Monday, December 27, 2010

Culling Profits in Down Market Situations by Ravinder Tulsiani

Culling Profits in Down Market Situations by Ravinder Tulsiani

In a Real estate market cycle, new investors try to bring a changed trend by over buying and making the affordability level leap higher. Now, when there's a slump in the market, these very amateur investors pour and lose their hard earned money by selling at low prices, than the prices at what they had bought. One man's loss is other man's gain. The professional investors lurking out there make huge profits by buying this discounted property on their terms.

The professional investors move in counter-cyclical manner, buying from these novice investors and selling at profits. This is an absolute gain.

Role of an Average Investor in North America - An average investor is in state of shock and panic, trying to simply get out of the vicious market cycles. It is important to note that panicky situation in any type of market creates good amount of opportunities for others.

Patience does all the work. Like in a positive market trend, the jobs, deals and profits are also created in panicky situations. Talking in context of real estate market, try every method out to keep the property with you during down market trend, and do not succumb to market pressures by selling the property at complete loss.

Keep the Basics Clear

For example, one can buy a Halloween candy at 50 to 90% off during first week of November itself. The reason being they are almost out of demand by that time. A week previous, the same candy made from same stuff were sold at almost 50 to 90% higher rates. This example also holds good when we talk of real estate market. The real estate properties are located at the same place, and standing upright without any crevices or cracks developed in them, made of same bricks and mortars as found elsewhere or when the market was moving up trend.

It is necessary that you keep your concentration and eye over the market fundamentals,

Market is driven by average consumer's confidence. Any false or panicky exaggerations make the markets move either up or down. As the result of these human exaggerations, when the market makes a dip, it will dip below than the real value of property, and likewise, if the exaggerations are positive, the market will substantially rise higher than its real market price.
Therefore, do some homework, and keep strong on the fundamental research about a property, which includes, employment, interest rates, immigration etc… see end of this report for a detailed breakdown of what you should look for.

Go for Cheap Deals

Take the panic on to its positive side and negotiate on the price as better as you can. Take the popular opinion on to your benefits. Supposing if the investor or home owner is deliberately thinking to make a jump out, because of poor market conditions, then it can be a great deal for you and you can take full advantage in such a situation.

Just acknowledge their fears and buy the property at ideal bargains. Ultimately you are helping the average investor by buying his fears!
Forced Appreciation

Try to manipulate your property on its aesthetic value, interiors, kitchen, bathrooms and light fittings. In this manner, you can have substantial returns on your property even in down market situations.

Concentrate more on Rentals

In a down moving market scenario, people opt for renting a property, rather than buying a property and paying high mortgage interest rates at the end.

Put a Curb on Housing Expenses

In a down market economic trend, the government tends to cut the lending rates substantially, and in the process the banks follow the same process too. As the result, borrowing is available at cheap lending rates. This is the opportune time to make the right judgment on your current mortgage rates. If you are paying high, you can break the mortgage in between and go for the refinance at low rates, and at the end you'll be having extremely reduced carry cost.

Municipal Property Assessment Corporation (MPAC) valuation

MPAC, a non-share capital, not-for-profit corporation whose main responsibility is to provide its customers - property owners, tenants, municipalities, and government and business stakeholders - with consistent and accurate property assessments. By using the assessment on the purchased property for refinancing purposes, you can always challenge property's current value with the local municipal governments, for real estate tax benefits. In this manner, you can really substantiate on annual property taxes.

Invest in No Money down Deals
Real estate markets can vacillate up or down, giving you the opportunity to loose or to gain profits. Remember to invest in no money down deals, because it is in such investments that you are bound to make substantial profit margins.

Invest in declining markets such as US. It represents excellent opportunity to the sophisticated investor. Remember, market opportunities are short-lived; you need to be decisive and cease the opportunity while it's still around. Three mantras out here for all you sophisticated investors - Buy cheap, stick to basics and follow the right strategies.

About the Author

Ravinder Tulsiani is a published author who has written about personal finance, real estate, self-help and online marketing.