When times are good, we start exercising selective memory, obliterating anything bad that had happened to us. This may not be a good idea. Michael Yardney for the Property Observer says that we will do well to learn a few things from the last property downturn. Let us talk about the five property investing lessons Yardney talks about:
1. Investing – nothing is permanent
Neither a recession nor a boom will remain forever. Real estate world behaves cyclically, with each phase sowing the seeds of a counter-phase. The theory is simple; too much of resistance calls for support and vice versa. Without this knowledge, most investors failed to capitalize on booms and insure adequately against bust phases.
2. Don’t go by the cynics
There will always be a handful of cynics who would keep repeating the recession hymn. They will keep saying how things have become too good to be true and a bust is on the cards. With hindsight, we learn that such recessions never materialize and property rates keeps growing for long periods.
3. Use a definite strategy
When the going is good, any deficit in strategy is covered by the generosity of the market. However, when times turn, such foolishness can make you pay in a big way. Thus, you must have a strong strategy backed by sound property fundamentals.
4. Do not be blown away by the “rags to riches” story
You will do well to keep shy of all those who want to tell you how easy it is to be rich. They will show you the marketing trends, the overvalued graphs and eat away into your wisdom; the fact remains that money in the property market can only be earned the hard way.
5. It is always about the property first
Many may fool you into believing otherwise but in the end it’s the fundamentals that count. If you buy in a development-inclined area and buy at a good price, you are bound to do well. Other aspects like mortgage rates and inflation turn out to be secondary.
Good Investment Advice
I think that amidst all the above points, the last one counts most. People look to trade cyclically assuming that a development-inclined land is set to give results. However, macroeconomics teaches us to think counter-cyclically too. With a developed property, the law of averages might catch up sooner or later and thus it may be safer to invest in properties that have not been doing well for some time now. You just need to keep an eye on the population growth as high population growth indices serve property prices well.
Five Unforgettable Investing Lessons
1. Investing – nothing is permanent
Neither a recession nor a boom will remain forever. Real estate world behaves cyclically, with each phase sowing the seeds of a counter-phase. The theory is simple; too much of resistance calls for support and vice versa. Without this knowledge, most investors failed to capitalize on booms and insure adequately against bust phases.
2. Don’t go by the cynics
There will always be a handful of cynics who would keep repeating the recession hymn. They will keep saying how things have become too good to be true and a bust is on the cards. With hindsight, we learn that such recessions never materialize and property rates keeps growing for long periods.
3. Use a definite strategy
When the going is good, any deficit in strategy is covered by the generosity of the market. However, when times turn, such foolishness can make you pay in a big way. Thus, you must have a strong strategy backed by sound property fundamentals.
4. Do not be blown away by the “rags to riches” story
You will do well to keep shy of all those who want to tell you how easy it is to be rich. They will show you the marketing trends, the overvalued graphs and eat away into your wisdom; the fact remains that money in the property market can only be earned the hard way.
5. It is always about the property first
Many may fool you into believing otherwise but in the end it’s the fundamentals that count. If you buy in a development-inclined area and buy at a good price, you are bound to do well. Other aspects like mortgage rates and inflation turn out to be secondary.
Good Investment Advice
I think that amidst all the above points, the last one counts most. People look to trade cyclically assuming that a development-inclined land is set to give results. However, macroeconomics teaches us to think counter-cyclically too. With a developed property, the law of averages might catch up sooner or later and thus it may be safer to invest in properties that have not been doing well for some time now. You just need to keep an eye on the population growth as high population growth indices serve property prices well.
You can read the original article here.
Do you have any favourite investment mantra?
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