A strategy that is often mentioned is sell up everything towards the end of the boom and then buy back in during the slump.
Would it work?
I'm thinking that more often than not, it wouldn't.
There's some pretty strong factors going against this strategy:
1. Who can pick the top of the boom and the bottom of the slump?
2. NZ property doesn't seem to drop more than 5-10% during the slump.
3. What happens to your vulture funds while you're waiting to buy back in? Why, you park them in a high interest bearing investment scheme with a finance company..oh that's right...
4. By selling and buying in different markets, you've introduced so much risk that you'd need a huge profit to make it worth while.
Notice I used the term "sell up everything" earlier?
I think that's the problem.
If you only sold up some - maybe half - then you'd do far better.
Use the profit you've made to pay down debt and ride out the slump.
But this is a different strategy to 'Cash up for the Crash' which is why I don't think it works.
Would it work?
I'm thinking that more often than not, it wouldn't.
There's some pretty strong factors going against this strategy:
1. Who can pick the top of the boom and the bottom of the slump?
2. NZ property doesn't seem to drop more than 5-10% during the slump.
3. What happens to your vulture funds while you're waiting to buy back in? Why, you park them in a high interest bearing investment scheme with a finance company..oh that's right...
4. By selling and buying in different markets, you've introduced so much risk that you'd need a huge profit to make it worth while.
Notice I used the term "sell up everything" earlier?
I think that's the problem.
If you only sold up some - maybe half - then you'd do far better.
Use the profit you've made to pay down debt and ride out the slump.
But this is a different strategy to 'Cash up for the Crash' which is why I don't think it works.
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