With everything that has been happening to the the South Africa property market in 2007, and a lot has happened other than the NCA and interest rate increases, there are two options a property investor can look at:

1. Pack up and go home, do not invest anymore and live in the depression mood or increase in interest rates, NCA and other worries, or
2. Take the opportunity to continue investing in a counter cyclical market.

If you don’t mind, we would like to discuss option 2, as option one is not very productive if you come to think of it.

Before we start looking at things, one should remember the words of Baron Rothschild:

“When there is blood on the street buy property”.

I think that is a bit excessive, but it does drive a point home.

So, how do we profit from a property market downturn.

As the market turns to the favor of the buyers you will find some of the following opportunities worthwhile pursuing or at least looking into:

1. Auction sales – all of the sudden there are far less bidders and good deals may be found.
2. Properties in Execution – more properties in execution auctions from the banks are found and far fewer buyers.
3. PIP list – Property in possession lists are getting longer. Though at the beginning of a downturn cycle not everything on the list may look attractive, there is a longer list than the usual. Investors should get the list once a month and keep tracking until, they either: find that the market is flooded with PIPs (rock bottom), or they find a property or two that fits their portfolio to buy.
4. Private sellers - Looking constantly for private sellers with or without agents that sell properties. As there are far fewer buyers right now, investors may just find what they are looking for. In the interim, sellers find far fewer buyers and even fewer buyers that they can trust have the affordability to buy and therefore may be more negotiable on price and terms than before.

Another big benefit in down market is that amateur investors do not usually play in such conditions. That even further reduces competition beyond the regular homebuyers that may have been out of the market due to affordability for a while now.

Bottom line, when the market turns to the benefit of the buyer it is the time to look for better and more suited deals for investments than before. However, the funny thing is that some investors read the bad news in the papers, get depressed and stop looking right when the time is ripe to profit. This is the group of people that rather take option one.

All that said, there is a catch to all this wonderful news, actually two. As more and more properties seem far more attractive than before, there are two pitfalls one should avoid.

1. Buying still too high because prices seem far cheaper than before and all of the sudden everything looks like a good bargain. That is normally not the case.
2. Sitting on the fence. Thinking that the next deal is better and the present one, and the next one may be even better. With this attitude in mind by the time a decision is made to buy, the market may have turned again to the favor of the seller or too many good deals are missed along the way.

To avoid this, a few things should be taken into consideration:

• Investors should know the properties that suit their needs. This will avoid looking at everything that does not suite the portfolio just because it looks good or waiting for the next property when present deals may already be excellent deals.
• Knowing the numbers. An investor should know how to calculate everything from IRR to cash flows and everything else in between. The numbers will make the decision far easier if not completely effortless.
• Excellent understanding of the current financial situation. Investors should know inside out their affordability, costs and the current financials for both personal and portfolio situation. This type of clarity also helps with easier decision-making and avoids wrong purchases that the investor may not be able to afford in the long term, no matter how good they are, or just won’t get mortgage bonds for the offers signed.
• Having a plan. An investor should have a long-term plan. When a property that fits the plan shows up with the correct financials, it should be easy to make the decision.

In summary, right now there are many opportunities for investors to profit from property investments when they buy. It's been many years since since such opportunities have showed themselves to investors.

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