Why is patience a priority in property?
Patience is a virtue, good things come to those who wait, Rome wasn't built in a day. There are myriad different quotes, lessons and sayings all centred around the importance of the ability to wait. While the names of many of the authors of these little nuggets of wisdom have been lost the ages, their wisdom remains and still applies to many things today.
We would argue that there is no industry where patience is more important than property investment. Fortune may favour the bold, but capital gains favour those who can sit back, remain calm and keep their portfolio ticking along in the face of panic. Here are just a few reasons why:
Property values tend to increase in the long run
We're going to tell you something that many people like to forget: property can drop in value. Yes, it's true, those bricks and mortar can take a tumble from time to time. However, these losses tend to be fleeting in the majority of cases, as property exists within a cycle. It goes up in value, so people stop buying it, so it drops in value, and people buy it again, it goes up in value – you understand our point.
However, the peaks and troughs are not made equal. Over a long period of time, you'll find that property values result in an even, positive gradient. Take the most recent CoreLogic RP Data Pain and Gain report, for instance: It found that the average length of time that a profit-making property was held was around about 10 years, while people who sold their assets at a loss only managed to last around five to six years.
Property should be something that is in your long-term financial plan rather than quick flipping.
So you can see, if you were going to sell your property, you would need to wait 10 years for it to be profitable. However, another fact is that those houses that were sold for more were held for longer.
The longer you wait, the more profits you get. That's why we advocate for long hold periods – property should be something that is in your long-term financial plan rather than quick flipping. Over the past 100 years, Australian property has typically grown by 10 per cent per year. A few years of good growth, a few years of stagnation, a few years of retraction, and back again. There's no crystal ball, but there's no ignoring this pattern either.
The reality is that property is a game of patience, and it pays (literally) to know the rules before you start playing. The mentors at Think Money can help you plan, enact and profit from a robust property investment strategy – come and discover how we can help you today.