Don't believe everything you read! If you believe what you read in the newsapers you are probably relying on outdated information.
All the figures and the stories are about past events.
The banks are reporting large losses and tightening up like a miser with rigor mortis, but the bad debtors have already lost their money! Newspapers sell papers by reporting past events and exaggerating the worst of these! The world economy goes up, and it comes down, in never ending cycles, sometimes the peaks are higher, sometimes the troughs are lower.
This has always been the case, and it isn't about to change.
No one seems able to predict the ups and downs very accurately, not even the economists.
According to George Bernard Shaw, if all economists were laid end to end, they would not reach a conclusion.
Nor has anyone had great success in flattening the peaks and troughs into a steady growth curve: governments around the world have tried but eventually their fate is like that of a rodeo rider clinging desperately to an angry steer.
One thing however that you can be sure of: bad times will get better and good times won't last forever.
Recession Attitudes There are three common attitudes about recessions, all of which contribute to the doom and gloom mentality, and all of which are wrong.
If you get these three attitudes right, you will be at a big advantage as an investor.
Attitude One - Things Will Keep On The Way They Are.
If constantly surprises me how top business people and investors forget the basic truth that the economy is a roller coaster.
When markets start rising frantically they somehow believe that the trend will continue upwards forever and they keep on buying.
In most cases when the market has been rising and the pace of growth is accelerating rapidly, a downturn is on the way.
When you plan your real estate investments you should be looking mostly to the medium and the longer term.
This means that you must expect both booms and recessions.
You might be lucky and invest through a period when the peaks and troughs are gentle ones, but then again you might not.
You have no control over this, so you have to accept it - and plan for it.
Be careful not to negative gear to the maximum you can afford in the good times because when the bad times inevitably come, you may pay a heavy price.
Planning for the troughs means not stretching yourself to the limit in the good times, this way you can stretch yourself to make the most of the bad times.
Attitude Two - All Recessions Are Bad.
When recessions arrive, most investors start to complain.
They talk doom and gloom; they see the end of the world looming.
They forgot that the good times would end, so they didn't plan for the bad times.
Now they forget that the bad times will also end and so they fail to take the opportunites presented.
What is the golden ideal of real estate investment? To buy in the trough and sell in the peak! What do you need to be able to do this Right? You need the troughs as well as the peaks!! The long-term trend for real estate prices is always upwards.
Viewed as a trend, real estate prices generally go up more than inflation.
This is because land is a limited commodity.
We can make more people, but it is very hard to make more land, particularly land in desirable locations.
This is what makes real estate such a secure investment.
The determined investor, however, wants to profit more than the few percentage points' difference between the inflation rate and the increase in real estate values.
This is where you need recessions, to boost your profits.
Recessions mean prices go down.
Sellers become desperate and more flexible.
There are more opportunities for the kinds of innovative win-win deals.
You can easily get properties which have built in profits, profits that you can realise as soon as the good times return - which they inevitably will.
Buying in a recession can speed up your rate of capital appreciation saving you years of investment time.
Attitude Three - Recessions Are The Same Everywhere Western economies are very complex things, multi-layered and difficult to understand or predict.
When economists say we are in a recession, they mean that the value of the output of the entire economy has fallen for two successive quarters.
That does not mean that every sector has gone backwards.
A smart investor however can switch their money and benefit from the boom right in the midst of an overall recession.
No matter how deep the recession, somewhere there are industries that are resisting the trend.
Not only that, but even within an industry which is going backwards, there will be some who are doing better than others, and some who are actually pushing ahead regardless.
Those who are strong enough and ruthless enough to take advantage of their competitor's weaknesses can build business empires during industry recessions.
What does all this mean for real estate investors? While the real estate market in total may be in recession, some types of properties will be performing better than others.
Prices for units can follow different trends to prices for houses; the top end of the market can perform very differently from the bottom end.
Some cities will perform better than others.
Within cities, some suburbs and even some streets will do better than others.
In the midst of recession, they can show strong gains.
Conditions in various states can fluctuate depending on demand, generated by migration and expansion.
Then there are cycles within cycles, such as suburbs.
Lower priced suburbs may actually increase in value, while higher priced suburbs can drop dramatically at the same time.
The cycles you need to look out for are the mini-cycles in the town or city where you want to invest.
What you have to do, to take advantage of a recession, is know these areas and shift your money into them.
Even in the bleakest recession, the investor who studies their market and keeps informed will find sectors that are going ahead.
