How can I make money in a falling market?
In the good times everything is rosy in the garden. Your chosen asset or investment is steadily increasing in value and all is well with the world. Even if you do nothing you will still make money.
But life isn't like that all the time and the value of most investments, as we are constantly reminded in the small print, can go down as well as up.
For the long-term investor, it is the long-term performance that counts. You will sit tight, secure in the knowledge that eventually your capital gain will appear (a capital gain that is taxed these days at just 18% with a tax free element of £9600).
In the short term though, how do you make money in a falling market?
The first way is that falling markets produce motivated sellers.
There are always reasons for people to move, some good some bad; relocation due to promotion or new jobs, growing families requiring more space, splitting families and mortgage difficulties. Some sellers have to move and need to move quickly.
They need to sell and you can offer to buy - at a discount of course.
Boo you say, taking advantage of others' misfortune!
Well first of all let us remind ourselves that we are in the property business to make money. That's a cold hard fact and you may have to harden your heart a little along the way. But second, let's remember that they want to sell at the best deal for them and you want to buy at the best deal for you. It cuts both ways. They would drop your offer in an instant if a better one came along.
Your finance is in place, there is no chain or complications and you can complete quickly. You are exactly the sort of buyer they were hoping for. Your appearance on the scene will save them time and the money involved in aborted transactions. Yes, you will offer a lower price because you have these advantages.
The other way to make money in a falling market is to buy at the bottom. Really? You would have to be a genius to call the bottom of a market but the good news is you don't have to be that precise, it's fine to buy just before or just after that point.
Let's call it a zone of opportunity.
How to spot that? - research, research, research, good estate agency contacts and knowing if the area you are considering is, in the mid to long term, always going to be a good bet. In other words, that the fundamentals are still in place.
Are the factors that made the investment a good one in the first place, still relevant and more importantly, still there?
But life isn't like that all the time and the value of most investments, as we are constantly reminded in the small print, can go down as well as up.
For the long-term investor, it is the long-term performance that counts. You will sit tight, secure in the knowledge that eventually your capital gain will appear (a capital gain that is taxed these days at just 18% with a tax free element of £9600).
In the short term though, how do you make money in a falling market?
The first way is that falling markets produce motivated sellers.
There are always reasons for people to move, some good some bad; relocation due to promotion or new jobs, growing families requiring more space, splitting families and mortgage difficulties. Some sellers have to move and need to move quickly.
They need to sell and you can offer to buy - at a discount of course.
Boo you say, taking advantage of others' misfortune!
Well first of all let us remind ourselves that we are in the property business to make money. That's a cold hard fact and you may have to harden your heart a little along the way. But second, let's remember that they want to sell at the best deal for them and you want to buy at the best deal for you. It cuts both ways. They would drop your offer in an instant if a better one came along.
Your finance is in place, there is no chain or complications and you can complete quickly. You are exactly the sort of buyer they were hoping for. Your appearance on the scene will save them time and the money involved in aborted transactions. Yes, you will offer a lower price because you have these advantages.
The other way to make money in a falling market is to buy at the bottom. Really? You would have to be a genius to call the bottom of a market but the good news is you don't have to be that precise, it's fine to buy just before or just after that point.
Let's call it a zone of opportunity.
How to spot that? - research, research, research, good estate agency contacts and knowing if the area you are considering is, in the mid to long term, always going to be a good bet. In other words, that the fundamentals are still in place.
Are the factors that made the investment a good one in the first place, still relevant and more importantly, still there?
Labels: below market value, Berkshire Property Meet, buy-to-let, Juswant Rai, no money down, property investing, property networking, respossessions, sale and rent back
posted by Juswant & Sylvia Rai at
10:46 AM
0 Comments:
Post a Comment
<< Home