Surviving a Downturn in the Real Estate Market
History shows us that the real estate market is on big cycle. It has boom times and stagnant times. Occasionally the real estate market suffers crash but real estate never becomes worthless. If the experts are right and we’re about to suffer a slow to stagnant period in the real estate market, but all is not completely lost!
There are a few secrets that experienced real estate investors like to keep close to their chest that enable them to survive and even profit during a slow market.
Aligning For Profit in a Slow Market
When experienced real estate investors believe the market is entering a slow period, they will change their investment strategies accordingly. One method that tough investors apply is to buy up property in the best areas that they can afford when a market is slumping. Experienced know that the best areas for property always boom again very early on in the next property cycle.
They can then leverage their investment by selling their property early on in the boom cycle and buying elsewhere and always remaining one step ahead of less experienced investors.
Up and coming areas will eventually peak.
They may take a little bit longer to peak
and investors in these areas will have to wait longer to see
their profits.
Slow Down Your Speculating
You may already have decided that you may have cut back on your property purchases. Remember that making any home improvement during a downward period in the real estate market is also considered to be speculating. Don’t just assume that capital appreciation from your property will justify home related expenditure right now…in a slow market it won’t.
Never Forget about The Supply and Demand Theory
Property prices don’t go up infinitely, if you examine the ebb and flow of the market in the US over the past decades for example, you will see that stand alone investment in real estate would’ve returned you gains of just over 1 percentage point above inflation! There comes a point in every market cycle when the market runs out of investors willing to buy up at the top prices and there comes a point when first time buyers are frozen out of the market. As demand dries up, over supply brings down prices and this stops the entire market in its tracks. If you remember this fundamental fact and examine the movement of the market closely and carefully you will be able to see when supply is about to outstrip demand, you will be able to watch first time buyers reigniting the market, you will understand when the time is right to sell and when the time is right to buy.
Balance Real Estate Exposure
You may assume that your only exposure to the property market is
what you physically hold in the way of real estate assets – but
don’t forget all your paper investments as well. Do you have money
invested in REITs, do you have funds that invest in commercial
property as part of the underlying portfolio, what about your
retirement fund, which market sectors are the find managers
investing in on your behalf right now? Don’t assume that fund
managers will make the right decisions at the right time on your
behalf, you might be able to see the heat going out of the market
quicker than they can react. If this happens you have to be prepared
to rebalance your entire portfolio and move your exposure away from
real estate if you believe the market is about to dip.
Protect Your Equity
There is nothing more valuable than the equity you own in your own home. Do not put that at risk. It is very tempting in a boom market to re-mortgage yourself back up to the new greater value of your home, but in so doing you expose yourself, your family, your home and your future to unnecessary levels of risk. Secure the roof over your own head first and foremost, and only then proceed into the greater real estate market with care! Do not be tempted to secure any extra loans or mortgages on your family home. Professional and wise real estate investors worth their salt will always secure their own position first and foremost.
The author, Roy White and his wife have been helping people buy and sell Las Vegas real estate for over 28 years. They are also investors themselves. For questions or comments you can contact Roy and Shirley toll free at 1-866-374-3444 or by e-mail at CENTURY21WHITE@aol.com
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The Roy and Shirley White Team
CENTURY 21 Aadvantage Gold
5041 N Rainbow Blvd
Las Vegas, NV 89130
Direct Line 702-610-4270
Toll Free 1-866-374-3444
Fax Line 702-309-4483
Each office is independently owned and operated
