only a few so it’s not a story by story style book.
To validate his claims would require a fairly detailed analysis of the data on an Australian slant (any volunteers? – there’s no way I’ll be able to fit this in for the next year or two)
Do I recommend it? Yes.
Rating 10/10. – It’s the only book I’ve seen that analyses & explains the drivers of the market & how to use them to your benefit.
Chapter Overview
1. What is the property cycle.
Details the 3 phases (Boom, Slump, Recovery)
The different timeframe of a full cycle i.e. 7-18 yrs
Based on NZ, but has relevance to anywhere there’s a ‘free market’ i.e. it’s a worldwide concept.
NZ has a smaller market so it responds to the cycle drivers quicker
Height of the boom to the low of the bust is a relatively short time (2-4 yrs)
Hot spots may perform against the overall trend for a short time but will eventually follow the major trend,
Major driver is ROI (affordability for owners)
2. Why it’s predictable
Length of cycle/phases change, the overall patterns don’t
Outer suburbs are more clearly defined & cyclical
Has Drivers & Influencers
Four classes of participant
Investor - demand driven by cost of holdings
Buyer – when owning is cheaper/comparable to renting
Vendor – Investor cashing up
Vendor – Owner selling to buy
3. The Clock
3 Phases with 3 stages in each phase (beginning, middle, and end)
Can’t consistently buck the trend
Most housing Indexes can be misleading (medians prices, etc)
4. Fear & Greed
He details what components of fear & greed operate for each type of participant in each phase
5. Key Drivers
These drive the market from one phase to the next
3 major categories - Financial, Demographic, Emotional. He details the components of these categories
Financial – Avg rent, ROI, finance aviliabiltiy, etc
Demographic- this dictates demand levels (migration, construction rates, vacancy rates, etc)
Emotional (herd mentality) combination of confidence & fear shows up in gentrification (renos), time to sell, volume of listings, etc
With all drivers need multiple of them to come together, a single driver won’t change the trend.
6. Market Influencers
Impact on immediate supply & demand, but have a temporary impact by changing or prolonging a trend
These include interest rates, confidence in property, alternate investments (how is property faring against these), inflation, legislative amendments, off-shore investors (Ozzies buying in Invercargill & Aucklanders buying in Oamaru spring to mind)
Interesting one here was his analysis shows interest rates as an influencer & not a key driver.
7. Recovery Phase
3 Stages within this phase
It’s the best time to buy
Analyses the key drivers & where they’ll be sitting in each stage of this phase
Property ROI, Affordability, & GDP are peaking
Construction, people/household, Gentrification (renos) are at a trough (low)
Focus in this phase is on good financials
Normally a shortage of rentals
NB: when he analyses the key Drivers (5 Demographic, 7 Financial, 4 Emotional) & what they’re doing for a phase (peak, trough, increasing, decreasing) he defines these at each of the three stages of a phase i.e. Affordability hits it’s low at the beginning of the slump, while Values, hit their low @ the end of the slump phase
8. Boom Phase
Shorter than the slump
Dominated by greed
“Wise investor” focuses on preparing for slump i.e. ensuring low LVR, good rent ability, etc.
Lots of greed around at this point & associated behaviour ‘get rich quick’ scams, OTP’s getting re-sold multiple times b4 settlement, lots of speculation.
Peak of - Net Migration, Employment, Property Construction, Rents, Incomes, Finance Availability, Gentrification, Sales
Trough of – Vacancy rates, Time to sell, Listings.
