HOUSING CRASH: 2022 is NOT 2008
How to invest in a volatile real estate market
(Listen to audio version of me reading👆)
Missing the macro
I’ve had many arguments over the last 12 years with bankers and lenders saying how the housing market is not going to crash again because we fixed so many things after 2008.
What many miss is that everything is interconnected.
The cracks in the economy don’t have anything to do with housing yet the housing market is one of the dominoes that will fall as unemployment goes down and wealth is destroyed through demand destruction as we have seen in the past six months.
Housing will be collateral damage and billions of dollars of wealth will be lost.
Rising rates have made housing payments shoot through the roof. That CANNOT last.
We have seen it in our own real estate firm.
Many of our clients have had a hard time selling their homes in the past two quarters.
As far as art investing goes it’s been hard for years to find great deals.
You have to spend dozens and dozens of man hours and countless dollars searching for great deals.
At some point the market will clean itself out of all of the excess currency printing in the system and all asset classes will re-calibrate.
Housing will be no different.
We must not be myopic thinking that housing is some stable platform of wealth.
In reality for most people it’s a liability on the balance sheet as it’s something they have to pay for every month.
Only those who have rental properties producing positive cash flow can consider housing an asset.
Moratoriums
That being said with the freezes and moratoriums on payments and evictions how much longer will real estate be considered an asset?
If you are not getting paid by your renter but yet you still must pay your mortgage how long will that last.
The deals that will be available in the next few years are going to be anywhere and everywhere.
Deals can be had now, but it takes a lot of effort and mindset right now to see deals and be creative.
Most people think that history will never happen again and we have fixed problems in the past. The economy can and will break in the same areas but even if it doesn’t the effects will cascade and reverberate throughout and be felt by all.
We certainly aren’t in a 2008 type environment.
2022 and beyond will be much worse.
The feds balance sheet is 10 times larger than it was in 2008.
Meaning we have 10 times higher the height to fall.
This might disturb some people but the imminent “everything bubble” will crash and things will implode everywhere.
Now this might not happen in the dramatic effect we all think it could.
It might happen slowly over the coming years and we may be all the frog in the boiling pot.
Prices may continue to go up because inflation is so insanely high that you just become poorer and poorer.
Look at the Venezuelan bolivar.
If currency was really a measure of wealth than those citizens in Venezuela would be among the wealthiest on earth.
However we know that’s not the case.
So what is true wealth?
Wealth is value creation and goods and services. It’s not pieces of paper.
This is an alarming wake up call for a society hell-bent on more funny money.
How to prepare for 2022 and beyond crash personally?
Prepare for the COMING crisis not only in housing but supply chains, empty shelves, energy blackouts, food scarcity, water scarcity, and most importantly a scarcity of truth and reality.
How do we do this?
Become resilient and independent by stacking up your pantry, becoming as energy independent as possible, generators, storing gas and solar, making sure your wealth is on hand through cash, gold/silver and bitcoin on your own cold storage wallet.
Make sure you have as little counterparty risk as possible.
As we have seen, if some one wants you out of the system, you will be taken out of the system.
You must diversify and become resilient.
How do you invest in real estate in environment like this moving forward?
Look at thousands of deals and has Robert Kiyosaki says, the 100/10/3/1 strategy.
For every 100 deals you look at you write offers on 10, you have 3 accepted offers, and you end up closing on 1 deal.
Most real estate is priced too high because of the unrealistic expectations sellers have.
The rent to value ratios are insanely high.
Patience is a virtue and that patience will pay off in spades in the coming years.
So be careful investing right now and make sure your numbers pencil in correctly and you underwrite deals very closely.
Patience, patience, patience.
They are deals to be found however you have to be careful and be diligent.
When the market does turn there will be deals everywhere.
So be careful in the current time and prepare self for what lies ahead.
Increase your underwriting skills
Sharpen your cap rates and determining the ROI that you want and the price you’re paying per door etc..
Make sure you’re buying deals that are for cash flow and spit out money on day one.
You do not want to be caught with your pants down and swimming with no clothes as the liquidity tide continues to move out.
If you are buying for appreciation and in the hopes that you can turn things around then I bid you good luck.
Make sure your due diligence checklists are put together and you are prospecting and ready to jump in to action when deals present themselves.
You generally will be fighting against other buyers so those that can be dialed in and make decisions quickly and decisively can beat out others.
Diligence and patience is the key of the day.
Stay strong,