This Simple Investment Strategy Can Work Even In A Decling Market

[arve url="https://www.youtube.com/watch?v=LfNPP89dSZ4" mode="lazyload" align="center" /] It's a really good idea to have a strategy that can work even in a declining market, especially given the current conditions of the Australian property market as a whole. Is there a strategy where you can achieve financial freedom even investing in a potentially declining market? Book A Free Strategy Session - https://onproperty.com.au/session/ 0:00 - Introduction 0:30 - You don't WANT to invest in a declining market, you want to protect yourself from risk 1:40 - We have to admit that yes there is risk of a decline, but there are also chances of the market growing 2:18 - The strategy is…positive cash flow properties 3:18 - The reason positive cash flow properties can work even in a declining market 4:46 - What about rent going backwards? 7:27 - Positive cash flow properties pay themselves off and when you own it outright that cash flow becomes yours 10:03 - It's so important to do your market research 11:09 - You want to purchase a property where you can manufacture growth 11:47 - Given the current market it's important to have a strategy that can work if the market goes backwards 12:50 - Something I love about this strategy 15:12 - I lean towards metro markets at the moment over regional markets 15:48 - What you can do if you want to explore this strategy more Recommended Resources Mentioned In This Video: Positive Cash Flow Is Underrated - https://www.youtube.com/watch?v=08oBO2C-5_4 Advanced Suburb Research - https://onproperty.com.au/research/ Australian Property Bubble Interview with Steve Keen - https://www.youtube.com/watch?v=brX18YrTPTY Recommended Videos: 2 Properties To Financial Freedom - https://www.youtube.com/watch?v=Pj8gLiDEz8Y Transcription: When investing in property, given current market conditions, it's a really good idea to have a strategy that can work even in a declining market. So even if the market goes back for a period of time, you can still make money and you can still be successful and you can still achieve financial freedom. So in this episode I want to talk about a strategy that works even in a declining market. Hi, I'm Ryan from on-property, helping you achieve financial freedom. And I just want to say from the outset that this is not me recommending that you, that you invest in a declining market. Obviously we want to invest in property that is going to grow. We don't want to go out and seek properties that are going to go backwards in value. I'm sure there's sound strategies out there that can be really successful and make a lot of money from properties going back in value. But that's not what I'm talking about. I'm talking about, given the current market conditions, a lot of people out there are nervous to invest because I feel like the market may go backwards for a short period of time. Sydney and Melbourne definitely look like they're going to go backwards. Brisbane, we're not so sure about it looks like it may continue to grow, but obviously there's the chance that Sydney and Melbourne can drag down the entire Australian property market as well as changes with appro. Making it harder to lend could have an effect as well as potentially a global recession could affect the market. So is it possible to invest knowing that there's these risks out there, but we can still make money even if this worst case scenario does happen? Because we have to admit that yes, there may be a risk of the market is declining, but also there's the potential for markets growing as well. So it's up to you whether you decide that you want to invest or not given current market conditions, but there's a lot of people out there that realize that the market may still grow, especially somewhere like Brisbane that's hardly grown over the last 10 years, kind of has more potential than maybe Sydney or Melbourne, which had the big booms. So there's a lot of people that may want to invest because they can see the potential for growth, but they're nervous about the downside risks. So let's get into it and talk about this strategy and the strategy is really simple. Okay. And we're going to look at positive cashflow properties. Now in the past, in order to find positive cash flow properties, you really had to go out to regional centers in order to find them where her rental yields are higher and find specific properties that have certain characteristics that generate higher until yields. But by working with Ben Everingham from pumped on property, we've now realized that you can quite easily generate a positive cash flow property in a metro market by building a granny flat so you don't buy it. And it's positive cash flow, but you can create the positive cashflow through building a granny flat. So we're not talking about positive cashflow. I'm not talking about properties that are really cheap in some unknown country town because given current market conditions, I don't think I would feel confident investing in smaller areas. I would want to stick to the metro markets. But obviously what you do is up to you. And so the reason positive cash flow properties can work even in a declining market, is that your making money from day one. So if you're investing in property that generates more income than you're paying in expenses, then you're actually making money through the rental income on the property. So you're getting a return on investment from the rental money that's coming in after you've paid all your expenses. So this means that you're not reliant on capital growth in order to make money. So people who invest in negatively geared properties, they're actually in the opposite situation where they're losing money from day one. So when they invest in the property, obviously there put a deposit down, but there's more expenses than the rental income. That's coming in. So there are therefore paying money out of their pocket every single week, every single month. In order to keep that property afloat, they need that property to grow and for that growth to exceed the money that they're putting into it in order to make a profit and to make any money. But in a declining market where the property isn't growing and is in fact potentially going backwards, you're both losing money in the cash flow that you have to pay out every single month and you're losing money in the decline in value of a property. So if you're investing in property that's positive cashflow, if the property is declining in value, you're still generating that cashflow and you're still making money. Now when markets do go backwards, rent does go backwards as well. So that's definitely something to consider. I have recently moved to Sydney. I'm in the Sutherland Shire in Cronulla. Uh, you can see at the moment, right near the beach and then my mom's place. It's really good spot filming today, but in Granola rents are currently going backwards. So I'm looking at rentals at the moment and a lot of rentals on the market are listing for a certain price and then a couple of weeks later the dropping by $20 or something like that. And so rents do go backwards when the market goes backwards. But this is the interesting thing and this is something that I learned from Steve Keen when I invested, not when I invested, when I interviewed him and talked about the potential Australian property bubble a couple of years ago, I asked him about when markets crash due, rents go backwards as significantly as prices. And he suggested that no rent don't go backwards as much as price falls in an area. And this is because rents are directly tied to how much money people earn, whereas purchasing a property is tied to how much money people learn. But it's also tied to how much money they can borrow and what the interest rates are at the moment. So when someone's renting a property like myself, I'm looking to rent a new place at the moment I look at my income and how much I'm earning. And then now we at, okay, how much can I afford to pay in rent? That's generally around the 30% of someone's income level is what they'll pay in rent. But when it comes to purchasing a property, people do the same sort of figure out what can I afford to buy. But they also look at, given current interest rates, how much can they afford to borrow? So when interest rates are really low, like at the moment, they can borrow a significant amount of money in order to purchase a property and that can drive prices up. And then when lending gets harder or interest rates go up, then people can't afford it as much. So it drives prices down. So property prices can be tied to lending as well, whereas rent them more directly tied to what people earn. So unless you have a major recession where people are earning a lot less money than rents tend to be more stable than prices, or at least that's what I gathered from what Steve Keene was telling me. So even when a market's declining, you rent may go backwards, but you're still likely going to be in a positive cashflow position and you can still make money. Also, when it comes to investing in positive cashflow properties, you have a, uh, hate using the word guaranteed. I need another word to explain it. You have an almost certain future ahead of you where that property will be paid off. So if you're negatively geared, you need to continue working in order to pay that property off over the next 25 years. And it's going to take many, many years before that property to become positive cashflow. Unless you've invented with invested with a good rental yield and you're nearly there or you pay a lot of that money off yourself. But with positive cashflow property when you purchased that property and it's positive cashflow, it will go on to pay itself off. And so even in a declining market, if you can stay in that positive cashflow position and you can continue to pay off the principle of your property,