How investors are unintentionally advantaged by the current crisis.
I’m not sure if we found a suitable name for the crisis and pandemic we’ve been going through in the last six months. I know there was a Dot-com boom and bust and a Great Recession, and, long ago, a Great Depression. For me, I call what is going on right now the Global Reset.
The norms the world was used to do not apply anymore.
Countries America was dealing with assumed they could depend on us when we signed contracts. They don’t have this luxury anymore (see Iran nuclear deal, Paris Climate Accord, NAFTA, TPP, etc.).
The world was told that we, Americans, have a model, politically and generally, that should be replicated by others. In some cases, when the opportunity arose (or when we created it), we tried to force the system on them (see Vietnam, South Korea, Iraq).
Our economic power used to tell people what to do and when they stepped too close or over boundaries. They had to decide to step back or suffer consequences. That’s not true anymore (see Kashoggi murder, North Korean missile launches, Afghanistan, etc.).
We were the financial guardians of the world. We have the reserve currency and almost all transactions used to happen in US dollars. That’s not really the case anymore (see SWIFT alternatives in EU, China/Russia currency exchange, Chinese digital currency introduction, Euro acceptance across the globe).
We used to have the best scientific basis to address health scares and issues. In the past, we were the ones who were asked to help (see Ebola, HIV, etc.). Now, we are struggling so much that we’re a health danger and can’t travel to the EU anymore.
Is there anything that actually appears to be positive in all of this? Can anything help us, especially if we are investors?
Before attempting to answer this question, it’s important to remember a few facts. All the points mentioned above require our leaders on all levels to “‘create ?”programs that entice economic activity:
- We are getting stimulus checks, free EIDL grant money we don’t have to pay back
- COVID loss at mortgage interest rates for 30-year terms
- Paycheck Protection Programs (PPP) to help small companies to pay their employee’s payroll even if there is no work
- $600/week extra payment to all unemployed to help them supplement the abysmal unemployment pay
- Tenants cannot be evicted and soon might receive rent support payments from the government
And here we are, as real estate investors, asking ourselves: “how will it play out in the years ahead for real estate?”
To address this concern, I have two predictions:
Prediction #1: The rest of the world learned that dependence on America is foolish.
Even in cases where it’s obvious that everybody is similarly affected by something like Covid19, America has opted to mandate the US drug manufacturers working hard to create therapies and vaccines to provide 90% of it to the US population and only let the rest of the world share the scraps.
This individualism and egoism are now in plain sight, obvious to see for anybody. The result will be a complete reset and the formation of new alliances no longer depending on what America used to be known for. The exceptional house on the hill we used as an analogy to describe who and what we are is now an old building with tons of deferred maintenance that has lost its attractiveness to anybody outside our borders.
Prediction #2: We can win from the situation by using our money well.
When you forget about external issues and focus on using your money, and everything the government is giving us, to overcome the current crisis, you can play your cards well and be a real winner in the near future.
There is very little anyone in America can do to change prediction #1. All of us, on the other hand, can start or intensify the journey related to prediction #2.
What should investors, and those who’d like to become investors, do in these times?
The most important advice I give to anybody willing to listen or read is this:
Spend as much time as possible learning about all the rules and incentives available to you and connect to people who have already started to apply those rules with good results.
Here are two examples of practical steps you can take as a real estate investor and what these actions could mean for you.
2 Practical Steps Real Estate Investors Can Take Today To Win From The Current Situation
1. Retirement accounts
The government has opened the opportunity to take money out of your existing accounts, i.e. 401K, and apply it for your own use or investments without any immediate penalty.
This means you can take $100K or $200K and buy yourself houses in well-performing locations around the country. You’d be able to get between 3–6 houses, at extremely favorable mortgage rates and let the tenants of those houses pay your mortgage. In addition, you’ll make some passive income each month. You could maybe use some of the positive cash flow to pay the taxes that will come due for the 401K money about 5 years after you invested it.
How much passive income could you make? If you find a reasonably good deal, you could make between $750 -$1750 each month and your houses have a good chance to increase in value over time. There are many additional benefits you will receive during your ownership and, when your tenants have paid off your mortgage, you’ll receive $3500 — $8000 each month.
That’s real economic independence and it gives you the freedom to stop trading your precious time for money.
2. If you already have investments, especially in real estate, learn about all the programs in place to help you.
Put your mortgages in forbearance. Become aware that your insurance and property taxes don’t need to be paid right now and when you’re back to normal, you’ll have 5 years to spread the missed payments out.
What will these two steps do for you and your future?
The world after the Reset
We’ll all emerge in a new world looking different due to the Global Reset. While we’ll have less international interactions and while maybe our dollar is less respected and valued in other places around the world, here at home a dollar remains a dollar. If its value goes down due to inflation, your income from rent will go up and the value of your properties will increase.
While we’re all waiting for the crisis to disappear and the reset to be completed, you are collecting rent which you should put in a savings account. This money will cover you for any maintenance, pay for your property management, be a reserve if something major brakes in your properties and after the reset, it will allow you to use all the massive income you make to re-invest until you reach your final goal: the monthly income number allowing you to stop trading time for money and be economically independent.
A lot of the things related to the Global Reset are troublesome, but there are many new rules and programs in place allowing you to pivot, set yourself up for a brighter future, and reach independence well before retirement age.
I believe this is a great positive outcome worth focusing on.
All you need to do is start learning, engage with knowledgeable people, read as much as you can, and then, take decisive actions.
