The Current Loan Tightening Situation Has a Silver Lining

Exciting times will be here soon.

Property players – developers and investors alike are now crying out in despair of the credit tightening. In fact, this mortgage crisis is expected to follow suit after a period of booms times. Granted, it all sounds pretty bleak and hurting to some, the current situation will soon be an amazing opportunities for investors ready for the change of scenery.

Yes, the real estate cycle is going through some massive changes. The good old days of runaway appreciation are over and speculative buying isn’t such a hot topic anymore. Flippers who rampantly bought at the top of the market may get burned when prices continue to fall in overheated markets.

But property investment isn’t dead. Investors will have to learn new strategies and adapt to the new reality while old methods or strategies may not be applicable in changing market. But properties can and will be bought and sold and some investors will make lots of money.

In the coming market downturn it doesn’t take a rocket scientist to find ways to make money investing in real estate.

Most of the changes revolve around two major truths:

Credit is tightening

Prices are falling

That means: bargains will be available, just harder to finance. Credit tightening good news? If it’s harder to find financing, it’ll be harder for everyone to finance meaning less competition. Developers on the other hand will be fearful of pricing themselves out of the current market situation, hence falling prices. Creative people can expound on the myriad ways investors can make money when credit’s tight and prices are low.

Here are a few tips for the days ahead-

Learn and find everything you can know about private lending.

When money’s tight, someone’s going to fill the gap. Maybe that someone could be you. Or perhaps you’ll find others willing to loan money for the

bargains coming up in the next few years. Now would be a really great time to brush up on the methods of creative financing, both as a borrower and a lender.

Understand your own market.

Let’s rephrase it another way… Market conditions vary from state to state, city to city and from neighbourhood to neighbourhood. You cannot assume that KL market is the same as that in Penang or Iskandar region in the same instant.

Wish it were that easy!

You may have heard that your friends in one state fretting over falling house prices whilst the property prices in your locality haven’t dropped one bit or vice versa.

Word to the wise: Get to know your market and don’t take all media news as true.

How’s your credit standing or cash flow?

A good credit standing is a valuable commodity when credit tightens. That doesn’t necessarily mean paying off all personal debt quickly. In fact, sometimes it’s best to use those funds to invest in something that will produce positive cash flow every month rather than actively pursue debt reduction that will leave you without a cushion for investment and emergencies. You should have various funds i.e. funds for savings, investments, and emergencies etc before anything else and learn to live on the rest.

Cash is king

All cash deals may just be the biggest bargain out there in the next few years. Bargains will be available to cash buyers who can close quickly. According to Bank Negara’s report household debts are high i.e. highest in the region, savings hence are low. What to do? Perhaps you can liquidate less productive assets to raise capital in one of these ways–:

If you have equity in your primary residence, perhaps you can refinance but just make sure you have permanent financing lined up before refinancing.

Sell something:

Do you really need that extra car? Have you got any gold or silver coins sitting in a drawer somewhere? There’s usually something that can be sold to raise capital if you scrape close to the bone. This is not common in Malaysia.

Find some private lenders:

There are plenty of cash rich individuals out there that would love to earn a better return on their savings, but know nothing about real estate. Put together a nice portfolio, complete with a solid business plan and send it to these individuals who might be interested. Be professional, use conservative figures and show them the money. You might be surprised who’ll take up your offer. There are many entrepreneurs who raised funds for their projects using this method too.

Always maintain a good working relationship with a few end financiers.

Sometimes different banks have different lending criteria and can offer attractive lending options for their long terms customers or depending on net worth of the customers.

Sound Investing Fundamentals:

The good times will be here soon;

Always practise sound investing fundamentals when investing. We’ve heard it all our lives-buy low, sell high. So when the good times are here, soon you will see everyone running away, shaking their heads or shying away for fear of drastic market downturn like those during the Asian Financial Crisis.

Well then… let’s get ready to pick up some great bargains soon!