{"id":3823,"date":"2015-03-19T01:00:30","date_gmt":"2015-03-18T14:00:30","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=3823"},"modified":"2015-03-19T01:00:30","modified_gmt":"2015-03-18T14:00:30","slug":"is-it-a-good-thing-to-invest-for-the-long-term","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/is-it-a-good-thing-to-invest-for-the-long-term\/","title":{"rendered":"Is it a good thing to invest for the long-term?"},"content":{"rendered":"

 
\n<\/strong>“There is this saying that crops up again and again or this piece of advice that somebody came up with \u2013 I don\u2019t know how many decades ago \u2013 that success in property investing is all about investing for the long term<\/em>\u201d,\u00a0Simon Buckingham<\/strong> from ResultsMentoring.com<\/a> tells us why he thinks investing for the long-term is the worst piece of advice he has heard.
\n <\/p>\n

Transcript:<\/h4>\n

Kevin<\/b>:\u00a0 As you might know by now, we\u2019ve been talking over the last couple of weeks about an article that\u2019s in the latest Australian Property Investor<\/i> magazine, which is out now \u2013 the April issue \u2013 and it is called Secrets of Our Success. In that article, they\u2019ve spoken to a number of experts about their strategies.
\nThe thing we do know is that there is no one strategy that fits all. However, there is one strategy that Simon Buckingham, who is the Director and Results Mentor at ResultsMentoring.com, says is a bit of a waste of time \u2013 it\u2019s actually not good advice at all \u2013 and that is investing for the long term. He joins me.
\nHi, Simon. I\u2019m a bit curious about this. You don\u2019t think it\u2019s a good thing to invest for the long term?
\nSimon<\/b>:\u00a0 Hi, Kevin. Thanks for having me on the show.
\nKevin<\/b>:\u00a0 Pleasure.
\nSimon<\/b>:\u00a0 I guess in my own experience and in the experiences I\u2019ve seen many other investors go through over the years, there is this saying that crops up again and again or this piece of advice that somebody came up with \u2013 I don\u2019t know how many decades ago \u2013 that success in property investing is all about investing for the long term. But I\u2019ve come to regard that \u2013 perhaps a little controversially \u2013 as some of the worst advice anyone could ever give you in property investing.
\nThere are a number of reasons for that, but perhaps, we need to look at first in terms of why people recommend that you invest in property for the long term. Most market commentators will say that holding on for the long term is a great way to build wealth in property, that if you just hang in there for, say, ten or more years, you\u2019ll be fine and you\u2019ll see your property values double \u2013 words to that effect.
\nThe promotion of this approach seems to be based on an idea that it doesn\u2019t really matter where you buy or what you buy, property prices are going to double on average every eight years or so.
\nNow, if we actually step back from the hype behind that approach and these kind of ideas and start to think for ourselves and question what\u2019s behind all of this, rather than just accepting it as law or common wisdom in property, when we dig below the surface, we start to see actually quite a different picture.
\nFor property prices to double on average every eight years or so, you need an average annual growth rate of around 9% per annum. Unfortunately, when you do go back in time and look at what has actually happened in the behavior of property prices, that 9% average is a myth. In fact, there\u2019s no statistical evidence on it.
\nIf you take studies of median house price movements going right back to 1901, which is about as far back as the records can go, the average rate of growth is a lot less. It works out to be something closer to 6%, and that\u2019s even before you take out inflation, so it can potentially be a lot less.
\nKevin<\/b>:\u00a0 Yes, I agree totally. I think you\u2019re highlighting a point here that a number of our experts have said, too, and that is that there is no one market around Australia. They\u2019re all very, very independent, they\u2019re different, and they change from time to time, Simon.
\nSimon<\/b>:\u00a0 Yes, absolutely right. If you look at times where property prices have done really well generally \u2013 and then again, there would be differences down at the individual state, city, and suburb levels \u2013 the prices have only really doubled in eight years in times like the late 1940s, during the post-war years, and really between around about 1967 and 1990. Outside of those times, the rate of growth has generally been much, much lower.
\nI think the attitude that just buy anything anywhere, doesn\u2019t matter, probably prices will double in eight years, hold on for ten years or more, you\u2019ll be fine, ignores a few realities. One is, as you said, you will get quite significant differences from one place to the next. It also ignores the reality that property prices in an area can and will go down and sideways potentially for an extended period of time.
