5 Secrets For Surviving A Real Estate Market Downturn
By Rhiannon Williamson, Thu Dec 8th

History repeatedly serves to show us that the real estate marketis cyclical. It has boom times and stagnant times, occasionallyit suffers a crash but real estate never becomes worthless,therefore if the experts are right and we’re about to suffer aslow to stagnant period in the real estate market, all is notlost!

There are 5 fundamental secrets that real estate investors liketo keep close to their chest and they are the secrets thatenable them to survive and even profit during a bear market.

This article blows the lid off the secret world of theprofessional real estate investor!

1)Aligning For Profit in a Bear Market

When professional property investors believe the market isentering a downward phase i.e., changing from Bull to Bear -they will change their investment strategies accordingly. Onemethod that tough investors apply is to buy up property in thebest areas that they can afford once a market is slumpingalready. Professional real estate investors know that the bestareas for property always boom again very early on in the nextproperty cycle.

By working in this way they can then leverage their investmentby selling their property early on in the boom cycle and buyingelsewhere and always remaining one step ahead of lessprofessional investors or average home owners.

Up and coming areas will eventually peak as well of course asthey are swept along on the tide of the boom, but they will notpeak first and investors in these areas will have to wait longerto see their profits.

Professional investors will likely enter these areas just beforethey peak and sell up just before the heat goes out of themarket enabling them to again buy up what they can afford in thebest areas thus positioning themselves ready for the next upwardtrend. And so it continues!

2)Slow Down Your Speculating

You may already have decided that the time is no longer right tobe over extending yourself and you may have cut back on yourproperty purchases, but remember that making any homeimprovement or taking on any renovation projects during adownward period of the property market is also considered to bespeculating. Don’t just assume that capital appreciation fromyour property will justify home related expenditure right now…ina bear market it won’t.

3)Never Forget The Supply and Demand Theory

Property prices don’t

go up infinitely, if you examine the ebband flow of the market in the US over the past decades forexample, you will see that stand alone investment in real estatewould’ve returned you gains of just over 1 percentage pointabove inflation! There comes a point in every market cycle whenthe market runs out of investors willing to buy up at the topprices and there comes a point when first time buyers are frozenout of the market. As demand dries up, over supply brings downprices and this stops the entire market in its tracks. If youremember this fundamental fact and examine the movement of themarket closely and carefully you will be able to see when supplyis about to outstrip demand, you will be able to watch firsttime buyers reigniting the market, you will understand when thetime is right to sell and when the time is right to buy.

4)Balance Real Estate Exposure

You may assume that your only exposure to the property market iswhat you physically hold in the way of real estate assets – butdon’t forget all your paper investments as well. Do you havemoney invested in REITs, do you have funds that invest incommercial property as part of the underlying portfolio, whatabout your retirement fund, which market sectors are the findmanagers investing in on your behalf right now? Don’t assumethat fund managers will make the right decisions at the righttime on your behalf, you might be able to see the heat going outof the market quicker than they can react. If this happens youhave to be prepared to rebalance your entire portfolio and moveyour exposure away from real estate if you believe the market isabout to dip.

5)Protect Your Equity

There is nothing more valuable than the equity you own in yourown home. Do not put that at risk. It is very tempting in a boommarket to re-mortgage yourself back up to the new greater valueof your home, but in so doing you expose yourself, your family,your home and your future to unnecessary levels of risk. Securethe roof over your own head first and foremost, and only thenproceed into the greater real estate market with care! Do not betempted to secure any extra loans or mortgages on your familyhome. Professional and wise real estate investors worth theirsalt will always secure their own position first and foremost.

About the author:Rhiannon Williamson writes for real estate investors,international investors and expatriates on her site http://www.shelteroffshore.com/