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Council Post: How To Prepare For The Recession As A Real Estate Investor

It seems like all the talk these days is centered around the inevitable recession. I see an article every day claiming that the end is near. Recently, the yield curve inverted, which many point to as a strong indicator of an oncoming recession. But, there are also many experts who claim the economy is strong. They cite strong growth, spending, development and other indicators to support their theory. No matter which way you lean, it is inevitable that there will be a market correction/recession at some point. It’s impossible to say for sure when or how bad it will be.

As a real estate investor, you want to be prepared for when it does happen. If you think back to the last crash in 2008, the best deals were the years after that. If you had capital, you made a lot of money. It almost didn’t even matter what you bought because prices were so insanely low. What I’ve heard most from investors looking back at it is, “I wish I would’ve bought more properties.”

Even though you can’t predict when it will happen, you can still take steps to get prepared. If you’re prepared, you’ll be able to capitalize. Let’s go over how people will be affected during the recession.

Sellers

In a recession, there will be many more distressed sellers than there are today. Since the last downturn, sellers have been able to refinance or sell if they got in a tight spot because of appreciation. Since prices will be going down, many will not have enough equity to refinance or sell. They’ll have to face foreclosure or a short sale. The sellers who do have equity will want to sell out of fear that they’ll lose their equity if they wait any longer.

Flippers

Many flippers will have exited the market. Prior to the recession actually happening, they’ll notice inventory rising, days on market increasing and their properties selling for less than anticipated. As a result, their margins will tighten. They may lose money or simply not make the return needed to justify the risk. Therefore, there will be far fewer flippers than you see today.

Wholesalers

Many wholesalers will leave the market. Even though there are more distressed sellers, there are fewer sellers with equity. They’ll notice that there aren’t as many flippers to sell to anymore either. The flippers who have weathered the storm will ask for significant discounts in order to do a deal. Wholesalers’ margins will begin to tighten to the point where it doesn’t make sense to spend marketing dollars anymore.

Contractors

Contractors will not have as many job opportunities since there will be fewer people buying and renovating homes. In order to get jobs, they will have to lower their prices to stay busy.

Real Estate Agents

With fewer buyers and sellers in the marketplace, there will be more competition to acquire clients. Real estate agents will have to spend more marketing dollars to attract them or take discounted commissions.

All these people play a vital role in real estate investing. You should ask yourself where you fit in with all of this. What’s the best position to be in?

The answer: become a cash investor.

In today’s market there are a lot of cash investors, but many will be wiped out or scared during the recession. So there will be far less competition in all aspects of real estate investing. The cash investors who do stay in it will own the market during a recession. With cash, you have many options. You can choose to flip homes with little competition. You can buy a bunch of discounted rentals and build your portfolio. Or you can lend the money to operators and have them do all the work for you.

Again, the No. 1 regret people told me they had after the last recession was that they didn’t buy enough homes. It wasn’t that they wish they would’ve wholesaled more homes or sold more homes as an agent. The person actually buying homes is the one who thrives in the recession.

The cash investor will be able to buy directly from all the motivated sellers with less competition. They’ll be able to buy from wholesalers at deeper discounts because there are more deals than money. They’ll be able to get cheaper labor from contractors because they’ll be one of the only sources of consistent work, and agents will work harder to find deals for cash investors because there will be fewer retail clients.

As you prepare for an oncoming recession, the most important thing you can do is become a cash investor. Here are a few ways how:

• If you have properties or assets, consider selling some so that you have more liquidity.

• If you’re a wholesaler or real estate agent, look into raising capital so that you can start buying the deals you find.

• If you’re a flipper, start building more relationships and using more lenders now so a trusting relationship is in place before the recession hits.

We don’t know when the next recession will be, but it doesn’t really matter. You should be preparing as if it could be tomorrow. Figure out how you can become a cash investor, and you will be ready for it.

Forbes Real Estate Council is an invitation-only community for executives in the real estate industry. Do I qualify?

Ryan Pineda is the CEO of Homerun Offer.

