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Buy Now?

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 times. 

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 just ¬£5,000.Ē

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 case.

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.

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