9. Slump Phase
Fear dominates this phase (greed at the beginning but that soon changes)with loads of horror stories, negative media, etc
Prices will still increase but slow & steady is now the order of the day
Increasing vacancy rates
Wise Investor = positive cashflow, upper socio economic areas
Peak – Vacancy rates, People/household, values, time to sell, listings
Trough – Sales, Affordability, GDP, Values, Employment ( & Others)
10. How to Survive the Property Cycle
Defines a simple rinse & repeat way of going broke in the property cycle as an example of how to go wrong
Cycle is cyclic, so are most Property Investors (most invest at end of boom)
Successful PI’s have a number of traits (he defines 14 of these)
Recommends “Interest rate Averaging”, which is breaking your loans into $100k portions & fixing these for varying time periods i.e. 1 = variable, 1= 1yr, 1= 2yr, etc,
Remember it’s a marathon not a sprint
Focus on the fundamentals i.e. ROI not # of properties
Clearly define what financial freedom is & how you’re going to achieve it i.e. 10 properties in 5 yrs might not deliver it (unless you follow Steve Navra)
11. When to buy
It’s always a good time for a good deal
Deals should be SAFE
S – Sensible based on your financials
A – Affordable – factor in a 3% rate rise & how’re you sitting ?
F – Friendly Vendor = keener to sell than you are to buy
E – Easily rentable or resellable
Reviews how to find out how motivated a vendor is, you must be observant & notice the small clues
Don’t waste time with an unmotivated vendor (unless the deal makes great sense at market price)
Details what you should focus on & how at which phase & stage within the phases
12. Finance Cycle
Explains the interaction between finance & the property cycle
13. The end of the property cycle ?
Reviews the arguments against the property cycle & explains why it will persist.
Has an appendix with graphs of key drivers over house price index.
Cheers
Mark
Disclaimer: I get no direct reward this (monetary or other), I am not associated in any way with Kieran Trass (except for being a fellow Kiwi), all my opinions are just that, opinions & should be treated accordingly.
Book Summary:
A VERY detailed analysis of the market & what drives it based on his research & analysis of 1000’s (apparently) of his property portfolios. It’s the best I’ve seen on why property behaves the way it does, & is very readable. He uses NZ as a case study but explains how this model fits anywhere there’s a relatively free market i.e. Australia. A lot of this stuff is discussed on the forum but to have it all presented in one concise place is brilliant. Interesting conclusions on some stuff e.g. he sees interest rates as an influencer not a driver (have short term impact but don’t change phase of the cycle).
He explains the property cycle, the phases within it, & the strategies you can use through the cycle (“Wise Investor”) i.e. what types of area to buy & what to do with them. He focuses heavily on positive cashflow although he allows for some negative cashflow scenarios at certain stages. Along the way he debunks some myths, & provides a very interesting viewpoint that he backs up with his research. A very handy part of your toolkit & for those of you analysts who look at migration, population trends, GDP, etc, it’s a must-have. He is a proponent of both timing & time in the market. There are a few stories of warning used as examples, but only a few so it’s not a story by story style book.
To validate his claims would require a fairly detailed analysis of the data on an Australian slant (any volunteers? – there’s no way I’ll be able to fit this in for the next year or two)
Do I recommend it? Yes.
Rating 10/10. – It’s the only book I’ve seen that analyses & explains the drivers of the market & how to use them to your benefit.
Chapter Overview
1. What is the property cycle.
Details the 3 phases (Boom, Slump, Recovery)
The different timeframe of a full cycle i.e. 7-18 yrs
Based on NZ, but has relevance to anywhere there’s a ‘free market’ i.e. it’s a worldwide concept.
NZ has a smaller market so it responds to the cycle drivers quicker
Height of the boom to the low of the bust is a relatively short time (2-4 yrs)
Hot spots may perform against the overall trend for a short time but will eventually follow the major trend,
Major driver is ROI (affordability for owners)
2. Why it’s predictable
Length of cycle/phases change, the overall patterns don’t
Outer suburbs are more clearly defined & cyclical
Has Drivers & Influencers
Four classes of participant
Investor - demand driven by cost of holdings
Buyer – when owning is cheaper/comparable to renting
Vendor – Investor cashing up
Vendor – Owner selling to buy
3. The Clock
3 Phases with 3 stages in each phase (beginning, middle, and end)
Can’t consistently buck the trend
Most housing Indexes can be misleading (medians prices, etc)
4. Fear & Greed
He details what components of fear & greed operate for each type of participant in each phase
5. Key Drivers
These drive the market from one phase to the next
3 major categories - Financial, Demographic, Emotional. He details the components of these categories
Financial – Avg rent, ROI, finance aviliabiltiy, etc
Demographic- this dictates demand levels (migration, construction rates, vacancy rates, etc)
Emotional (herd mentality) combination of confidence & fear shows up in gentrification (renos), time to sell, volume of listings, etc
With all drivers need multiple of them to come together, a single driver won’t change the trend.