Source: Council Post: How To Prepare For The Recession As A Real Estate Investor

Lets talk about a potential recession, what might happen, and how you can best prepare – enjoy! Add me on Instagram: GPStephan – Avocado Toast Merch: https://bit.ly/2DhFyo3 GET $50 OFF FOR A LIMITED TIME WITH COUPON CODE: THANKYOU50 The Real Estate Agent Academy: Learn how to start and grow your career as a Real Estate Agent to a Six-Figure Income, how to best build your network of clients, expand into luxury markets, and the exact steps I’ve used to grow my business from $0 to over $125 million in sales: https://goo.gl/UFpi4c Join the private Real Estate Facebook Group: https://www.facebook.com/groups/there… So first, lets talk about what’s influencing the market and what factors we should be made aware of: The first is rising interest rates: This means that the cost of borrowing money is expected to INCREASE over the next few years. When borrowing gets more expensive, you either need to RAISE prices to keep the profit margins the same – which means things get more expensive to you as the customer. Second, we’ve begun seeing the warning signs of the INVERTED YEILD CURVE – which, according to just about every article out there, the inverted yield curve has historically been associated with a high likelihood of upcoming recession. Third, we have the tariffs and the uncertainty surrounding what may or may not happen. And when it comes to investments, the ONE thing all investors dislike is UNCERTAINTY. When people are UNCERTAIN, they don’t invest, they hold cash…and that causes stock prices to fall. And fourth…we’re seeing a slow down in nearly all markets. Here’s what I think is going to happen… First, I’ve noticed QUITE a lot of what I call “gamblers fallacy.” This is the expectation that the market will drop, JUST because we’ve been in the longest bull market in HISTORY and that means it’s “overdue” and more likely to happen. Second, I believe that a lot of our “Recession Talk” is already SOMEWHAT factored into the price. Think of all the people NOT investing right now because they want to wait for lower prices…that is, in itself, self fulfilling and lowering prices. And third…no one, including myself, knows whats going to happen. No ONE. And fourth, you have so many false news articles designed to APPEAR like credible new sources so they get pumped through Facebook and Blogs for the sole purpose of manipulating you into buying their products. Well here’s the reality: First, NO ONE can predict when a recession will happen. We’ve been seeing these articles since 2013 from people who claim the recession is coming any month now. It’s never ending. You’ll read about this one expert predicting something, then another expert predicting something else, and they keep repeating themselves until eventually, one of them is right. Then they use that credibility of being right ONCE to propel them into the next opportunity. Second, it’s important you PREPARE for a recession in ways you can CONTROL: First, you CAN control whether or not you keep a 3-6 month fund in the event you lose your job or something unexpected comes up. This is absolutely ESSENTIAL for you to do. Second, you CAN control whether or not to have too many outstanding debts that might need to be paid down. If you’re over leveraged, or if you have high interest debt, it’s in your best interest to pay those off to free up cashflow in the event of a downturn. Third, you CAN control how much you spend…if you’re spending is too high, it’s important to cut those back so that you can save more money to invest. And when you DO invest, invest long term. Ideally, these are investments you should plan to keep 10-20 years. For me, I see lower prices as an opportunity. And to alleviate some of these concerns, you don’t need to just drop ALL of your money in the market at once…buy a small amount each and every month. This way, if the price goes down..you’re buying in cheaper and cheaper over time. If it goes up, you’re buying in little bit little…and anytime when it comes to investing, slow and steady wins the race. This isn’t about making an immediate 10% profit in a month…this is about investing for your future in a slow, stable way where you don’t feel stressed whether the market goes up or down. For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness@gmail.com My ENTIRE Camera and Recording Equipment: https://www.amazon.com/shop/grahamste… Favorite Credit Cards: Chase Ink 80k Bonus Point Offer – https://www.referyourchasecard.com/21… American Express Platinum – http://refer.amex.us/GRAHASOxHd?XLINK…

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It’s August, and All of Europe Is on Vacation. How Do You Run Your Global Business?

