Talk to anyone who has been in the game a long time and they all agree that a slump offers the greatest opportunities but only to those who really know what they are doing. This is not a time to be buying skinny deals and hoping that someone will magically appear and pay us a fortune for it. That doesn’t mean we shouldn’t be trading, but that we need to be a bit more sophisticated about what we are doing to stay safe.
So the rules for trading revolve around two things:
1. Margin
You MUST know your numbers on any trade. If you not certain that your minimum margin is covered then don’t buy anything. Your risk of having to settle on a trade in this type of market is higher, so you have to be absolutely certain a deal is a deal to cover yourself if you have to settle on it.
2. Strategies
The second thing is to be very clear on what strategies you are going to employ in this market. Some strategies work well in a slump, some are high risk.
Safe Slump Strategies
Buying to Order:
There are always people buying property in any market, dealing with pre-approved buyers is great in a slump.
Large Margin Straight Trades:
A deal that has huge margin in it and requires no work on your part, in other words buy it and contemporaneously sell it, works well in any market. In a slump ensure the margins are fat, and go for long term due diligence and long term settlement so you have time to secure buyers.
Sandwich Lease Options:
Slumps are a fabulous time to relieve tired landlords of their rentals by guaranteeing their rent with an option to purchase and then leasing them down to buyers.
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