Do it right in Real estate
investment; wealth creation at its best
Dose 2. Step buying to
crunch busts and booms (Afloat in a cyclical industry)
Figuring out peaks and
bottoms is a pure act of luck.
However figuring out what
makes sense and what doesn’t is far from needing a degree in Astrophysics.
I have published on
13/12/2014 looking at a softening market, thinking among ourselves have the
market lost pace- Have the market boomed and is ready for a crash- Have the
market grown beyond it’s real potential.
We use reports and predictions to confuse
ourselves further. Some talking about the benefits of EXPO2020, others talk
about the oil price drop, few of us ever get regional security and the
international political game into the discussion. Some talk purely about
technical indicators and fundamentals. And finally the few who go deeper into
the crowd’s emotional intelligence and talk about sentiment and the drive
towards important episodes. We see parameters of when will the market change up
and down, we sometimes even hear specifics about the 63.5 days or the 4 months
and a quarter it may take for the market to change direction again.
Gents all those reports
and arguments are so interesting to read and analyze. However let’s go back to
basics. I said it in great times, I said it in bad times, and I will say it in
all times, it is the same. I will not say something new.
Please answer those questions and you will get
the answer you are aiming for.
1.Why are you purchasing
property?
Is it to be an overnight millionaire. If so, I
hope you make much money, please stop reading what I publish and continue
reading the reports, any of the reports. Actually you can even stop reading the
reports and flip a coin. Head towards volatile markets, hit and hope that you
can run..
Is your purchase to create consistent stream
of incomes and make some money over a descent period of time; or to live in it
and hopefully make some money over the long run on top of the rent saved. You
are on the right track. The question paused above won’t matter to you. We all
know that no one could predict the peak (except by mistake) or the bottom (also
by mistake) thus the additional few pips you will save waiting for a market to
soften further or lose if the market went up in the overall scheme of things is
meaningless. Let’s spread the 8% you would save if you were so lucky; and while
waiting hope for the market to drop by that much, over 10 years- or even seven
years. do your maths, to find out how meaningless it is.
If you are buying the right property today at
a descent price, researching properly, negotiating properly, and sleeping over
it to take the right choice you will score right every time or let me say most
of the times to stay within the parameters of gravity.
2.How are you paying for
it. are you over investing- regardless of your aim of the purchase, it is
advisable to always buy with the ability to hold long term even if your aim is
to profit short term.
For some property is only
a shelter, and a source of pride.
For others property is only an asset, and a
source of profit.
It doesn’t matter how you view property it
always provides you with the following:
Hedge against inflation, currency risks.
Income producing, while the probability of
growing in value.
Today 23/10/2015 let’s
look at how to successfully invest in property throughout busts and booms; how
to make the best whichever part of a cycle you make your move in; and stay
afloat in a highly cyclical industry.
Studying real estate
prices historically we can see that there are 3 kinds of cycles; a short one, a
medium length cycle and a long cycle. Every market have the three and lives all
in every stage of the market growth and evolution. What differs mostly is the
length of each. Dubai is a vibrant city where the dynamics affecting the
realestate market indicate that cycles are shorter and mostly sharper. There is
a general thought that is so often heard dealing with expectancy of the market
maturity. Mostly perceived that market maturity should mean that the market
will stop acting as it should, and should step out of the bust and boom cycles.
Which is far from true. When markets develop and mature cycles become slower
thus each phase of the cycle takes longer, softer landings are believed to be
possible. This said, Dubai is not expected to have the same spam of cycles like
London as the comparison is generally done. The dynamics of the market from
geopolitical, economic and social aspects as cleared in my previous
publications; show that Dubai’s market lives and prospers of shorter cycles and
faster movements. This implies several benefits which make people more
interested in the market as it is of higher liquidity and more prospects of
faster, bigger profits (which will be fully discussed in (Dose 4. What does it
really mean to have a market with short and fast cycles (Liquid markets and why
they are the most interesting?)
As a conclusion cycles are
there to stay, however this doesn’t mean we should have each his own fortune
teller to predict when is it right in a cycle to come in or out. The solution
is step purchasing. Step entry and step exit. Such a strategy allows you access
to a big part of the upside while lowering risks of the downside. It is right
to set disciplines within this strategy. Such a strategy is widely used by
mutual funds and institutional investors investing in property and equities.
Investing is never a
precise science, it is more the art of understanding the market dynamics and
human reaction to market movements.
Part of the series
"Do it right in Real estate investment; wealth creation at its best"
Dose 1. Real state a
component of every portfolio.
Dose 2. Step buying to
crunch busts and booms (Afloat in a cyclical industry)
Dose 3. Opportunities
within every part of every cycle
Dose 4. What does it
really mean to have a market with short and fast cycles (Liquid markets and why
they are the most interesting?)
Dose 5. Have your money
work for you.
Series by Makram Hani ©
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