Paid vacation time is mandatory in the European Union–four weeks is a minimum. That number can seem crazy to people in the United States, where it takes 20 years of service to reach an average of 20 vacation days a year–and even when we have it, we don’t use it all.

But, in my experience, Europe embraces vacation–sometimes in ways that make no sense. I’ve frequently found restaurants that close for two weeks during peak tourist season–because the owners want to take their own vacation time. I’d think they would close in the offseason and make money while they could, but the vacation culture is strong.

This summer, my family is basically staying put, for a variety of reasons. We’re making a couple of short trips, but otherwise staying in our home in Switzerland (which, admittedly, is a prime vacation spot in and of itself). And it’s impossible to get anything done.

My lawyer has been on vacation for the past three weeks and will be back next week. I have some things I need her to look at, and they have to wait.

Getting a doctor’s appointment? Good luck! At least the walk-in clinic runs year-round.

While this affects my day-to-day life because I’m physically here, it can also affect your business, even if you’re based in the United States. When someone says, “The Geneva office is closed for three weeks,” they aren’t joking, and no one around here even bats an eyelash. So, how do you do the international part of your business when everyone else is at the beach? Here are some ideas:

Plan ahead

This is going to happen every year. Some countries are worse than others, with everyone going at the same time. One of the problems is that European schoolchildren tend to have shorter summer vacations–six weeks is common–compared with the 10 to 12 weeks American schoolchildren get. Don’t cry for the poor, suffering schoolchildren here–they get an additional eight weeks throughout the school year.

But those six weeks are going to vary from country to country. German and British schools tend to get out at the end of July, while Swiss schools close the last week in June. So, you’ll have better luck with your London office in July than you will with your Swiss office. Go ahead and ask when peak vacation season is and plan accordingly.

Partner with larger companies

While small businesses can be excellent partners, if you will need people year-round, without fail, a large company will be a better bet than a small one. The multinational corporation isn’t going to shut down its Paris office for the summer, but the small business might close its doors for the entire month of August. Ask when you are building relationships. They won’t think to bring it up, because it’s often a normal part of doing business here.

Embrace vacation yourself

Go. Take a vacation. Step away from the office and your phone and your laptop. Europeans have proved that the world doesn’t end if you go on a vacation. If you’re good at what you do, people will be waiting for you when you get back. It’s OK to take some downtime.

Just make sure that if you do come to Europe for your vacation that the restaurants will be open in the small village you thought looked charming. Otherwise, you may be miserable during your vacation.

By: Suzanne Lucas, Freelance writer @RealEvilHRLady

Source: It’s August, and All of Europe Is on Vacation. How Do You Run Your Global Business? | Inc.com

The 80/20 Rule And How It Can Change Your Life

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What is the 80/20 Rule and could it actually make 80% of your work disappear?

If you’ve studied business or economics, you’re well familiar with the power of the Pareto Principle.

The Man Behind The Concept

Vilfredo Federico Damaso Pareto was born in Italy in 1848. He would go on to become an important philosopher and economist. Legend has it that one day he noticed that 20% of the pea plants in his garden generated 80% of the healthy pea pods. This observation caused him to think about uneven distribution. He thought about wealth and discovered that 80% of the land in Italy was owned by just 20% of the population. He investigated different industries and found that 80% of production typically came from just 20% of the companies. The generalization became:

80% of results will come from just 20% of the action:

Pareto’s 80/20 Rule

This “universal truth” about the imbalance of inputs and outputs is what became known as the Pareto principle, or the 80/20 rule. While it doesn’t always come to be an exact 80/20 ratio, this imbalance is often seen in various business cases:

• 20% of the sales reps generate 80% of total sales.

• 20% of customers account for 80% of total profits.

• 20% of the most reported software bugs cause 80% of software crashes.

• 20% of patients account for 80% of healthcare spending (and 5% of patients account for a full 50% of all expenditures!)

On a more personal note, you might be able to relate to my unintentional 80/20 habits.

I own at least five amazing suits, but 80% of the time or more I grab my black, well-tailored, single-breasted Armani with a powder blue shirt. (Ladies, how many shoes do you own, and how often do you grab the same 20%?)

