What are the unintended consequences of suppression? This seems to be the question on everyone's mind. No government wants to force their economy into a recession. However, that is exactly what they had to do. We don't need to go into everything that has led up to this point in history. What we need to do now, is start to prepare.
But how do you prepare for something that has never occurred before in our lifetime?
My only answer is try to simplify things and quiet the noise. The simplest way for me to illustrate this is through graphs and charts. Not through headlines or the news.
What did we know before going into this pandemic?
We knew the American economy was on the longest expansion in history. We knew unemployment was at an all time low.
We knew nothing can last forever...
I have used this graph above in separate articles. However, it's by far the best graph to illustrate markets and economics as simply as possible. The Market Cycle Graph below illustrates both the economic and human emotional impact we place on investing.
Based strictly on this graph below, we are in the Fear Stage. We still have a way to go before we can safely decide on the best investment approach to take.
In fact, real estate at the moment hasn’t declined. It may be better categorized in the Anxiety or Denial Stage.
Back in 2008, I wasn't aware that markets had cycles.
To be honest, I wasn't aware of a lot of things that I am aware of now. The last recession taught me valuable lessons after making very expensive mistakes that I will not repeat again.
The biggest lesson was how fear can paralyze and distort reality. For me, fear was not only what I was facing but the fear of what may come. During the 2008 recession, I was overleveraged and completely unprepared. I had never experienced headlines of Detroit going bankrupt and a Mortgage Meltdown.
What I also learned first hand was Fear is one of the strongest human emotion. Its drives us to flight or fight.
Last time I chose flight, this time I choose fight. In 2010, I panicked and sold all real estate investments that had equity. As history will tell you, that was a mistake. However, at the time, things were not appearing to get better. My first child was on the way, and I felt stuck. I wasn't in any financial shape to fight.
(courtesy of the PBC)
I was an out of shape boxer forced into a ring with no experience. To my credit, I did make it a few rounds. It wasn't until middle of 2010, after staring into the abyss for two years, that I began to sell off assets.
Instead of reading books about market cycles, I was reading books by Harry Dent titled “The Great Depression Ahead”. This book was not good bedtime reading or if you had $3M in real estate valued at half, like I did. I still wish I had never picked up that damn book.
I’ve been preparing for a market correction, mostly in real estate since 2017. I had a property 1340 Emerald, Grand Rapids MI that I purchased sometime turning the crash for $25K. In 2015, the tenants had moved out and trashed the place. Therefore, it was time to try to sell it for $55K. I received one offer for $40K cash. I didn’t take it. Two years later, and after another tenant clean out, I put it on the market and had 7 offers and sold it for $92K cash.
TIME TO SELL!
I convinced my real estate investor partners to start selling and by the end of 2018, we had sold all our whole portfolio.
You could say we started training for the financial fight ahead. We became lean and mean. This time we are ready!
(courtesy of the PBC)
Over the last 3 years, I have been creating a network of downline companies and servicers that will streamline our investment operations efficiently as possible. We have cash investors waiting to deploy funds. My investment group use no financing leverage. We do not owe any bank money. We are the bank.
The plan from the start was to expect a downturn. Now that it's officially here, it's time to get ready for the fight. Or in better words, get ready for the biggest wealth transfer in history!
It's my opinion that the last quarter of 2020, we are going to see opportunities in real estate we have never seen before.
Ready to learn more? Let's talk and set up a phone call. calendly.com
Kyle Zimpleman, Managing Member