Profiting From RE Cycles
Profiting From RE Cycles
Real Estate
Market Cycles
Buying & Selling Real Estate
in the Right Place, at the Right Time
…Every Time!
You may share this transcript/ebook with others provided that you do
not edit, change or modify the content in any way.
This recent down-cycle isn’t much different than the other ones
I’ve been through: in the early 1980’s and again in the early 90’s
At the time, both were thought to be the granddaddy of all real
estate crashes.
Then, after years of ‘blood in the streets’ they did what all cycles do:
Reverse course and shoot back up.
Because it’s so cyclical, it’s like a slow moving train: you can spot it from
miles away if you know where to look.
I can show you why that’s the case in another video… but what you
really want to know is the when.
The Wealth Building phase is where millionaires are made. (that’s the
GREEN boxes and bars)
This is important:
And every day you spend in the wrong market, or using the wrong
strategies for that market – is your lost opportunity cost.
Usually, there are local markets all across the USA in the wealth-
building phase of the cycle… while at the same time, other markets are
in the transactional or declining phase.
ALL the wealth is created during the green times… so pay attention to
the green bars at bottom.
Even so, even in these gray transactional phases, you can make
more money, do more deals, and take less risk if you’re in synch with
your local cycles.
You’ve heard the saying that most of the money made in the stock
market comes during just 17 or 29 days of the year?
That all the other days are back and forth, up and down?
It’s like building a house on a frozen lake – it doesn’t matter if you have
the best blueprints, the best materials and the best construction crew –
it’s inevitable… you’re going down.
Almost everything you ever read or heard - about real estate investing
relates to strategy, tactics or execution.
For example, Rehabs and Subject-to’s were all the rage a few years
ago… and in the right market, were real wealth builders.
Using those tactics in a red or gray market today will get you pummeled
in no time.
Short Sales were dead in the water until recently, you got laughed out
of the bank.
The cycle has changed, short sales are in vogue now, and they’ll
become irrelevant again as the cycle progresses.
But Success is NOT about your Strategies and Tactics – it’s about
the market.
Listen, a monkey with a deed in the right market at the right time will
make far more money, with far less risk and effort – than a brilliant
investor in the wrong market.
We’ll talk about that – and the whole real estate guru ‘thing’ in
another video.
Just Remember:
It’s the MARKET that is your success driver – Strategies and Tactics
are just tools - not drivers. Using them in the wrong market is worse
than investing blindfolded because they can get you into big trouble
very quickly.
Vegas is actually a poor first example to show you the power of market
cycles because none of the other hundreds of other markets I cover
look much at all like this one.
… but I’ve been getting way more subscriber emails asking about the
Vegas market than any other… so we’ll start with Vegas and show you
the better markets in upcoming training.
Some are even emailing me that the Commercial market has now
bottomed as well.
Sooner or later someone will guess it correctly, in the same way that a
broken clock is right twice a day, but it’s a stupid gamble because for
every winner, there’ll be hundreds of losers… you’d be better off just
plopping your money down on a roulette wheel.
It’s pretty easy to get it right the first time if you know how, and that’s
what I’m going to show you!
In 2009 the Vegas market dropped by more than another 20% - wiping
out the entire investment many of these bottom-guessers paid out of
pocket a mere 12 months earlier; add to that their transaction costs,
time, effort and most important, their LOST opportunity cost… it’s
been a real disaster for them.
In addition to losing their cash, they’re now upside down and out of
options. They’ll miss great opportunities because of one stupid decision
to go ‘all in’ at the wrong place and time.
We’re not talking about those that bought back in 04, 05 or 06 and held
on – (there’s not much hope for them).
No, we’re talking about those ‘patient’ investors who bought in early
’09… two years AFTER the big Vegas crash.
They didn’t have a system, they were just going on a hope and a prayer
– a gut feeling that they’ve waited long enough.
First – some of you may suffer from “graph-anxiety” and start sweating
whenever you see charts like these!
Don’t get bogged-down with these charts if that doesn’t come naturally
for you because I’ll show you a simple visual method that a
kindergartner can get… and it doesn’t require any graph reading.
The red, green and yellow lights tell you exactly when to stop, when to
go or when to proceed with caution.
Now, see the two black horizontal-ish lines I added to this chart and
highlighted in between them?
The top one is called the ‘resistance’ line and the bottom one is
‘support.’
The yellow area in between is the ‘range’ that Las Vegas home price
appreciation was stuck in for 20 years.
When either of these trendlines lines are broken by the blue line, it’s
not unusual to see a major thrust (up or down) – as you can see
happened in 2004 and again in 2007.
