In business, many things happen in cycles. Real estate certainly does, but so does the stock market. In certain months of the year, the stock market is notoriously bad; in other months, it is traditionally good. Everything has its time, and the psychology of the masses define that.
When everyone is excited for real estate, prices jump like crazy. When everyone is excited about stocks, prices will jump like crazy. When everyone is running from real estate or stocks, prices fall.
I find it difficult to time the market, but I find it easy to go against an existing trend. Simply put:
- When the market crashes, buy.
- When the market soars, sell.
This knowledge applies to real estate as much as to stocks and to any other investment that operates cyclically.
Here is example. When the real estate market broke down, and prices in some areas went down by 70 percent in many areas, what did most people do? They shied away and swore to never get involved in real estate again. Yet, it wasn’t real estate that failed them. It was their inability and lack of education to see that things weren’t sustainable. As a result, nobody was touching houses, and the Phoenix, Arizona, real estate market had 50,000 houses on the market. That would have been the time to buy houses. Yet, every article in the local newspapers warned, “Stay away from houses. Prices might go further down.” I started buying houses in March 2009 when the market hit an all-time low. Nobody wanted to buy, but—to the contrarian smart investor—the key was not whether prices were at an all-time low; the key was that the numbers for buying these houses as investment rental homes now made a lot of sense.
A true contrarian opportunity seeker would have ignored what the media was saying at that time and just analyzed the opportunity by looking at the numbers. And the numbers made amazing sense. And because I consider myself a hard-core contrarian, this is what I did and I went and bought a batch of fifteen rental houses. It didn’t matter to me what the media said about the potential of the market going down another 40 percent— as some media outlets were reporting—because I bought these houses for their potential to bring in Forever Cash. With Forever Cash, my preferred holding time is just that … forever. I saw no reason to wait any longer.
The key here is to invest when everyone is scared. Although that sounds like a scary concept in itself, it is not. As a true Forever Cash investor, you don’t care what the people say; you listen to what the numbers say. And if the numbers scream “deal, deal, deal,” you act.
Remember the neighbors, friends, and newspapers don’t pay your bills. Only you do.
Listen to the numbers, and you will be fine.