Don’t get sucked in by the “hype”.
KEEPING a cool head is rule number one when it comes to cashing in on the property game, according to an expert who knows a thing or two about human behaviour.
Dr John Demartini — who is an investment consultant and human behaviour expert — said that there are some key things to bare in mind when looking at how to handle a falling market.
Dr Demartini says the current chatter about falling Sydney property prices may have some homeowners flying into a panic, while cashed-up investors are poised for a buying frenzy.
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So what should you do?
Well, according to Dr Demartini the trick is simply to not react to any “hype” and go about your business as usual — with careful research and logical analysis.
“To those who are over-leveraged, this market cycle may appear to be a challenge or, in some cases, a financial disaster,” he says.
“But this adjustment is actually essential for long-term economic growth and stability.
“Many Sydney property values have risen over the last decade — and quite substantially in some cases.
Approach the market with a business as usual approach.
“This anticipated downturn is well overdue and will allow many who have believed they’ve been unable to invest, to finally be able to.
“A fall like this separates experienced investors from the inexperienced investors, calms down those who work from pride, and centres investors who are authentically committed.”
Dr Demartini has consulted to high-wealth investors all over the world and says that there are often great buys at every phase of the property market cycle.
The trick, he says, is to ignore emotional impulses and stick to logic.
“In a falling market, some people can feel the pressure of a cashflow shortage and be driven by an impulsive sense that they need to sell,” he says.
“This can provide wise investors with cash reserves a great opportunity to buy.
“But if you are cash poor — and perhaps seeking immediate gratification and trying to speculate in the market — then I recommend you don’t act when the prices are beginning to head down but are still quite high.
Get to know people who are in the know.
“Instead, you may be wise build up your cash reserves or acquire other negotiable assets and wait for the dip or ‘panic phase’ of the cycle, before you buy.
“If you think long-term, market cycles are less concerning, and you consistently acquire true income-generating assets as your primary aim.”
So what are Dr Demartini’s top three tips?
Get to know people who are ‘in the know’
“Mentor under a seasoned, savvy property investor and or developer that has ridden the waves for at least three market cycles, who is ‘cash rich’ and sound with their investments,” he says.
“Associate with wealthy property masters. You cannot put your hand into a pot of glue without some of the glue sticking.
“So, too, you cannot associate with those who have mastered the game of property investing without some of their wisdom sticking with you.
Think about the worst-case scenario
“It’s okay to take a risk, but always make it a calculated risk,” he says.
“Logically think through what the potential returns are and imagine any worst-case scenarios.
“If you can handle the worst-case scenario — if everything worked against you and you can handle that — then you can move forward.
“Avoid looking at the upside and not the downside; to do so is foolish.”
Avoid impulsive moves and ‘get-rich-quick’ opportunities
“Maintain a cash reserve no matter how hot the market appears,” he says
“Understand the market mean and don’t let the crowd sway you from being reasonable with your expectations and decisions.
“Resist impulsive, immediate gratifying deals that have not been scrutinised.
“If they seem too good to be true, they just may be so.
Importantly, Dr Demartini advises against acting without complete certainty, even in a hot buyers’ market. He says:“Stick to your core competencies.”
Understand the market.
“Start with what you know and let what you know grow,” he advises.
“Many great investors only use their capital when they are certain they have a true asset to purchase, with a fair return potential.
“Therefore, don’t be unwise and void yourself of alternative income sources until you are certain that your properties are securing you the cash reserve and lifestyle you choose. Patience pays off. Stick to strategies.”