I have 15 rooms in my house, but I spend about 80% of my time in just my bedroom, family room, and office (exactly 20%).

I’m not sure how many miles of roads are in the small town where I live, but I bet I only drive on 20% or less of them, as I make daily trips to my kids’ schools, the grocery store, the bank and gas station.

On my smartphone, I have 48 different mobile apps pinned to the tiles, but 80% of the time I’m only using the eight on my home screen.

When I go grocery shopping, I definitely spend the most time in the aisles that are around the edges of the store: produce, the fish market, dairy, breads—and generally skip the aisles in the middle of the store (except for health and beauty).

As a massive introvert, I don’t actually socialize too much, but when I do, 80% of my time is spent with the same 20% of my friends and family members.

In my research into the productivity habits of high achievers, I interviewed hundreds of self-made millionaires, straight-A students and even Olympic athletes. For them, handling every task that gets thrown their way—or even every task that they would like to handle—is impossible. They use Pareto to help them determine what is of vital importance. Then, they delegate the rest, or simply let it go.

How You Can Use It

So how can you apply Pareto’s principle to gain more time in your life?

Are you an executive? You’re surely faced with the constant challenge of limited resources. It’s not just your time you need to maximize, but your entire team’s. Instead of trying to do the impossible, a Pareto approach is to truly understand which projects are most important. What are the most important goals of your organization, or boss, and which specific tasks do you need to focus on to align with those goals. Delegate or drop the rest.

Are you a freelancer? It’s important to identify your best (and highest-paying) clients. Of course, you don’t want all your eggs in one basket. But too much diversification will quickly lead to burnout. Focus on the money makers and strengthening those long-term relationships.

Are you an entrepreneur? The temptation always exists to try the new and exciting. There’s nothing inherently wrong with that, but it boils down to your goals. Are you trying to grow your current business? Would an 80/20 mindset help you to stay focused on your strategic plan and spend less time chasing endless new opportunities?

No matter what your situation, it’s important to remember that there are only so many minutes in an hour, hours in a day, and days in a week. Pareto can help you to see this is a good thing; otherwise, you’d be a slave to a never-ending list of things to do.

So, what 20% of your work drives 80% of your outcomes?

 

You’d Be Better Off Just Blowing Your Money: Why Retirement Planning Is Doomed

Between interest rates and poor financial planning, the comfy retirement you may have dreamed of is most likely to remain a dream.

I know this is a bold, and possibly controversial title, but retirement planning is broken and leaving people broke.

The destructive narrative is, “work hard, save money in a retirement plan, wait and it will all work out in the long run.”

The reality is, without the ingredients of responsibility and accountability, there is no easy solution for retirement. Meaning, if we just work hard and set money aside, we are putting money into a market we have no control over.

The institutions are winning though. Taking fees along the way. Convincing us to separate ourselves from our hard earned money, encouraging us to take it out of the business we know and put it into investments we don’t.

Low interest rates are great for those borrowing money, but terrible for those wanting to take income from a retirement plan. Those low interest rates are not providing enough cash flow, so that even if you’re a millionaire on paper, you still may be living like a pauper. For example, if you could find 4% interest in a fixed income account, that is only 40,000 dollars a year per million in your retirement account. Oh, and that income is taxable if it isn’t coming from a Roth IRA.

The concept of retirement has robbed the public of the responsibility and accountability required with personal finance. It has become too easy to hand money over to so-called experts due to the busyness of business, kids, hobbies, and other obligations competing for our time.

The reality is, we have more opportunity for time now than ever. For thousands of years people were limited and constrained with the monumental duty of providing for their family by having to hunt, farm or provide shelter with less technology, efficiency and access to resources. We have become addicted to saying yes to things less important than financial stability and freedom…..

Source: https://www.forbes.com/sites/garrettgunderson/2019/07/16/youd-be-better-off-just-blowing-your-money-why-retirement-planning-is-doomed/#18c0d351302d

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Binance Coin (BNB) Leaves Position 8 Behind Stellar and Tron

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