We are in a time of pessimism and fear amongst the general public. Inflation is high, the economy is bad, interest rates are rising, people are getting priced out of buying homes, and so much more. Not to mention the news and their ongoing doom and gloom fear-inducing stories designed to get an emotional rise out of viewers. Amongst this fear, great opportunity exists. It exists in the calm, non emotional realm where things become evidently clearer and panic subsides. Those who remain clearheaded are able to see opportunity. Others who buy into the constant emotional panic aren’t. When things look to be at their worst is when opportunity is ever more existent.
Opportunity in every industry
It doesn’t matter what industry you’re in, during any market cycle it is possible to make money and a lot of it. You need to change and adapt with the current environment and try to forecast future trends while staying ahead of them so you can capitalize when the opportunity fully reveals itself. The best way to turn off the chaos is to rid yourself of the doom and gloom news, quiet your mind, and surround yourself with like-minded individuals who are in your industry. The collaboration of minds will result in the recognition of a market opportunity for you to capitalize on. While others sit on the sideline in fear, you’re taking decisive action. If you listen to the noise, times will never be good and nothing will ever be ideal. It all starts with what media you consume, who you surround yourself with, and your ability to analyze your niche for the right opportunities.
How I’m using this principle
In real estate, as you may know, interest rates have been rising for the better part of the last 12 months. We went from record low interest rates to higher rates than we’ve seen in years. This is the government’s attempt to curb inflation and level out the cost of things to keep the value of the U.S. dollar in check. Not to mention the ridiculous increases in home values over the last 2-4 years that have priced people out of buying homes and has contributed to the overall inflation problem. This has turned the real estate industry from bustling in a steaming hot market to coming to a screeching halt. Lenders aren’t issuing many loans because less people are buying. Realtors can’t stick a sign in someone’s lawn anymore and sell a house. Things are much more difficult in the real estate industry nowadays and people in the industry are hurting because of it. Is all that is happening out of their control? The answer is, of course, yes. But their inability to adapt to the current market conditions is their fault and theirs alone. There are ways to make money in any market and if you can’t adapt, you will starve. Plain and simple. After all of that, what could possibly be the opportunity out there lurking in this market? The answer, creative finance!
Over the last few years, interest rates have been in the low 3s and high 2s, a historically low figure for 30 year fixed loans. Now, with the ever so slightly decreasing value of homes and rising interest rates, affordability to sell your home has changed drastically. The difference between 3% interest and 6.5% interest can mean the difference of thousands of dollars per month. Since wages have remained relatively the same, this prices a once qualified buyer to a lower price point if they wanted to buy. For this reason, many people who want to sell their homes on the market are failing to do so. The biggest asset for me as an investor is that low interest loan because it keeps my monthly payments low and my principal paydown high (two very valuable things). In contrast to many other investors, I am buying more houses than ever before using a method called subject to. What this means simply is I’m buying homes subject to the existing mortgage meaning the loans are remaining in place while I take over the deed to the property. The purchase and sale process allows the seller an out for a property they can’t sell due to equity concerns, and in turn I get a great interest rate that I can turn around and cash flow on when I rent it out in addition to paying down the mortgage significantly more every month than a new loan would allow me to do at a higher rate.
Under the current state of the market, this is one of, if not the best strategy in my opinion to continue to acquire real estate. Instead of giving in to the fear of the economy and high interest rates, I was able to collaborate with a group of individuals and pick up on an opportunity I’m now capitalizing on. I know that as a rule this will not last forever and I will have to adapt, and that’s part of the fun. To be successful, you need to forecast change before it happens and be one step ahead of your competition. Today’s strategies might be very different from tomorrow’s. Anticipating that correctly can and will make or break you.
Staying on your toes
The bottom line is, listening to the fear perpetuated around the general public is a fast way to get nowhere. The best and only solution is to stay on your toes and adapt to the market conditions as they are. There is always opportunity hidden amongst the chaos. With the right mindset, you will find it.