| If history is of any value to us, then looking at | | | | in the last 50 years was fueled by credit; and |
| past recessions and depressions shows that | | | | money printing worked in the past bubbles |
| during such periods of time real estate value | | | | because they were relatively small, but bubbles |
| diminishes. This is because of tight credit - during | | | | grew bigger and bigger each time and now we |
| rough economic times credit is scarce and interest | | | | have a systemic crisis - a mother bubble. Who will |
| rates are high - only very small percentage of | | | | lend money to the lenders? - Printing presses - |
| people and only economically sound business | | | | the vicious circle which will lead to hyperinflation |
| proposals do get credit. | | | | and ultimately to the bankruptcy and emergence |
| There are more sound investment areas during | | | | of new monetary system backed by precious |
| economic depressions: precious metals, food and | | | | metals. Hyperinflationary environment is not good |
| energy - the essentials. One might argue that | | | | for real estate investment either - the prices lag |
| precious metals are not the essentials, but | | | | way behind inflation pace. |
| humans use them as preservation storage of | | | | What is real estate investor to do during such bad |
| wealth (especially when there is a hyperinflation | | | | times? |
| possibility on the horizon), thus it is essential. But if | | | | First, what not to do: Do not use any credit |
| you are bent on investing in real estate - read on. | | | | unless you get a low fixed interest rate for the |
| Depression can be inflationary or deflationary. In | | | | duration of the loan and no inflationary |
| 1930 depression in US was deflationary - the | | | | adjustments on principal (dream on on getting |
| prices of goods and services went down and | | | | that!). Well, truth to be told, you never know, you |
| money was scarce. In such environment real | | | | might find some desperado willing to lend on such |
| estate loses value as there are few buyers - | | | | terms. |
| mostly bargain hunters - prudent individuals and | | | | Second, invest for value: |
| businesses who saved money during boom time | | | | - If you buy a residential property, the property |
| and now buy real estate for investment, income | | | | better have good tenants living in already; who |
| generation or for business development. | | | | have been there for a while. Avoid ghost towns - |
| Residential real estate prices go down depending | | | | areas where more than 20% of houses are for |
| on the area - less prestigious or further away it is | | | | rent or for sale. If property is not rented, check |
| from major centers of employment -the bigger | | | | around the neighborhood for asking renting prices |
| the price drop. | | | | and subtract 25% from that - this will be the |
| The world is currently in a depression state - | | | | price you realistically will be able to rent for. I find |
| prices of goods and services are dropping due to | | | | good value in buying a rundown property, giving it |
| weak demand. Current low interest rates are | | | | a nice facelift on a budget and getting more rental |
| supposed to encourage new house purchases and | | | | income because of that. |
| jump start the real estate market, but because | | | | - If you buy a commercial property with renting it |
| consumers are buried in debt from past excesses | | | | in mind - the same rules as above apply. I would |
| and are trying to pay it off, there are very few | | | | like to add one thing- if it is a storefront - it |
| of them on the market for new houses. | | | | better be located in an area with high pedestrian |
| Governments in most developed countries in the | | | | traffic. I will not touch office space right now with |
| world are bankrupt and cannot possibly repay the | | | | a mile long post. That bubble is yet to burst! |
| huge amounts of debt they accumulated in the | | | | - If you plan to buy an income property - a |
| past few years. There are only two possible | | | | parking lot, a producing farm, reforestation |
| outcomes: bankruptcy or massive currency | | | | project, etc. - do your DUE diligence - don't trust |
| devaluation. Currency devaluation is out of the | | | | sellers on anything - you never know what |
| question because all the governments are trying | | | | pressures are on them to sell! I have seen |
| to devaluate their respective currencies right now | | | | business owners faking income statements in a |
| to become more competitive and what happens | | | | desperate attempt to get rid of a bad business. |
| when everybody tries to pull the blanket their | | | | Go to the bank to check their statements - if |
| own way - it either balances out or the blanket | | | | seller refuses any reasonable financial check - |
| gets torn apart. | | | | down walk away - run away. |
| Bankruptcy of one of the big countries will have a | | | | Prices are down 20-30% from their high and |
| domino effect and it will lead to the bankruptcy of | | | | there are a lot of distressed sellers in real estate |
| the world monetary system. Economic expansion | | | | market in Costa Rica. |