Time in the market vs timing the market

From: Nigel W

Greetings All

Here's a hypothetical to get the debate going...

Assume our hypothetical investor is having difficulty either finding or financing properties which offer:
1) strong cashflow
2) good cap growth potential; and
3) renovation opportunity to improve both 1) & 2)

Should our investor buy a property or properties which don't meet all the above criteria to the extent he or she would like, just to be "in the market"?

Let me elaborate...

As we all know, the value of our hard earned cash is decreasing with every day due to the insidious effects of inflation (albeit fairly low at the moment).

Also, property values are, as a general rule, rising (although certainly not at a uniform rate between different suburbs and cities) due to the limited supply and the ever increasing demand due to population growth.

Our investor presumably wants to keep his cash fairly liquid and accessible to take advantage of the good deal when he/she finds it. This rules out most managed funds etc as a way for our investor to invest his cash for a short period whilst saving/searching for good deals.

At best, our investor can probably get about 5.25% on his money from the bank on which he or she will be taxed heavily!

In light of all this, should our investor find a property or multiple, perhaps smaller, properties and invest in those in the interim? The logic being that although there will be acquisition costs which will temporarily decrease our investor's asset position, the growth from those properties (plus any tax benefits) and modest cashflow will mean the investor will have more assets in the medium term against which to borrow to buy better properties to put in place more advanced/higher reward strategies like subdivisions, reno and strata, development etc.

I guess the question is whether or not you will always be playing "catch up" if you are saving up to afford the type of property which you want to make your "niche".

Or to put it another way, should you creep your way "up" the market by buying smaller properties, then in time (and with some reno along the way) take your cap gains and plough it back into successively "better" properties

(I suspect Sydney house buyers will have some views about this - *joke* How do you know someone lives in Sydney? A: they earn $150K and still can't afford their own home!)

Just some ramblings to spark some debate and learned commentary! Lay on...

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Reply: 1
From: Todd Dick

*joke* How do you know someone lives in Sydney? A:they earn $150K and still can't afford their own home!)

And their place of residence is as equivalent as what they lived in 10 years ago when they went to Uni – despite their income increasing exponentially.
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Reply: 1.1
From: Carly Henderson

nigel and todd
Funny ha ha but what does it tell you about the supply and demand theory?
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