Educating Individuals About Private Real Estate Investing
This is a tough but necessary subject matter in the real estate investment business. In any normal 40 year career in real estate investment and development, you can expect to experience anywhere between 3-5 recessions or market downturns. Scott Choppin and the Urban Pacific team have been through 2 recessions - 2001 and 2007. These lesson are drawn from those periods.
Part 2 of 3
Here are observations you can be making now to prepare:
Be wary of what I call “peak market thinking”. I termed the phrase “Peak Market Thinking” which is a general euphoria surrounding amazing almost magical upward market movements. When you are in it, it seems like it can be no other way, like it’s the “right and perfect” time, that it can never go down or get bad, and that any crazy assumption must be right. Most importantly, look for language like “it’s different this time” explaining away why economic principles are being suspended. Those are signals that the downturn is coming.
Be wary of delayed production cycles that push your project into the downturn: That include delays and other breakdowns, that may delay your completion and sale/lease up, that ultimately carry you into the downturn.
Be cautious of overly abundant credit, i.e. particularly construction debt: The 2008 downturn was a bursting of the CDO/MBS credit bubble. People could buy our downtown loft condos as the prices we projected, solely because of the available debt products on the purchase mortgage side.
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