Don Campbell posted on August 12, 2008 09:35
These are the types of economic times where both fear and greed often take control
of a marketplace. It is our job as Real Estate Investors to ensure that we do NOT
get caught up in the media-created fear, and separate the facts from the misinformation.
It is a good time to take a deep breath and review your investment strategies, based
upon the long term fundamentals.
This time of media-created uncertainty and fear has proven to be the best buying
time, a time that many veteran Real Estate investors have been waiting for a couple
of years for. During this seasonal slowdown, they can finally write offers without
much competition, analyze multiple properties, take their time, negotiate aggressively
and complete the full due diligence required to purchase properties.
As we have shown many times before, when there are times of change and uncertainty,
there are lots of opportunities for the brave. Recently, Jack Welsh (former head
of GE) published a column in Business Week Magazine that summed up how serious investors
look at markets such as these, and believe me they are not hiding under their sheets!
A question was posed by one of his readers and he answers it directly. Here are
the first two paragraphs of that important column (along with a direct link to the
whole piece). I think you'll find it refreshing to see how sophisticated investors
are looking at the next period of economic times:
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Opportunity Is Knocking
The current credit crisis will pass. And so will the rewards awaiting the
courageous - by Jack Welsh
Question: Is the current mortgage crisis the beginning of
the end for the U.S. economy? — Jacques Wullschleger, Jupiter, Fla.
Answer: Do you mean, is the sky finally falling? We wouldn't blame
you for putting your question that way, given the market's volatility over the past
few weeks and the state of highly public bankruptcies, such as those at New Century
(NEWC) and American Home Mortgage (AHMIQ), and the recent closure of the respected
hedge fund Sowood Capital Management. And that's not to mention the big private
equity deals that are hanging precariously or, like last week's sale of Home Depot's
(HD) wholesale supply unit, being sharply renegotiated at the 11th hour.
No, we'd only blame you if your question meant you were thinking of running for
cover right now, or worse, hunkering down. Because for many individuals and companies,
right now happens to be the perfect time to venture out—in fact, to get aggressive.
Forget Chicken Little. Think "Holy Cow!" That's what you'll be saying when you see
the once-in-a-lifetime deals that are suddenly popping up all over the place. The
strategic acquisitions that never seemed possible before. The warehouses of assets
selling at massive discounts. Every economic, industry, or business crisis inevitably
spawns such extraordinary opportunities. You just have to have the foresight to
be looking for them and the guts to grab them.
(Read
the rest of the article by clicking here.)
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I talk with many Real Estate investors across the country, sadly many of them do
not treat Real Estate like a business, and they get caught up in this 'fear and
greed' in the marketplace. I find it ironic that some investors I talk to are having
fear around writing offers right now (in certain markets where listings are higher
than normal), and those same investors only 8 months ago had no fear in writing
an offer $20,000 over list price and making unconditional offers (no inspections,
very risky). Through education and knowledge comes great opportunities. Right now
is that time to take action and separate yourself from the masses.
That is why it is so important to review your fundamentals at least once per year.
No matter how great the hockey or football player, they go to training camp every
single year to re-focus on the basics. This is the same for investors: keep honing
the fundamentals and the big picture takes care of itself. For instance, if you
are investing in Edmonton and are feeling fear because the market has shifted in
the last couple of months, did you know that between August 2005 and Feb 2006, the
average price of an Edmonton condo dropped 10.6%, then during a second plateau between
October 2006 and December 2006 the price remained flat. Same time of the year as
this plateau, so it is no surprise to those who study markets. These two drops occurred
during a period that the condo market has increased by 82.8% (Feb 06 - July 07).
Short term plateaus will ALWAYS occur in a strong market. It is almost like they
are designed to shake out the speculators from the market so that we sophisticated
investors can pick up some bargains along the way. Which is exactly what we're doing
right now.
Real Estate is not a race, it is a business. Make sure you are running it as such,
and I look forward to seeing you at the fundamentally focused ACRE System coming
up in a couple of short weeks (we're completely updating our Western Canada research,
so you won't want to miss that). Be aware and you'll do amazingly well in this marketplace.
You sure don't want to look back at today and have regrets of not taking advantage
of the short term bump in the market.
Focus on the fundamentals, keep emotions out of your decisions, and enjoy the results
in just a few short years.
Don R. Campbell
