03/02/2022
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The True Risk Factors of Real Estate Today
In today's world real estate investors have been overpaying for properties that they feel will inflate their way out. Buying properties for low yield and high prices has always been the death toll for investors. This is particularly manifest in scenarios where excessive leverage is used. The hope of continued inflation is all coming to a close. The Fed can only push it so far before the financial system totally collapses.
All that is required for the final blow is excess capacity as seen in the office and retail sectors. Covid also hurt the residential and multifamily due to freezes on rents.
Next question: What happens when the financial bubble bursts? Heard that they are expecting a devaluation and revaluation of the assets in Dollars . Rumor is that the value of all assets will be devalued downwards to the price point of the nineteen fifties/1950’s. This devaluation will be done in increments. This will supposedly show the true value in purchasing power. But will be a psychological blow to what we perceive our wealth in today's terms. A property worth $10 million will then be only $3 million if the value falls by 2/3 . I don’t claim to know what they truly plan as a base, but you must be prepared to deal with whatever these resulting losses. Don’t worry about the debt because it too must be cut to the equivalent value of the reset currency. This is just my expectation.
Many institutional investors are buying to protect themselves against losses in paper which they feel will end up worthless.
We have to see how this turns out.
