Who of you reading this email believes we are heading for a recession in 2023?
I imagine if I asked that question in a classroom setting, everyone would hold up their hand… Probably both of them.
And you would all be RIGHT.
When you have the chairman of the Federal Reserve, Jerome Powell, telling you that he intends to drag the economy down into a recession by raising interest rates until he feels like inflation is under control…then a recession will be coming.
The two important questions as it relates to investing in real estate now that we know the economy is headed for a recession are:
- What can I do to protect myself from the damaging effects of a slower economy
- Where are the opportunities for me to capitalize on with this shift?
… … …
One of my favorite books is “The Snowball. Warren Buffett and the Business of Life”
In this biography about Warren Buffett, the author describes many different examples of Warren’s ability to cancel out all of the outside noise and emotions going on all around him and when everyone in the market is selling at massive discounts, he and Charlie Munger would be there to buy up valuable assets at discounted prices.
And then,more importantly…they would sit on those assets and allow them to compound over time. A very long time…
RESULT: Berkshire Hathaway simply repeated this tried and true methodology for decades and the fruit of their efforts has now amassed close to 100 billion dollars.
Have you ever heard the phrase, Real Estate is better bought, and never sold? Just think about those investors who were smart enough to sit on those homes they purchased in the last downturn for pennies on the dollar…They allowed the tenants to pay off their mortgages and are now sitting on assets with an average net worth in Phoenix of $375,000 per home. 10x what they bought it for!
I have spoken to so many people over the last 5 years who have told me, “hey, I just can’t wait until we have another downturn…When that happens, I will come in and buy up all the real estate that I can!”
Sound Familiar to you? Maybe that was you?
Well, guess what, over the next 4-5 months, I believe the market will present a very unique and limited-time opportunity to take advantage of.
Why do I know this?
Because it is SCARY to face the crowd running in the opposite direction! And once everyone adjusts to the new reality of interest rates next year, we will return to a normalized market and that window of opportunity could be gone.
Here is why I feel now could be one of the greatest opportunities for you to buy a home either for personal use or as an investment.
- The market just got SHELL SHOCKED. Sellers are panicking and buyers cannot be found. What happens with negotiations when you are the only buyer they have to work with? Name your price/terms.
- Sellers were hoping to sell their home in a WEEK. It has now been 2-3 MONTHS. Do you think they are ready to negotiate?
- With investing there are small windows of opportunity that can close QUICKLY. Does anyone remember what the market was like just a mere 5-6 months ago? Lowest inventory of all time, highest appreciation, listings getting 10 offers a day…How quickly did that window close?
- Some sellers HAVE to move for a job or relocation or maybe they can no longer afford the big home they are in and they paid 30% less for it just 2-3 years ago. Well, guess what…You could be the new owner of that home and if you want to learn how you can take it one step further and ASSUME their 3% interest rate, or make an offer with creative financing to create a win-win solution…Those opportunities will be everywhere!
- Inventory was at historically low levels in large part due to Airbnb popularity. Unfortunately, that is the next bubble to pop once the recession hits, discretionary travel is one of the first things to cut in the budget. Second homes will be hitting the market soon which will flood inventory levels and create even more buying opportunities!
Last of all (if you have made it this far)…My greatest piece of advice when purchasing real estate is to remember that financing does not have to be permanent. How many of you refinanced your home in the last 5 years…See what I mean?
If you find an investment property that cash flows at a 7-9% interest rate…Can you imagine how amazing that investment will be when rates come back down and you lock in a lower interest rate?
In other words, if a property can stand up to the test of a higher interest rate, that tells you it is a solid investment that will withstand the test of time.
Low rates have been the fool’s gold of real estate investing over the last decade! Think about all of those Airbnb purchases that were made based on the low-interest payment and the hope that discretionary travel will stay at levels we have never seen before!
Do you think a few of them may be listing those homes as soon as occupancy rates dip during the recession?
NOW is the time to buy up investment properties. THIS IS THE MOMENT SO MANY OF YOU HAVE BEEN WAITING FOR!
If you are looking to build up your rental portfolio, by acquiring solid cash-flowing assets at discounted prices, we have the team and the tools in place to make it happen. Schedule a call or visit our website to see if we have any available properties you would be interested in.
CEO Property Rush