Investment: 10 ways to make money in any market - Jonty Crossick, Ready 2 Invest

10 ways to make money in any market

We’ve all just experienced first hand what happens when property markets rise and fall. But while prices go up and down, opportunities to make money don’t disappear, they just change. Knowing what openings to look out for and how to make the most of the assets you have will set you up for success.

Start with the fundamentals

There are 195 countries in the world (give or take a disputed territory or two) and that means 195 property markets to invest in. While many are still far too unstable for even the most pioneering investor, every year a few countries will pop up on my radar as places to watch.

I read the Economist every week and the FT daily to have a good handle on what is going on globally. But if I want to know more, some extra digging on the internet into GDP growth, inflation history, employment figures and foreign direct investment flow gives me a much more in-depth view of potential hotspots. It’s how we first identified the potential in Mendoza, Argentina where we now have a luxury residential golf and vineyard project. It’s the premier wine-growing region and it’s had higher growth than China over the past decade but is still seriously underdeveloped from a tourism point of view.

It might sound boring and time-consuming when all you want to think about is the excitement of short-term capital growth but research like this will give you the confidence to pick the right deals.

Track trends

We all saw first-hand how prices in the UK fell last year, but while everyone else got caught up in the negative media frenzy Alise and I knew that the huge pent-up demand for property in the UK made this an incredible window of opportunity for investors.

We’ve been proved right in 2009 as demand continues to outstrip supply – the NAEA estimate that there are five house-hunters for every property in the UK right now. But just because prices have started to go up doesn’t mean we’ve stopped looking for deals. We are in a very strong position to negotiate bulk discounts – we recently put together a deal on some apartments in Manchester which are 25% below the RICS valuations and 35% below the list price - and we passed these discounts straight on to our investors.

By tracking trends in demand and the speed that the market has decreased and subsequently increased, we can make informed decisions about where to invest. And with a little bit of research so can you.

Economic Cycles & Property Cycles

Before you invest in property there are two inter-dependent cycles you need to be aware of: the economic cycle and property cycle. The economic cycle is important because it impacts on things like the number of people with jobs, wage increases and access to credit. These factors are all in play in the UK today.

The property cycle feeds off the economic cycle. The main reason that property prices in the UK crashed so quickly was because the banks simultaneously withdrew credit. But in 2010 unemployment is likely to have more of an effect on prices.

That’s not to say that property markets don’t sometimes act independently. We stopped investing in the UK in 2004 because we could see that the market was getting hugely over-inflated. People were worried about missing the boat so used easy credit to rush in. But the boom in prices was crunching yields and pricing out the first-time buyers – the market had to come down again.

Now we’ve had a correction in prices making property more affordable to more people – but restrictions on credit mean that it is tough to get on the ladder. As credit comes back prices will start going up again.

Up and down, up and down: it’s happened before and it will happen again. By keeping an eye on the cycles you’ll be in a better position to know when to get in – and out!

Major reforms = Opportunity

It makes sense that the more unpredictable countries offer the most potential for high returns. This is because your risk is higher going into an emerging or unknown market. But some countries are more advanced than others and often it’s difficult to tell where to start.

Fortunately there are some handy tools at your disposal. My first stop would always be the Governance Matters section on the World Bank website (http://info.worldbank.org/governance/wgi/sc_country.asp. Here you can search through 212 countries and territories and see their progress on key indicators such as accountability and political reform. You might find yourself considering places you never would have looked at 10 years ago like Oman, which has only recently relaxed its property ownership laws to allow foreign ownership. The market there is very interesting right now.

The information here is priceless. For example, if you can see a sharp increase in the rule of law in a country this is a sure sign that foreign direct investment will start pouring in to that country. We all know the effects that EU membership can have on a country and this is similar. Foreign investment sparks economic activity and brings wealth.

Buy under market value

If you’re going to take away just one piece of my advice then choose this one: Always buy under the market value.

Put simply, buying at a discount safeguards your investment. If prices slow, stagnate or even fall, you can still make money as your property comes with the safety margin of having a built-in profit from the start. It also makes your property easier to sell because you don't need to achieve the highest price to make a decent profit.

Thanks to the internet it is now simple to judge whether a property's price is genuinely beneath the market value. By finding similar properties online and doing a quick comparison you can be truly confident in your discount.

When we started Ready2invest, this was the core principle to our business, and using our research we have saved our customers in the region of €100million on properties worldwide.

Part two of Jonty's article is available here.

Jonty Crossick

Jonty Crossick is a founder and Director of property investment company Ready2invest alongside his wife Alise. www.ready2invest.co.uk