All the figures and the stories are about past events.
The banks are reporting large losses and tightening up like a miser with rigor mortis, but the bad debtors have already lost their money! Newspapers sell papers by reporting past events and exaggerating the worst of these! The world economy goes up, and it comes down, in never ending cycles, sometimes the peaks are higher, sometimes the troughs are lower.
This has always been the case, and it isn't about to change.
No one seems able to predict the ups and downs very accurately, not even the economists.
According to George Bernard Shaw, if all economists were laid end to end, they would not reach a conclusion.
Nor has anyone had great success in flattening the peaks and troughs into a steady growth curve: governments around the world have tried but eventually their fate is like that of a rodeo rider clinging desperately to an angry steer.
One thing however that you can be sure of: bad times will get better and good times won't last forever.
Recession Attitudes There are three common attitudes about recessions, all of which contribute to the doom and gloom mentality, and all of which are wrong.
If you get these three attitudes right, you will be at a big advantage as an investor.
Attitude One - Things Will Keep On The Way They Are.
If constantly surprises me how top business people and investors forget the basic truth that the economy is a roller coaster.
When markets start rising frantically they somehow believe that the trend will continue upwards forever and they keep on buying.
In most cases when the market has been rising and the pace of growth is accelerating rapidly, a downturn is on the way.
When you plan your real estate investments you should be looking mostly to the medium and the longer term.
This means that you must expect both booms and recessions.
You might be lucky and invest through a period when the peaks and troughs are gentle ones, but then again you might not.
You have no control over this, so you have to accept it - and plan for it.
Be careful not to negative gear to the maximum you can afford in the good times because when the bad times inevitably come, you may pay a heavy price.
Planning for the troughs means not stretching yourself to the limit in the good times, this way you can stretch yourself to make the most of the bad times.
Attitude Two - All Recessions Are Bad.
When recessions arrive, most investors start to complain.
They talk doom and gloom; they see the end of the world looming.
They forgot that the good times would end, so they didn't plan for the bad times.
Now they forget that the bad times will also end and so they fail to take the opportunites presented.
What is the golden ideal of real estate investment? To buy in the trough and sell in the peak! What do you need to be able to do this Right? You need the troughs as well as the peaks!! The long-term trend for real estate prices is always upwards.
Viewed as a trend, real estate prices generally go up more than inflation.
This is because land is a limited commodity.
We can make more people, but it is very hard to make more land, particularly land in desirable locations.
This is what makes real estate such a secure investment.
The determined investor, however, wants to profit more than the few percentage points' difference between the inflation rate and the increase in real estate values.
This is where you need recessions, to boost your profits.
Recessions mean prices go down.
Sellers become desperate and more flexible.
There are more opportunities for the kinds of innovative win-win deals.
You can easily get properties which have built in profits, profits that you can realise as soon as the good times return - which they inevitably will.
Buying in a recession can speed up your rate of capital appreciation saving you years of investment time.
Attitude Three - Recessions Are The Same Everywhere Western economies are very complex things, multi-layered and difficult to understand or predict.
When economists say we are in a recession, they mean that the value of the output of the entire economy has fallen for two successive quarters.
That does not mean that every sector has gone backwards.
A smart investor however can switch their money and benefit from the boom right in the midst of an overall recession.
No matter how deep the recession, somewhere there are industries that are resisting the trend.
Not only that, but even within an industry which is going backwards, there will be some who are doing better than others, and some who are actually pushing ahead regardless.
Those who are strong enough and ruthless enough to take advantage of their competitor's weaknesses can build business empires during industry recessions.
What does all this mean for real estate investors? While the real estate market in total may be in recession, some types of properties will be performing better than others.
Prices for units can follow different trends to prices for houses; the top end of the market can perform very differently from the bottom end.
Some cities will perform better than others.
Within cities, some suburbs and even some streets will do better than others.
In the midst of recession, they can show strong gains.
Conditions in various states can fluctuate depending on demand, generated by migration and expansion.
Then there are cycles within cycles, such as suburbs.
Lower priced suburbs may actually increase in value, while higher priced suburbs can drop dramatically at the same time.
The cycles you need to look out for are the mini-cycles in the town or city where you want to invest.
What you have to do, to take advantage of a recession, is know these areas and shift your money into them.
Even in the bleakest recession, the investor who studies their market and keeps informed will find sectors that are going ahead.