6. Market Influencers
Impact on immediate supply & demand, but have a temporary impact by changing or prolonging a trend
These include interest rates, confidence in property, alternate investments (how is property faring against these), inflation, legislative amendments, off-shore investors (Ozzies buying in Invercargill & Aucklanders buying in Oamaru spring to mind)
Interesting one here was his analysis shows interest rates as an influencer & not a key driver.
7. Recovery Phase
3 Stages within this phase
It’s the best time to buy
Analyses the key drivers & where they’ll be sitting in each stage of this phase
Property ROI, Affordability, & GDP are peaking
Construction, people/household, Gentrification (renos) are at a trough (low)
Focus in this phase is on good financials
Normally a shortage of rentals
NB: when he analyses the key Drivers (5 Demographic, 7 Financial, 4 Emotional) & what they’re doing for a phase (peak, trough, increasing, decreasing) he defines these at each of the three stages of a phase i.e. Affordability hits it’s low at the beginning of the slump, while Values, hit their low @ the end of the slump phase
8. Boom Phase
Shorter than the slump
Dominated by greed
“Wise investor” focuses on preparing for slump i.e. ensuring low LVR, good rent ability, etc.
Lots of greed around at this point & associated behaviour ‘get rich quick’ scams, OTP’s getting re-sold multiple times b4 settlement, lots of speculation.
Peak of - Net Migration, Employment, Property Construction, Rents, Incomes, Finance Availability, Gentrification, Sales
Trough of – Vacancy rates, Time to sell, Listings.
9. Slump Phase
Fear dominates this phase (greed at the beginning but that soon changes)with loads of horror stories, negative media, etc
Prices will still increase but slow & steady is now the order of the day
Increasing vacancy rates
Wise Investor = positive cashflow, upper socio economic areas
Peak – Vacancy rates, People/household, values, time to sell, listings
Trough – Sales, Affordability, GDP, Values, Employment ( & Others)
10. How to Survive the Property Cycle
Defines a simple rinse & repeat way of going broke in the property cycle as an example of how to go wrong
Cycle is cyclic, so are most Property Investors (most invest at end of boom)
Successful PI’s have a number of traits (he defines 14 of these)
Recommends “Interest rate Averaging”, which is breaking your loans into $100k portions & fixing these for varying time periods i.e. 1 = variable, 1= 1yr, 1= 2yr, etc,
Remember it’s a marathon not a sprint
Focus on the fundamentals i.e. ROI not # of properties
Clearly define what financial freedom is & how you’re going to achieve it i.e. 10 properties in 5 yrs might not deliver it (unless you follow Steve Navra)
11. When to buy
It’s always a good time for a good deal
Deals should be SAFE
S – Sensible based on your financials
A – Affordable – factor in a 3% rate rise & how’re you sitting ?
F – Friendly Vendor = keener to sell than you are to buy
E – Easily rentable or resellable
Reviews how to find out how motivated a vendor is, you must be observant & notice the small clues
Don’t waste time with an unmotivated vendor (unless the deal makes great sense at market price)
Details what you should focus on & how at which phase & stage within the phases
12. Finance Cycle
Explains the interaction between finance & the property cycle
13. The end of the property cycle ?
Reviews the arguments against the property cycle & explains why it will persist.
Has an appendix with graphs of key drivers over house price index.
Cheers
Mark
