Hi Folks,
One of my property managers, Jeff Hunt, occasionally puts a few personal thoughts together in a newsletter. I thought this article was worth posting here. Bear in mind when you read this that Jeff is located in Epping, Sydney and his remarks are probably based on the state of the Sydney market in June this year when he wrote the article.
Quote:
Have you ever felt puzzled when you see normal rational people do things that they feel is intelligent, yet to you, their actions appear to be so illogical and unwise?
For months now I have been struggling to understand why so many "property investors" appear to be ignoring the fundamentals of property investing. By this I mean that they do not appear to be "reading the property market" and making sure that the "numbers add up". Rather, they appear to be following some type of herd mentality or playing a game of "catch up".
From my experience of property investing, you watch the "trends" for opportunities and you only buy if the specific property you are looking at shows you a profit from day one. If the "numbers" don't add up, then you don't buy. It's that simple.
While driving to work this morning it finally dawned on me why so many people who claim to be property investors have been acting in a manner that I find so confusing. The reason for their illogical behaviour is that they have only been investing for a relatively short time and have never experienced a "down market". They sincerely believe that the property market just keeps going up and that every purchase is a great investment.
For a lot of these people, a day of reckoning is fast approaching. The problems they potentially face may prove to be a double whammy.
On one side - the actual cost of holding the investment property is going up because of rising interest rates and rising vacancy rates.
On the other side - as the property market slows, the property values will be under greater risk of actually falling.
If history repeats itself, these people will then sell their recently acquired investment, blaming real estate as a poor vehicle for wealth creation rather than their own ignorance of the product or sound accounting principles.
Because they don't accept responsibility for their mistakes, they never actually learn from the experience and go on to perpetuate the mistakes with say a hot stock market tip or a plunge on say gold bullion.
It's all a bit like a dog chasing it's own tail. A lot of energy but without any real gain. - Jeff Hunt
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Mmmm... I hope we never see any forum members posting a forced sale on Caveat Emptor. If that happens we may have a real auction on this forum!
Regards, Mike
One of my property managers, Jeff Hunt, occasionally puts a few personal thoughts together in a newsletter. I thought this article was worth posting here. Bear in mind when you read this that Jeff is located in Epping, Sydney and his remarks are probably based on the state of the Sydney market in June this year when he wrote the article.
Quote:
Have you ever felt puzzled when you see normal rational people do things that they feel is intelligent, yet to you, their actions appear to be so illogical and unwise?
For months now I have been struggling to understand why so many "property investors" appear to be ignoring the fundamentals of property investing. By this I mean that they do not appear to be "reading the property market" and making sure that the "numbers add up". Rather, they appear to be following some type of herd mentality or playing a game of "catch up".
From my experience of property investing, you watch the "trends" for opportunities and you only buy if the specific property you are looking at shows you a profit from day one. If the "numbers" don't add up, then you don't buy. It's that simple.
While driving to work this morning it finally dawned on me why so many people who claim to be property investors have been acting in a manner that I find so confusing. The reason for their illogical behaviour is that they have only been investing for a relatively short time and have never experienced a "down market". They sincerely believe that the property market just keeps going up and that every purchase is a great investment.
For a lot of these people, a day of reckoning is fast approaching. The problems they potentially face may prove to be a double whammy.
On one side - the actual cost of holding the investment property is going up because of rising interest rates and rising vacancy rates.
On the other side - as the property market slows, the property values will be under greater risk of actually falling.
If history repeats itself, these people will then sell their recently acquired investment, blaming real estate as a poor vehicle for wealth creation rather than their own ignorance of the product or sound accounting principles.
Because they don't accept responsibility for their mistakes, they never actually learn from the experience and go on to perpetuate the mistakes with say a hot stock market tip or a plunge on say gold bullion.
It's all a bit like a dog chasing it's own tail. A lot of energy but without any real gain. - Jeff Hunt
----------------------------------------------------------------------------------------
Mmmm... I hope we never see any forum members posting a forced sale on Caveat Emptor. If that happens we may have a real auction on this forum!
Regards, Mike
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