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How To Make Money From Real Estate When The Market Is Crashing

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Well that’s a vanilla flavored headline for a blog post…isn’t it? As bland as it may sound, there’s actually a method to the madness that takes place when markets begin crashing.

But first…lets back the truck and talk about this “crashing” market. A lot of you “haters” are passionately against all the “doom and gloom” talk and vehemently oppose the idea that it is part of the Economists job description to keep crying wolf when it comes to the property market bubble because that’s what she’s paid to do.

That's not entirely true though. It is an undeniable fact that the current property market (as of March 2019) is in a state of decline.

For those of you who haven’t seen the recent video from Property Magnets about the upcoming economic crisis (which is more about a long term crisis as opposed to a short term one driven purely by a slump in the property market), here it is again.

Play Video

Contrary to popular belief, this video is not about painting a doom and gloom scenario.

It is to make you aware of the fact that Australia and New Zealand – we have a PROBLEM.

Here’s something interesting for you:

  • In 2023, roughly 4 million Aussies are set to retire.
  • By 2026, the Australian government plans to discontinue the pension program and resort to food-stamp based social welfare system.
  • The current pension or amount of money held as free cash within households is at an all time low.
  • The % of debt relative to an average household across New Zealand and Australia is between 146% to 169%.
  • The current Australian mortgage debt is at circa $1.8 Trillion while New Zealand is at circa $800 Billion.

So what does this mean for the average you and I? OPPORTUNITY.

You all know that the market moves in cycles. It typically oscillates between euphoria and depression, going through stages of denial, fear, panic and optimism.

While this may go against conventional wisdom, when the markets are crashing is the time to be buying. Look at the illustration below. The peaks and troughs are the two consistent areas of high opportunity with low risk.

If you bought when the market was at its lowest, you might want to consider selling out when it reaches its zone of euphoria and vice versa.

 

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The market in Australia and New Zealand is on its knees. There’s no question about it. And by the way, when I say “on its knees”, I’m not referring to the “top” end of the market or the “bottom” end of the market.

Oh wait! You know about these different tiers right? NO????? Ok here’s a quick crash course on market tiers – this, by the way, is covered in details i the Basics of Real Estate Investments course.

The tiers of the Real Estate Market

The top or the bottom end of the market never gets affected adversely. The rich will remain rich and so will the poor remain poor.

Its the middle income families that get the stick each and every time. Its the people who bought investment properties according to their own taste of what a good property should look like. They purchased investment properties as though they were going to live in them. This is the worst approach to investing in Real Estate.

When the market turns, people usually think of downsizing. The guys at the top are never going to downsize to the level below. The one’s that are in the Middle are the ones that end up downsizing because the ones at the bottom have no where to downsize to.

So when the downsizing begins, supply of middle-class homes increases, demand drops (due to lack of affordability and a credit crunch), the people owning those homes begin struggling and as a result the market tanks.

So, the moral of the story is this:

  • The market is on its knees
  • Become SMART at reading the market
  • This is the best time to get into the Real Estate business

The Real Estate Investment Basics course is a great starting point for the ones serious enough to take advantage of this upcoming market opportunity.

Learn more about our courses.

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4 thoughts on “How To Make Money From Real Estate When The Market Is Crashing”

  1. But isn’t it also true that when the economy tanks, the lowest income earners are the ones that get laid off work first? If that’s true, then how come they aren’t affected by the economics as you say?

    Reply

    • Good observation @LC. When the economy is heading south, the low income earners aren’t always the first ones to lose. Having said that, my comment is more to do with the economics around the real estate bubble, not the economy in general – that’s a much deeper conversation that’s beyond the scope of this article. Also note that when governments announce new housing construction projects, they are mostly aimed at meeting the demands of state housing (low income) or low end, 3-bedroom townhouse type developments – why? Because the bottom end is where the most amount of demand will always be and hence, it makes sense to increase the supply there…

      Reply

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