In 2003 and 2004, my strategy was to buy good rental properties at the bottom.The price I bought was often the lowest in the condo’s caveat history. Here’s how I did it:
Before I put up my offer, I would check the last transacted price. I would then offer 15% lower than that — thinking that I still have a 10 to 15% safe buffer in case the market goes further south.
And when the market recovers, I can sell anytime at any price and still make a profit.
I was so wrong!
The prices will go up?
How could I tell prices won’t drop another 15 or 20%?
You know many people who bought the wrong properties in 1996 still haven’t break-even.
These people held on to their overpriced purchase. They struggled through the 9-11 in 2001, the SARS in 2003, the downturn in 2004 … Every time they thought the bad times are finally over. Little did they know that the worst of the storm has yet to come.
I bought at a good price, ‘hoping’ that the market will recover soon.
People are buying uncompleted properties now, ‘hoping’ that prices will go up at TOP date few years later.
Perhaps the only difference is that I am ‘bearing’ the risk of the seller, while these people are ‘baring’ the risk of the developers.
Wait a few years, it will turnaround?
Jim Rogers said,
Bottoms in the investment world don’t end with four-year lows. They end with 10 or 15-year lows.
In the 1980s, many Japanese borrowed huge housing loans that can only be paid off by their 3rd generation.
The bubble bursted in late 1980s and came Japan’s lost decades. The problem lasts for longer than 20 years. People borrowed yen to invest in other currencies. Over the years, billions of yen have been invested outside of Japan.
Are we seeing any sign of turnaround yet?
I bought some lousy mutual trusts more than ten years back. They still haven’t break-even. Honestly, I doubt that would ever happen. I think they will continue to change hands among different fund managers … and so will the poor performance.
Property prices always up in the long-term?
People often say that each property cycle always surpasses the previous one to reach another all-time high.
But God knows how long the cycle can be.
The commodity bull market which started in early 1930s was surpassed only by the bull market in 1970s. Look at the history of gold, there is a very long period that prices are really depressing.
What are the lessons learned?
Next time, before I buy, I will look for any upside in the fundamentals first.
I will ask myself the following questions:
• Do I have the holding power to wait for the next bull run?
• Can I possibly see the silver lining after my retirement?
• Will I live long enough to see a recovery?
• Am I prepared to let my next generations to realize the profits one day?
What have you learned from your past property investments?
Agree. It is a cycle thing, and hyper-inflation is coming close. What’s the strategy when it goes up all the way further and when it burst ? My 2 cents is timing to sell and holding power. 😉
Agree. It is a cycle thing, and hyper-inflation is coming close. What’s the strategy when it goes up all the way further and when it burst ? My 2 cents is timing to sell and holding power. 😉