Real estate is a tricky investment. It depends on a lot of factors.
- As it happens with all investments, real estate investments also have a cycle (typically 20 years). Prices move considerably fast in first half of an investment cycle (with any investment).This is the phase when everyone say that ‘This is a bad investment!’. That is when smart money enters into the market. They slowly purchase at dirt cheap rates and accumulate during the first five to 10 years of investment cycle. As time passes the news spread (or smart money leaks news) that this is hot property or hot location and so and so have invested there.
- After accumulation phase of smart money comes accumulation phase by other rich money. They push the prices feverously. All of sudden it spreads like jungle fire and common public starts to jump in and drives prices to almost all time high. Everyone gets excited about the investment and people feel super positive about the investment.
- At this peak smart money takes profit and changes investment domain with next highly undervalued commodity or investment!
- After exit of smart money, rich investors start profit booking. Since they off load huge quantities, prices fall quickly citing any number of reason. Till rich money exits the system, property prices are kept high through several manipulation techniques (media etc.). We are now in this third phase of property market!
- Hence a crash is due and it will come as soon as rich money gets out of system and public buys all the stuff! We are now in the last phase of this rich money leaving the system.
What are some tips for the person who starts using money?
What to do?
- If you are invested, don’t panic. You will have to wait for next cycle to begin. This must start from 2025. Don’t sell now if you haven’t sold.Similarly wait for crash to purchase new property. Global economies are going through a very bad phase, unprecedented debt, low employment, bad results etc. All intertwined into one big ball of husk.We need only one spark for this system to crash.
- I guess next cycle of recovery will only start after market crash. Hence wait for the crash (Due in 2020 or 2022, when LIBOR agreement changes in US). All this is aftermath of huge 2008 economic collapse. We are trying to put away fire from fire (Debt by debt). Two wrongs don’t make a right.
- Money once created can never be destroyed (Unless currency is burned or hyperinflation hits). Money aka wealth is only transferred. These are great times for wealth transfer. Tread with caution. Some will gain multiple times while others will lose everything in a jiffy.
Economic and economic collapse is a very complex system.It’s like silent cancer. It Can go for a very long time undetected. But you know later you detect, harder it is to treat.
- Everyone will not earn money in any investment. Only 5% of investors make killing money in any investment. It is obvious and natural.
- Whatever information is public shall make you no money. Remember the last time you bought that special share based on advice of so-called TV experts and that share dropped in next couple of days!! Yes it would later go up but drop just after information goes public. That is when smart money leaves the system and rich money invests. After next surge rich money leaves and people money hold for very long-term!! Yes people make money by holding for very long-term. But only when next cycle starts and a greater fool comes to buy your stock. Hence people makes money in investment but never make windfall gains. You need to learn from cues since public information is never available in earlier parts of investment.
- Smart money is Rich but not vice versa. Sometimes in investment being smart in not same as being rich. A professional might be very rich and smart in his profession. But it is neither necessary not mandatory for him to be investment smart. Remember investment (typically stocks) requires smallest amount of effort. But when to invest and where to invest requires very high understanding of a very complex socio-economic system.
Endnote : User discretion is advised.