Property Cycles – Phase 1 – Stagnate/Watch Cashflow
Phase 1 – Stagnate/Watch Cashflow
This is perhaps the most boring of phases of the property cycle. Your property will remain at the same value or perhaps increase in line with inflation but not much more. So property bought in this phase is unlikely to be easily sold or refinanced in the short term. Once you own it you are stuck with it. During this phase interest rates are likely to be stable but high so your cashflow must be your primary consideration.
Property sales during this phase are likely to be very slow and asking prices are definitely negotiable.
I remember one of my property mentors Peter James saying that you can make the most money in property when prices are going down, he went on to say that this not the prices were actually going down but because everyone was talking about them going down. My own personal experience has been the same.
The essential tactic in this phase is the ridiculous offer. Choose a property you want and think of how much you are willing to pay for it. Think drop it by 15-25% that will give you your starting bid. Be prepared for some rejection but even if only 1 in 20 ridiculous offers come in you have snapped up a bargain in anyones books.
The basic strategy in this phase is buy & hold only when you can cashflow for at least 2 years.
If you cannot cashflow it you had better have a good reason to buy it.
An example year in the UK property market would be end of 2004 and the whole of 2005.
Live with passion,
Brett Wood
