Winning Is Refusing To Quit During Challenging Times

Private Property South Africa
Neale Petersen

At the height of the boom, almost everybody was convinced that property prices would rise forever and that credit would always be easy to come by. Clearly, the pendulum has swung and the market is now making a drastic downward correction. In fact, the US and UK are now officially in recession, and SA is one quarter away from recession – meaning that there will be negative growth for two successive quarters. The global financial crisis has created a lot of uncertainty in world markets and made many investors cautious and even nervous. It will be interesting to see whether the new US President, Barack Obama, can make an impact on American and world real estate markets.

Property investing has always generated excellent returns through long-term investment. Many investors are struggling to service their existing loans due to high interest rates, lower than expected rental returns and tighter credit measures. If you are heavily over-indebted, it might be wise to sell quickly. However, wherever possible, struggling investors should still try to retain their properties and negotiate new payment plans with the banks. No matter how difficult your situation is, your ultimate victory will be in having a winning attitude while being creative, resourceful and refusing to quit.

Think long-term wealth creation

While the emphasis in the current market is on wealth preservation, wealth creation must also not be ignored. Banks are extremely cautious in granting new loans and demand a 15% deposit with 30-year loans.

John Loos of FNB reports that despite tighter credit measures from the banks, small groups of sophisticated investors are far more likely to take advantage of distressed sales with more success than the majority of less seasoned investors. Seasoned investors always come up trumps in the longer term, no matter the state of the market.

Property investing fundamentals remain

  • Don’t invest with your emotions. Evaluate the returns on the deal not the property.
  • Don’t put all your eggs in one basket, such as investing only in residential in one suburb or province.
  • Diversify across all categories. A combination of residential, commercial, industrial and offshore is the best way to optimise your portfolio mix.
  • Always apply a long-term strategy, and think carefully before you buy and sell. The credit assessment allocations by banks in the past no longer apply today, neither will they in the next few years.
  • Buy now! Buy when there is blood on the streets, and sell when the champagne corks are popping.
  • Consider all the risks, and plan for the worst-case scenario. Budget carefully for cash flows, unexpected interest rate hikes, conservative rentals and lower-than-expected capital-growth increases.

Use the resources at your disposal

REIM supplies various types of resources to assist investors improve their situations and to become truly successful Master Investors. Make sure that you attend advertised events and use all of the resources available to you.

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