The Unique Property
It would be unfair to say where I got this. I have nothing
against the company that put the following quote out there. They
have a business to run and need to make money. They are simply
talking their book, and I wish them well.
ďWithin this guide, we take a comprehensive look at the current
state of the property market here in the UK and establish why
it's a safe haven during uncertain and high-inflationary
We also show you how to partner with our contacts
who are some of the UK's leading housebuilders, and explain
how you can get access to smart investment opportunities from
Real estate may well be a safe haven during inflationary times,
but what you need to understand is that if you are looking for a
safe haven, you have to own it before the bad times hit. When
the bad times come it is either too late or too early to buy
either gold or real estate. This is a property blog, so letís
leave gold out of it for the moment.
Iíve said it before and I say it again, you make money when you
buy, not when you sell, so you need to buy at a sweet spot.
You need to buy when interest rates are high but falling, not
when they are low but rising.
Now is not the time to buy real estate. Neither of the two basic
rules apply at the moment. In fact, exactly the opposite is the
You should keep your powder dry. OK, money loses its value
during a period of inflation, so when you come out the other
side the money you have isnít worth as much as it was going into
the storm. But there are such things as mortgages. And you can
always mortgage your existing house when you want to buy and use
that money to buy another.
Other people will not be wanting to buy. After a crash they are
scared, so they leave well alone. Prices will be on the floor
and interest rates will be high. Thatís ok, those problems will
be keeping other buyers out of the market. You may be the only
person buying, so you have a choice from the whole board. But
you dont buy.
You wait until interest rates start falling and then you go in
and make silly offer prices, and back up the truck.
Let me tell you a story.
I went into a bank in 1993 It was Lloyds in St Leonards. None of
the banks would lend. P/E ratios were about 2. They would lend
when they were up at 11, but they wouldnít lend when they were
on the floor. Typical brain-dead banks.
In the end my friend Gerry cracked the problem. He went back in
after just being refused a mortgage. He said he wanted to buy a
car. He got a loan there and then.
Gerry and I bought a lot of Ďcarsí that year.
I bought a three bed flat for pennies. I actually paid cash on
the agentís desk. A week later I was taken to see a two bed
semi-detached house which was advertised at £20,000. Back at the
office I offered £8,000. For the record the agent was
Nationwide. There was a rather long silence in the office, then
a plaintiff voice asked me if I could raise my offer to £10,000.
We agreed to split the difference.
Thatís the time to buy a house. I later sold it for £120,000.
So, whatís the take-away?
You buy when no-one else wants to buy, and that is after the
crash when everyone else is suffering from shell-shock, and
youíre the only one offering money. You do not buy now.