Did ANY of the Fundamentals change right at the end of 2004 in Las
Vegas? …where you see that dramatic reversal in the blue line?
In fact, some other local markets were just starting to soar, like mine
here in Ocala, Florida at the exact same time Las Vegas was starting to
roll-over and crash.
Technical Analysis – that’s the name given to that 500 year old
Japanese invention - or ‘T-A’ for short - is the only way to track
market psychology.
There are some TA-related items we don’t have time to cover in this
intro video, but the bottom line is that Vegas home prices have not
demonstrated any long term strength at all, excluding the 2004 to
2005 blip.
But if you got in – and got out – at the right time, - during the ‘wealth
building’ phase in green -- you made a killing of historic proportion... as
you’ll see in a second.
It’ll likely gonna be a long, hard, slow crawl back for Vegas home
prices… not a time to be jumping in with both feet or making any long-
term bets on the upside.
That’s why the big dogs all use Technical Analysis – it’s simple and
accurate… far more accurate than anything else, as you’ll see.
If and when the Las Vegas market ever changes from a ‘transactional
income’ market to a ‘wealth creation’ market - I’ll be the first to know.
In the meantime, you should either pursue other hot markets or limit
yourself to the appropriate Transactional income strategies… it’s not in
a wealth-building phase right now.
I know that’s not what many of you want to hear – and it certainly
doesn’t help sell investing ‘products’ – which is why you never hear the
gurus talking like this, but it’s the truth.
I’ve seen it time after time from Realtors, investors and homeowners
who are so buried in the trees they can’t see the forest.
I spent way too many years myself – back in the 1980’s and early
90’s making the same stupid mistakes, chasing deals instead of
chasing markets.
There’s an awful lot of ‘noise’ and bad advice out there; you’ve got
to tune it out.
Likewise for knowing when to use certain strategies – let the market
work FOR you, because it’ll crush you if you try to fight against it.
You can’t stop the flow of a river, or an ocean tide. Either go with the
market or get out of the way.
You may be surprised to know that if you bought a house in 1980 (or at
any time since then) in Las Vegas – and still have it, you lost money!
For simplicity, we’ll assume rents = your carry cost like interest, taxes,
insurance, maintenance, etc.
These are in ‘real’ or what’s called ‘constant dollars’ – which just means
they’re inflation adjusted.
It gets much uglier if you bought it during the last seven years, but
regardless of when you bought it, it’s a hell of a thought to have dealt
with tenants and toilets for that many years, and losing money in the
process… just because you didn’t pay attention to the main driver of
success: The Market.
You bought only when the Market Indicators said it was time, and you
sold when it told you to. (I’ll show you those indicators in a second.)
The difference is astounding because you got in and got out at the right
times. Your $20,000 investment became $98,900.
You were only ‘in’ the market while it was in the Wealth Building phase
– less than six years.
And remember, in this example, you paid full price for the property and
just held it.
Compared to the first example, even if you sat on the couch eating
potato chips for all of the 80’s and 90’s – you still did much, much
better and with less risk and effort.
Timing is everything.
You bought only when five of the six indicators turned GREEN… which
first occurred in the 2nd Quarter of 2001.
The ‘rules’ you set to trigger an action are all up to you. I’ve got some
standard ones I use and recommend. They depend on what your
investment objectives are, your risk profile and desired holding period.
We’ll talk more about this tool in upcoming videos, but in general, the
longer your time horizon and the more volatile the markets, the more
‘green’ lights you want to see before taking action.
This is what the sell signal looked like, using the same “5 of 6” rule we
used to get in back in 2001.
Obviously, in real time, you don’t see what’s happening in the future –
I just included it now you can see them all turning red shortly after
you got out.
That was quick primer – there’s lots more I’ll be sharing with you.
For many years, I kept it top secret as I perfected and tested it in real
time, with real money.
Over the last couple years – I’ve taken it a big step further and
developed some outrageously powerful algorithms that effectively
automate my analysis process. I recently added a complex market
scoring system and the ‘traffic light’ signals so anybody can use it.
Now, I don’t mean to brag, but just like Tiger Woods was ‘meant’ to be
a golfer from an early age, I was meant to invent something like this.
In the 1960’s, as the third grader, I scored off the charts on the ‘graph
reading’ section of a national standardized test. It was a big deal for the
elementary school.
At Harvard Business School, it was the same thing for Technical Analysis
and market trends.
So here’s my dilemma…
and your opportunity:
(remember as a member, you’ll get every ‘public’ video plus all the
member’s only training inside your membership area immediately once
you’re enrolled)
(If you’re viewing this through a mobile device, like cell phone or Ipad –
you won’t see the button and will need to watch this on a laptop or PC.