Professional investors will likely enter these areas just before they peak and sell up just before the heat goes out of the market enabling them to again buy up what they can afford in the best areas thus positioning themselves ready for the next upward trend. And so it continues!
2)Slow Down Your Speculating
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You may already have decided that the time is no longer right to be over extending yourself and you may have cut back on your property purchases, but remember that making any home improvement or taking on any renovation projects during a downward period of the property market is also considered to be speculating. Don't just assume that capital appreciation from your property will justify home related expenditure right now'in a bear market it won't.
Property prices don't go up infinitely, if you examine the ebb and flow of the market in the US over the past decades for example, you will see that stand alone investment in real estate would've returned you gains of just over 1 percentage point above inflation! There comes a point in every market cycle when the market runs out of investors willing to buy up at the top prices and there comes a point when first time buyers are frozen out of the market. As demand dries up, over supply brings down prices and this stops the entire market in its tracks. If you remember this fundamental fact and examine the movement of the market closely and carefully you will be able to see when supply is about to outstrip demand, you will be able to watch first time buyers reigniting the market, you will understand when the time 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 is what you physically hold in the way of real estate assets ' but don't forget all your paper investments as well. Do you have money invested in REITs, do you have funds that invest in commercial property as part of the underlying portfolio, what about your retirement fund, which market sectors are the find managers investing in on your behalf right now' Don't assume that fund managers will make the right decisions at the right time on your behalf, you might be able to see the heat going out of the market quicker than they can react. If this happens you have to be prepared to rebalance your entire portfolio and move your exposure away from real estate if you believe the market is about to dip.
5)Protect Your Equity
There is nothing more valuable than the equity you own in your own home. Do not put that at risk. It is very tempting in a boom market to re-mortgage yourself back up to the new greater value of your home, but in so doing you expose yourself, your family, your home and your future to unnecessary levels of risk. Secure the roof over your own head first and foremost, and only then proceed into the greater real estate market with care! Do not be tempted to secure any extra loans or mortgages on your family home. Professional and wise real estate investors worth their salt will always secure their own position first and foremost.
