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Remaining level-headed throughout property cycles

Wednesday, 3rd Aug 2016

emotional investingOne of the fastest ways to diminish your personal wealth is to make investment decisions based on emotion during the normal ups and downs of the property cycle.

While it might seem like an amateur mistake, many investors fall into this trap all too often, particularly when it comes to property.

Overpaying for property at the market peak

One of the most common ways investors diminish their wealth is to overpay for a property when markets are booming.

While this might seem like an obvious mistake (and one that you’ll be able to avoid), it’s a far too common pitfall as investors become caught up in the hype of a red hot property market and let their emotions get the better of them.

Overpaying for a property at the peak of the market may mean you’ll have to wait several years for the next up-cycle to realise any capital growth in your property.

Why should I buy an investment property in a downturn?

On the flipside, when property markets are cooling, many investors will shy away from acquiring an investment property because of the widespread negative sentiment.

Such a decision can be just as detrimental as overpaying for a property because you’re likely to miss out on the initial capital gains when the next upswing occurs.

Acquiring property in a cooler market can deliver many benefits for investors, including:

  • A greater choice of housing stock
  • Less buyer competition
  • Greater control of contract negotiations
  • The potential of receiving more value for money

Tips every investor needs to remember

Given that property markets will always experience ebbs and flows, it’s important for investors to remember a few tips.

  • Wealth creation through property investment is a long-term strategy. Don’t let the short-term cycles of the markets influence your decisions.
  • Overpaying for a property, particularly at the peak of an upswing, can significantly set you back

Purchasing a good investment property during a cooler market can be a springboard to building significant wealth sooner