How to Invest with Real Estate in Crisis

“The ongoing financial crisis has changed the investing game forever, making uncertainty the norm and creating a whole set of new rules that will quickly and painfully determine the winners and losers out in the global financial markets. Investors who ignore this "New Reality" will struggle, and will find their financial forays to be frustrating and unrewarding. But investors who embrace this change will not only survive - they will thrive.” (Excerpt from Money Morning website)

Most players in the investment fraternity agree that with the huge dip in all markets, it’s time to go shopping for stocks. Selling at this point would be a poor strategy. To capitalize, today more than ever, investors need to change perception and view financial turmoil as possible time of investing opportunities and employ the correct tool.  The above caption is directed and addressed for players and investors in global financial markets but also is relevant and can be addressed to players and investors in global and local property market.

1) “View Crisis as a Prospect”

The financial crisis is not going to last perpetually. At the same time, the opportunities are not permanent as well.

But everyone should keep in mind, that the real estate market is a long term process, not a short term one. Investors should regard the time of crisis as the most convenient moment to begin the process of the investment cycle.

Not many people decide to acquire the real estate in given conditions. Consequently at the point where prices are receding and the supply is irrelative to demand, the one to win is a consumer, or in other words – investor.

The best time to explore for investments is when supply exceeds demand. You might as well look for opportunities in property development, real estate development, township construction planning and 5 star hotel construction ongoing projects.

Some recommendations are:

  • The fundamental quality is patience. Be patient and you will snatch the best investment opportunities with ease. 
  • Invest in the real estate funds. After the crisis they will recover faster.
  • Invest in the ecology-based projects. Most likely the waste disposal will become a priority subject.
  • If you are in possession of the real estate property, it would be wise not to sell it in the current moment.
  • Buy apartments. It is best if they are located in closely populated residential areas and have a good transport access.
  • Aim for the locations near shopping centers or for suburbans with neighbourhood shopping centres such as Wangsa Maju or Mutiara Damansara
  • Detailed market observation, the expert’s council and patience are the crucial success factors, which will help to trace down the best real estate investment opportunities. And remember that the marathon is won not by speed but by patience and wisdom. The probability is that the financial market will recover faster than the real estate market.

Till date, the biggest profit in the real estate market was accumulated by various banks and profiteers. The famous banking analysts in different countries declared, that the prices concerning real estate will increase and that it is a chance one shouldn’t miss. The declaration was made by the banks that neglected the upcoming financial downfall and later on had to sell out their real estate property in drawback prices.

“Banks are trying to protect their own investments and they are not satisfied with the sudden decrease in prices. Consequently the loaning has become a lottery, won only by the individuals, who are interested in buying the real estate belonging to the same bank.”

The profiteering has come to an end with the rise of economy. However the expert real estate analysts do not expect the further economical ascension. With the decrease in prices, there are no one left to price push.

2) "Be Greedy When Others Are Fearful"

Remember that famous Warren Buffet's quote?

"We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."

Right now fear has seized the stock market and to many investors it seems like it is the end of the world now. However, it is not. The economy and the market will recover even if it takes longer than expected. Thus, what you can do in times of crisis like the current one is take advantage of the attractive prices and fearful environment. 

Of course, this does not mean that you should invest in companies with bad outlook. Before you make a major, long-term investment, do your homework and find companies with strong and experienced management teams, good track records of profitability and growth, and innovative R&D.

You may not find extraordinary bargains but there are certainly some nice bargains for patient investors committed to gains over the long term. There are many companies that the general market has dragged down to very low prices despite their great product lines. 

3) Invest Based on Your Objectives and Age

Do not forget that both your age and objectives should play role when you are choosing your investments.

If you are young, far from your retirement years, you can afford a little bit bigger risk. Surely, it is painful to watch your investments drop significantly. And it is very easy to give in to the fear when a stock in your portfolio drops 50%. But fear is not a good guide to decision making. While sudden financial losses may be indeed indicators that even worse drops in value lie ahead, they can just as easily be followed by an upswing.  

Selling now and moving to safer investments that will provide only 2 or 3% rate of return will not get you to your goals and will certainly take you too much time to even get back to where you were before the market went down.

On the other hand, if you are near your retirement you should choose more stable and safer investments. First, you might never be able to recover from a significant drop since you have much shorter timeframe to work with. Second, since you are going to need your money sooner, you may be forced to sell your assets at their lows.

4)  Other points to remember / strategies that can be adopted

  1. Invest in growth, rather than borrow to grow
  2. Now is maybe the right time to liberalise and globalise
  3. Look at emerging markets

Conclusion:

Surely the current financial/credit/housing crisis caused tremendous losses and sent many investors "racing" for the exits. Yet, remember, when the real estate and the stock market are going down, this is still equal to both crisis and opportunity. Once inflationary pressures have eased, the market will primp up for another good run.

If you’re a long-term investor, then the time to buy is when everyone else is selling, but do so wisely with all details checked out and all opportunities explored. 

And always remember, to be a successful investor you need two main things - the knowledge and the right trading platform.