If you’re planning to take money out of the market (problem loans) or put new money in (vulture funds), how do you know where we stand in the real estate cycle? It turns out the feelings you get on a roller coaster are a pretty good analogy for judging where we stand in the real estate cycle.

Consider this: when you are about to go into free fall on a roller coaster, you don’t know where the bottom is. Once you’ve hit bottom, there’s a clear sense of accelerating back up.

For lenders, this means get out now, for we haven’t begun to fall yet and there’s still money in the market. For vulture funds, this means waiting until you’ve clearly passed the bottom. You won’t overpay, you’ll save carry costs, and by that time most of your competitors will be out of the market.

That’s what happened in the 80’s and 90’s. The market was overbuilt by 1985, but money kept flowing in until 1990. Smart money waited until 1993, and there wasn’t true liquidity until 1996 or 1997. We don’t know if the next “ride” will be as long, but we do know one thing for sure: we’ve just gone over the top and are now headed down.