Ask HN: If you believed a real estate market is in a bubble, what can I “short”?

1 point·curiousjorge··3 comments

If you believed your local real estate market is greatly overvalued and in a state of bubble, what financial assets can you "short" to profit from it's subsequent crash (speculation)?

If large hedge funds are speculating the same outcome (real estate bubble burst) and are putting their money where their mouth is, is this a good sign?

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You'd have to do what's known as "shorting a stock":

http://www.investopedia.com/university/shortselling/shortsel...

So pick companies that would be hurt by a real estate bubble (you can look at the previous bubble, and that can include those who hold the debt or secondary sources like companies that sell things to first time home owners like a Home Depo).

A secondary strategy might be to invest in companies that focus on rentals since that would go up (I'm assuming you're talking about homes and not commercial real estate):

http://investorplace.com/2014/07/rental-reits/#.VZm3J3jsfH0

Although keep in mind that trying to do a play can come down to timing which can be tricky.

short REIT?

I'm not sure why Home Depot would be affected directly, I can see less demand for housing construction and such.

Would commercial estate be affected by residential homes?

Wouldn't the rent go down as the asset falls in property value?

Looking at your questions I have a huge suggestion: Unless you know a space really well be careful with investing. Maybe spend some serious time doing research, and place your bets with a small amount of money or even make an imaginary portfolio to track it to see how you do.

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