The paper investigates how market imperfections affect agent’s investment decisions. To address the question I simulate a two-asset economy, characterized by market frictions. Individuals choose, in a Bewley-class heterogeneous agent setting, whether to borrow or lend resources in liquid assets, and whether to invest in illiquid housing. After solving for the stationary equilibrium, the paper further analyses the impact of a credit crunch on individuals’ choices and wealth distribution across households.