How to Make Money in a Falling Real Estate Market

October 3, 2018 | Posted by: Calum Ross


How to make money in a falling real estate market - Here are Three Easy Ways

Trade wars are not good. In fact – they are very bad! The type of thing that puts even economic powerhouses into major turmoil and messes up global economies.

When you manufacture inflation via unnecessary tariffs and don’t make it enjoyable for people to business with you this funny thing happens – the national economies and the people both lose. What history will remind us about these times is that indeed those who do not learn from history are doomed to repeat it.  Billions of dollars of wealth are created in the markets when volatility occurs. The problem is that most people don’t know how to capitalize. With the economy in Canada and the US about to go into a long and painful recession here is how to make money when the economy slows.

Anyone who follows the news knows that the economy has been doing well for some time which is great in many ways. At the same time – everyone knows that what goes up … must also come down (especially in Toronto or Vancouver real estate markets where there is massive over valuation).

 
        See my commentary in the media from April 2017 and May 2017 below:

April 21st, 2017
Toronto and Vancouver Real Estate Investors should sell now, author says

May 2nd, 2017
Mortgage Lender woes may cool Canada housing market, finally (REUTERS)


The only questions remaining at this point is when will the next recession start and how bad will it be? With that in mind, here are three ways to have your net worth go up while the ill advised or self taught lose theirs.  

1. Cash is King - make sure you have the liquidity to capitalize on volatile markets

Naïve people think this is a good time to take out a mortgage and put it in markets that have been going up (chasing returns like Toronto and Vancouver delusional condo investors) However, this is exactly what you shouldn’t do. Instead, when you see others running toward an investment, this is the exact moment you should run away.

Real estate and stock markets are ruled by many foolish retail investors and as a result you need to exercise extreme caution when you see irrational behaviour in the market (see: The Irrational Exuberance and Greed of GTA and Vancouver Real Estate Investors in 2017 (April 2017))  Be very wary of the herd mentality. People don’t get rich following others… following the wisdom of well-educated thought leaders makes you rich.

2. Target the Over Leveraged AND Speculators (their pain will be your gain)

People who default on mortgages need to sell and the people who have bought negative cash flowing assets will soon bleed their money into your wallet. This is a great way to snap up a prime real estate for a fraction of the price. Just don’t think you are the only one with access to this information. In fact, buying properties in default or stocks when they are over valued is the primary way many of the world’s wealthiest people built their net worth.  Long standing clients of mine have been advised to get ready for this time for over 18 months (if you are not ready – call us now and we will get you ready).

Key point on this is that you need liquidity to have the buying opportunity. Make sure you have a home equity product in place and/or cash readily available, so you can capitalize. Don’t put yourself in a situation where you buy something, and you can’t pay for it. You don’t want to win a property and not be able to close. Interesting fact – I made my single best returns on a real estate investment where the seller needed to absolutely close in a week.  

3. Get interested with Economic Reports

I read for two or more hours every day and meet with economists weekly. If people spent more time understanding where the market was going as opposed to ‘chasing returns’ we would all be a little richer (if you have time to watch TV and don’t read, then PLEASE don’t complain about your finances).

Many people spend so much time watching reality TV that they have failed to realize the poor state of affairs in their own reality. If wealth were easy to acquire then more of us would have it. Spending the time to properly understand and execute your long-term financial plan will pay you far more than six figures a year during your retirement and very likely take care of the next generation of your family (consider this the next time when you tune if for the new exciting issue of “insert mindless program A here’). You may also want to think a little more of where you get your financial advice from when decide to actually entrust Sally Smith, the friendly person at your bank who studied intensely for their forty-hour investment funds course (and passed with an impressive 64%). If you think good advice is expensive then I would suggest you don’t understand the price of bad advice.

We have a full-service wealth management firm partnership that provides complimentary reviews for our clients where every single one of their advisors has more than five years of full-time financial education (some even read as much as me ????). The devaluing of government debt and the growing concern of their ability for the government to repay their debt will very likely cause bond yields to rise and pass along material extra costs to your household budget in the form of direct or indirect taxation (stealing away your very valuable after-tax dollars – in this country a penny saved is over two pennies earned).

Once the recession hits, the world’s central banks will once again begin lowering overnight lending rates (backing off the rising interest rates from dare I say it – ‘fake news’ ????).  When this happens, it will once again make it more viable to invest and the economy will recover, and we will start the cycle all over again.

Closing Thoughts

As you are aware I had advised my clients to get liquid more than 18 months ago and advised that most Toronto and Vancouver real estate investment had become speculation grade (read my online commentary or refer to the much more detailed and thorough version I gave clients). Of course, if you read my Globe and Mail and Amazon best selling book you would already know this. I published that book in February 2017 and it contains the basic information that I teach my clients. While obviously much has changed in the 18 months that it has been an Amazon bestseller … allowing the time for more than 65 to leave glowing Amazon reviews (for the official record – only one was written by my mom). She said that she wished she knew this stuff twenty years ago. This is exactly why I am trying to pay more attention to what my ten and fourteen year old daughters have to say. Right now they believe they are raising a good dad and I wouldn’t want to disappoint them.

https://www.amazon.ca/Real-Estate-Retirement-Plan-Investment/dp/1459738411

My next book will include the insight of falling markets, the implications of unpredictable political leaders and the insight from the more than 50 other books I have read since I finished writing this one in October 2016. After all… you didn’t really believe that wealth was that simple, did you? 

When it comes to making money, the security of your wealth is only as good as the quality of your team. I have made over $1.8 billion dollars of incremental net worth for my clients in my more than 15 years as an advisor. Its so weird to me that many ‘real estate and investment advisors’ seem to be able to talk about how much money they have made themselves personally, but don’t see to know the numbers they made for their clients – weird right?

PS – negative cash flowing real estate is an almost guaranteed way to lose money in the long run. Most real estate investors in the last five years have done well via good luck … not good judgement. The time is now to get rid of underperforming real estate and/or secure home equity products to make sure you have the cash to act in one of the single biggest market opportunities we will see in this lifetime. For those of you who are already clients of mine I will be there with you every step of the way!

Email our office today for a complimentary evaluation or your portfolio:  cleintcare@mortgagemanagement.ca or call 416-410-9905. 

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