Lessons That Property Investors Learn From Crisis
Real estate investments have seen a surge in popularity in the past decade or so, but the practice of buying and reselling houses as an investment has been around for quite some time. Through the years, the real estate industry has surpassed many obstacles in the market. Now that it’s facing a whole new kind of crisis, let’s take a quick look at some of the lessons that you can apply in property investments.
The economic recession of the 1980s eventually pushed businessmen into real estate investment, due to the foreclosed properties on the market. However, it wasn’t until the first few months of 2000 that flipping houses became a trend, followed by a massive pricing bubble that occurred, then an economic downturn.
By that time, the property developers had been lowering rates with each downturn of the economic cycle. There were plenty of investment opportunities in many economies, including the Philippines. As mortgage rates continue to decline, real estate investing started to look even more practical for those looking to put their money into something new.
While real estate investing may have started as a mere trend, the housing crash brought with it a fresh supply of distressed properties and a new pool of potential renters as displaced homeowners were forced to lease. With mortgage rates low, real estate investing began to take off and soon became an attainable goal for homeowners who were financially stable enough or had enough equity in their primary residence to secure financing.
No longer just a sideline for real estate agents or a new portfolio for the wealthy, real estate investing began to hit mainstream homeowners who were suddenly flipping houses or adding the job of the landlord to their resume.
Lessons Through the Years
The crisis that the world is facing today is not new to the real estate industry. In fact, the industry goes to war with dozens of challenges each year with the ever-changing, unpredictable free market. But what seems to be an all-time low has become a source of strength and endless opportunities for the resilient real estate sector.
Here’s a few lessons that property investors learned through the years:
Objective Planning
Smart property investors always have a plan, know where they are heading and follow a reliable system to become objective thinkers for more consistent results.
They make educated investment decisions based on scientific market research and buy a property below its intrinsic value, in an area that has above average long term capital growth and then adds value to manufacture equity.
Long-term perspective
The property market moves in cycles. Almost every quarter of the year, there are flat or falling property prices. However, a well-located real estate will eventually increase in value by an average of over 8 percent per annum over the long term.
Just imagine if you were able to purchase the house your parents bought at the price they paid thirty or forty years ago; how many properties would you have bought then knowing what those properties would be worth today?
Business-minded
Every successful investor will grow a substantial asset base by taking their investments seriously.
They were able to achieve a huge feat by surrounding themselves with a great team of advisors, getting the right type of finance, setting up the correct ownership and asset protection structures, and knowing how to legally use the taxation system to their advantage.
Multiple Property Markets
While many people generalize “the property market,” there are actually many submarkets around the country.
Each city is at a different stage of its property cycle, and within each city, the markets are segmented by demography, minimum wage, and type of property that is commonly used.
Double Check Investments
Every year brings its own series of crises and a couple of reasons to doubt market trends. But historically, there’s always been a crisis every year. While it is true that some years are simply worse than others, there is always the worst, and much of it is unexpected, like a thief in the night.
Where investors get into trouble is that they lose track of their long-term goals and see these crises as once in a generation events that will alter the course of history, when in reality, they are just the normal path of history.
“Crises are temporary and opportunities are everywhere. We only need to contemplate and put a goal on what we could do to get a positive outcome,” said Ranny Abella, Sales Director of top sales firm LYONS Sales Corp.
Abella also added that “in the real estate world, [good] investors see this crisis as a big opportunity to invest.”
“We as an advocate need to open the eyes of those who are new in property investment.”
Detail-oriented
With so much available information — journals, research papers, and articles — market analysis is readily available to us today. However, investors should get caught up in detail and scared into inaction.
It’s better to keep an eye on what an investment can provide in return and look at the property markets through a telescope and not a microscope.
All About Property
In the business of property investment, some investors tend to forget the age-old rule of buying the best property they could afford in proven locations.
Instead, they get sidetracked by getting money fast or even glamorous finance that will blur tax strategies and lose out.
But the truth of the matter is, the property is not a get rich quick within 24 hours. Don’t get carried away by the next luxurious spot or latest fad – always keep in mind that it’s better to hire a reputable brokerage firm than having to gamble on your own.
Leverage
While many people worry about having to spend years paying debt, smart investors use “good debt” and leverage to build their asset base using networks to multiply spendable cash.
They then protect their assets by strategically buying time though having a “rainy day” cashflow buffer set aside in a line of credit or offset account.
Property Values
While in the short-term the property markets will be driven by market sentiment, interest rates, supply and demand, and micro-economic factors; in the long term, the value of well-located properties will rise propelled by the twin factors that have always driven long term property prices – population growth and the wealth of the nation. Both of which will increase substantially over the next few decades.
Learn from these lessons, and the rollercoaster ride of your property investment career may not be as dramatic. Remember, both fear and greed will send you down the wrong path, but sense and sensibility will keep you heading in the right direction; toward real estate riches.
Perfect Investment
While working abroad, OFWs save money and wait for the right timing to settle in the Philippines for good. At that point, it is highly recommended to invest in real estate to generate passive income. This so-called passive income refers to earnings derived even when you are not actively participating in the labor phase. This means you will be able to have regular income at the comfort of your home. Choices for revenues are plenty.
LYONS Sales Director Ranny Abella said that now that a lot of OFWs are coming back to their respective hometowns, property investments are highly recommended to get passive income.
“For those who are capable to invest I would recommend them to start now while the developers have lighter payment terms. A higher possibility of property value appreciation is waiting too.”
If you’re interested in starting out as a property investor, consider inquiring with LYONS Realty Corp., a trusted brokerage firm in the Philippines dedicated to providing fresh perspective and ideas for a new approach in providing top-notch service to every real estate client. Contact us today and get your dream home in no time.
