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.
By Makram H. Hani
C.E.O. Arms &McGregor International Realty®
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