Bubbles blown by the boom always burst…but you could be safe.

Real Estate investment is highly capital intensive and comes with low liquidity. The risks are large and hence possible returns too are high.In a positively charged market, investors follow the herd.

New constructions start in small pockets, in certain cities. It spreads slowly, establishing definite positive trend, in key city markets. Once a critical mass of base new investment is built across cities, news investors flock in, attracted by the positive vibes spreading fast across news channels, chat groups and social media networks.

The result is the all too well known “boom” in housing and commercial real estate. Investors lap up the most illiquid asset class, as if there is no tomorrow for meeting their craving for high cash liquidity. The boom turns economics on the head. People stack up tonnes of brick and concrete, dreaming to pass these on, as and when they wish and stuff their lockers with mounds of dollar bills.

The craving for “more” makes people blind to the impending doom. The overwhelming positive chatter shuts out the cold winds. Only the very smart who notice the chill and let it churn inside their heart, would be able to reign-in greed and dispose of the newly acquired assets. As the bubbles blown by the boom burst, they would be the only ones around, with stuff in bank.

The overwhelming majority of investors who refused to analyze news as it came and stuck on, would drift into negative cash flow zone, forcing them to sell at a loss.

After having had the opportunity to experience the boom followed by the meltdown which shook the world and drove it close to dangerous recession, its for investors to be cautious. The key to making money is to read extensively and shed the longing to hang on, as soon as the breeze brings hints of chill.

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