As real estate investors, we’re always looking toward tomorrow. We’ve had a long, sustained recovery since the market crash in 2008. Many indicators show the economy is on the right track … the stock market is up, unemployment is down, and the dollar is strong.
So, what could be the problem?
We’ll talk about what we’ve learned since 2008 and how we’ve changed the way we look at the economy AND the financial system.
Learn how you can repair your financial roof now while the sun is still shining so when the next downturn comes, you’ll be in better shape to protect and grow your wealth.
In this episode of The Real Estate Guys™ show you’ll hear from:
- Your weather-any-storm host, Robert Helms
- His fair-weather co-host, Russell Gray
Broadcasting since 1997 with over 300 episodes on iTunes!
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Inspecting the financial foundations
From the outside, the economy looks like it’s in good shape. But, just like when you’re evaluating a house, it takes an expert to understand what shape the foundation is in.
While it’s easy to look at the structure and assume everything is going well, a failure to inspect the foundation could cost you dearly.
One of the most important things we learned from the 2008 market crash is the difference between the economy and the financial systems it’s built on.
In order to do that, we knew we needed top-notch inspectors. We changed who we hung out with and started to learn from economic experts outside of real estate.
They taught us about the cracks in the foundation and how we could better prepare for economic downturns. Because while we didn’t see the scope of the crash, there were experts who did!
Through serious study, we’ve learned that this is something that anyone can learn.
So, how did the investors who weathered the storm in 2008 do it? And how can we all be better prepared for next time?
Digging into debt
Our financial system is built on debt. The amount of debt on corporate and government balance sheets is staggering.
When consumer and business confidence is high, everyone borrows to consume more. Eventually, this leads to too much leveraging and over-allocated capital. And the higher the boom, the bigger the bust.
The Federal Reserve has tools in place to help smooth some of the dramatic rises and falls. When the economy slows, they lower interest rates to free up lending. As recovery builds, they raise rates to tighten and restrict lending.
For individual investors, one of the biggest problems was that our portfolios were built for perpetual sunshine. And while the next crash won’t necessarily look the same, there are plenty of similarities.
Shoring up your investments
Learning from the past means you’ll be in a better position to profit from the next downturn. Don’t let the good economic numbers lull you into doing nothing. Use the good times as a wake-up call!
- Don’t spread your equity too thin. Make sure your deals make sense on paper and that you aren’t lowering your standards. The bigger your portfolio, the more careful you need to be and the fewer mistakes you can make before a market downturn tumbles all your holdings.
- Keep cash on hand. Don’t over-rely on your credit lines for liquidity.
- Have your foot near the brake. Keep an eye on your assets, credit, and future deals. There’s no need to panic, but be cautious and thorough.
- Consider having some properties paid for in cash. If you have a property without a loan, it won’t be a target of or subject to the swings of the market.
- Acquire recession-resistant real estate. Look for properties in the middle of the market where there’s nearly always demand. Also consider niche investments like long-term storage, luxury properties, or assisted living opportunities.
If you’re looking for a fantastic primer on the financial system, how it is the foundation for the economy, how to recognize the warning signs of a downturn and how prepare for it, check out our video series The Future of Money and Wealth.
We captured some of the best and most relevant information from expert financial minds in 20 sessions you won’t want to miss. The information in this series is a head start into understanding the underpinnings of the system and how to build and protect your wealth in a changing economy.
To learn more, send an email to future [at] realestateguysradio [dot] com.
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