\nKevin<\/b>:\u00a0 Of course, sophisticated property investors, as you rightly point out, seek greater certainty in that they take greater responsibility for their financial outcomes. They actually do their homework and make sure they do this due diligence on it.
\nSimon<\/b>:\u00a0 That\u2019s right. If you throw out a statement like \u201cinvest for the long term,\u201d it\u2019s the equivalent of saying \u201cshe\u2019ll be right, mate.\u201d As a sophisticated investor, obviously, we need to be a bit smarter than that, not just have a cop-out that says, \u201cWell, I don\u2019t know what the markets going to do tomorrow, five years, or ten years from now. So I\u2019ll just gamble and hope and pray that everything turns out okay by waiting long enough.\u201d
\nThat\u2019s ultimately an abdication of responsibility for your own financial outcomes. As a smarter, sophisticated investor, you need to be not throwing away that responsibility but taking on that responsibility.
\nKevin<\/b>:\u00a0 Simon, what\u2019s your top investment rule?
\nSimon<\/b>:\u00a0 My number one investing rule really goes opposite to the invest for the long term mentality. My number one investing rule is that if I don\u2019t expect to make a significant profit in a six- to 36-month timeframe, I won\u2019t do the deal.
\nThere are a few reasons for that. A significant profit to me, is five figures or better, or if I was doing it for income, it would be some sort of immediate or near-term positive cash flow. But when I look at a property deal, before I go into it — and you\u2019ve said this yourself, Kevin \u2013 it\u2019s absolutely critical to understand the numbers in the deal, to do the due diligence, and from my perspective, to actually quantify the profit you expect to make.
\nI won\u2019t accept the notion that it\u2019s okay to invest in a property if it goes up in value. I want to know how much am I expecting it to go up in value by and by when, and specifically, how much do I expect to make from this property deal in the next six to 36 months?
\nIf I can\u2019t quantify it or if I can\u2019t put a timeframe around it, I won\u2019t buy the deal. The reason for that is because if I focus on a 36-month horizon, I\u2019m in a far better position to be able to predict the movements in the local market. I can have regard to things like the dynamics of the balance between supply of housing and listings versus the demand evidenced by sales in the area and what direction that\u2019s going, and I can make some fairly accurate inferences about where prices are likely to go in that six- to 36-month timeframe.
\nIf I try to look beyond that, there is no science in the world that can give you any degree of accuracy or high confidence in what prices will actually do. You just start to get too many influences coming in and too many unknowns that far out. Frankly, if anyone tells you that they can predict where property prices will be ten years from now, you should turn around and run away very quickly because it\u2019s frankly impossible.
\nThat\u2019s where I get a little bit anxious or upset when I\u2019m talking to investors and they show me things like a table in an off-the-plan sales pack that says, \u201cThe average growth in this property over the next ten years is likely to be 8% or 10% per annum.\u201d
\nThat\u2019s completely made up. There\u2019s no way anyone can say that that\u2019s going to occur with any confidence.
\nKevin<\/b>:\u00a0 That\u2019s right. Very sobering advice and very good advice, too.
\nSimon, I want to thank you for joining us on the show and bringing that to our attention. Simon Buckingham, who is the Director and Results Mentor at ResultsMentoring.com.
\nThanks for your time, Simon.
\nSimon<\/b>:\u00a0 Thanks, Kevin. You\u2019re more than welcome.
\n <\/p>\n","protected":false},"excerpt":{"rendered":"

  “There is this saying that crops up again and again or this piece of advice that somebody came up with \u2013 I don\u2019t know how many decades ago \u2013 that success in property investing is all about investing for the long term\u201d,\u00a0Simon Buckingham from…<\/p>\n","protected":false},"author":176692471,"featured_media":3825,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[10,25],"tags":[88,101,107],"class_list":["post-3823","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-kevin-turner-sponsored-channels","category-sponsored-channels","tag-long-term-investment","tag-podcast","tag-property-investment-2"],"yoast_head":"\nIs it a good thing to invest for the long-term? - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/is-it-a-good-thing-to-invest-for-the-long-term\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Is it a good thing to invest for the long-term? 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