I was in Johannesburg this past weekend and I met with a seasoned financial advisor for top corporations. We had an interesting conversation prior to his presentation on “Mending the Mortgage Market’.
He told me that “the most spectacular money is made by going against consensus – at times in odd circumstances!” Yes, with the bottom falling off, this is the perfect time to create wealth!
“It is no secret that property, especially the high end of the property market, is in the toilet right now. Values are down in most parts, with some taking a 40% nose dive (that is the sale prices). Interests rates are soaring and consumers are definitely in the eye of the storm.
“Without any change in your personal lifestyle, without any increase in your budget lines, the inflation and change in interest rates, high petrol prices collectively can introduce an added 20% payment increase in your budget. Without doing anything, without getting into any further purchases or further debt, you may still automatically find yourself in debt.
“How then do you take cover in the storm? What should this situation mean to you?”
This is what I asked my new found friend - how do you come out from this financial turbulence bigger and better? How do you position yourself to create more wealth rather than roll into financial disaster?
In his forthright manner, he told me that, “this is the perfect time to create wealth - we can all easily talk ourselves into a recession, yet for one, I refuse to participate in this imaginary mind space.
It seems that we all too easily adopted the belief that now is the winter of our discontent. Judging by what’s apparently happening to the state of the regional and international residential market, the interest rate cycle, the economy in general as well as global oil and food prices - everybody is psychologically preparing themselves for the worst. This is wrong, this is the very mentality that will sink people into great unrecoverable poverty,” he tells me.
“However”, he asked me rhetorically, “if there was a massive sale in the Game Stores how will people react? Surely they will liquidate their savings and use this opportunity to get the entire store home. For some it will be an opportunity to stock the goods for resale at a later stage; for others it will be an opportunity to get those items they could never afford until the sale opportunity.”
This he told me, is exactly what we are experiencing right now.

“This is the GREATEST property and stock sale of our time.”
“ Doors are open for the excluded and it is an opportunity for the consumers to buy high end properties at a fraction of the cost; this is the time to buy – renovate and sell later at 3 times the price. When the property price is down, the rental market picks up, with an opportunity to sell at a later stage when the prices eventually pick up.  We should not wait to buy when the market and – YES, the property prices pick up!
He made the analogy of a cattle feedlot, where the farmer buys drought stricken cattle, feeds and fattens them and proceeds to sell them at 3 or 4 times the price. The drought is actually a blessing for him. Why then is it that with property, when house prices are falling, people cry a river that property is dead and a finished business and wish and pray to God for recovery – why? So that they then BUY houses at twice the prices they could have paid during the recession time?
Whilst it’s good to get property in the best address, it’s better to get a low priced property, renovate it and sell at multiples its price - you get wealthy through such a smart investment.
Before you sign on the dotted line, ask yourself: Is this transaction creating wealth for me, or it is just a lifestyle issue? Is it creating debt or wealth for me,  what are the capital appreciation rates, how real are they, how easily can I liquidate this equity? What is the cost of my loan (interest rates), is it lower than the capital appreciation rates? What is the resale of the property, say in 5 years, can I afford to develop this property (or plot) further or once I am stuck with the plot am I stuck, and despite its high value I can only sell at a loss?
What is my financial roadmap? Do I know where I am headed?

Contact Boi (72537788, This e-mail address is being protected from spam bots, you need JavaScript enabled to view it ) to book yourself space in the 1st ever DEBT & WEALTH CREATION SEMINAR, scheduled for the 9th August 2008. Market knowledge is Investment Power!
First Mortgage provides Investment Advice to individuals, SMMEs and In-House Company Financial Wellness Seminars.