Can You Recommend Some Ways to Make Money with Real Estate in a Depression?
Question: “Dear Marc, can you recommend some ways to make money with real estate in a depression? I trust your insight and opinion. Most of the “how to make money in real estate” programs today are outdated and are trying to leverage dying trends. Thanks!”
D.K. Bloomington IN
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You can make money with real estate in a depression. I’ve done it and so have other savvy entrepreneurs. The key is to reject the “mass think” mentality.
If you invest like the general public or the masses you often lose your shirt.
Real Time Losses!
A friend of mind recently lost more than $700,000 in various real estate deals. He constructed his deals like a rookie. He succumbed to “mass think”.
My buddy bought into the real estate frenzy which says you can’t lose money with real estate “cause they aren’t making any more of it”.
Listen…I’m not a seasoned real estate billionaire or even the “Great Predictor” of trends. But I’m not fooled by “mass think” and the so-called “experts”.
I’ve avoided major losses in real estate the past eight years.
In fact, I haven’t lost a dime in real estate since 2001 (other than appreciation value). I’ve made money because I don’t trust the general public.
What’s more, I do my best to apply horse sense when to real estate investing.
Horse sense is sound, practical judgment.
“The thing a horse has that keeps him from betting on people.”
W.C. Fields on horse sense
I know more than a dozen entrepreneurs who’ve been devastated by the recent real collapse (in six different areas of the country and in Winnipeg).
The real estate boom (and bust) over the past eight years was predictable. And I’m not a psychic! But if you had eyes to see, you could have known the real estate boom would never last.
Remember The League of Power special report (Level IV) about making money with real estate?
Here are four key points:
1. Minimal risk
2. The ‘experts’ and masses generally get it wrong
3. Superior knowledge beats them every time
4. This knowledge is hidden by the politicians and media
“The fact experts and masses get it wrong with such regular predictability is the reason I have minimal risk; by doing the EXACT opposite to what they do”.
Most people involved in real estate prior to the crash were exposed to maximum risk, agreed with so-called experts, utilized inferior knowledge, and believed the media were telling the truth (not to mention politicians).
In other words, most entrepreneurs were doing the exact opposite of what they should have been doing…and therefore lost money.
I knew the real estate market and sub-prime mortgages were toast when… On a walk near my home on the coast of Maine I saw a cashier from the local convenience store drive into her three car garage attached to a $650,000 home.
This was in rural Maine mind you. $650k is a lot of money for a home here if it’s not on the water. Anyway, when I saw this gal pull into a three car garage in her Escalade, I knew the boom was toast. That was early 2005.
This is horse sense in action.
Granted, the nationwide real estate frenzy lasted another three years. But then it went kaput!
The Secret to Making Money with Real Estate in a Depression
The masses were insanely bullish on real estate from 2004-2008. In most cases, people were bullish because they were making money hand over fist…on paper!
But the market collapsed. A lot of people, including savvy entrepreneurs lost a bundle.
We’ve learned about “perceived” and “actual” risk in The League of Power. Who else is teaching this stuff?
Let’s forget about perceived risk for a second and concentrate an actual risk.
If you want to make money with real estate in depression (or any cycle for that matter) you need wise counsel….not conventional wisdom.
Here’s what I’m talking about… Most people never realize, or they refuse to believe they’re involved in hysteria.
How Do I Know its Hysteria?
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One way to determine if you’re involved in hysteria is with Google. I’m serious.
We can all agree, Google is the “engine of the masses”…right? Almost everyone with Internet access uses it. Well, if you Google the term “real estate” you’ll discover something interesting.
Ten out of the top fourteen search results are for real estate companies and realtors.
Generally speaking, real estate companies and realtors have lost tens of billions of dollars. Their formula for making money in real estate in a depression is to “buy a house“.
Most real estate companies, developers and realtors (who own property) are underwater….meaning they owe more on the properties than they’re worth.
Heck…most individual home owners are in the same boat! The masses are telling you to “buy a house” or “buy a foreclosed house”.
We need to remove ourselves from the masses if we want to make money in real estate in a depression.
Another key to making money with real estate in a depression as I said is by using horse sense or wise counsel. If you don’t have it you can get it.
Proverbs talks about seeking counsel….
“Where no counsel is, the people fall: but in the multitude of counselors there is safety”
This passage is actually talking about “wise” counselors. In other words, most people think they’re “wise” ….at least in their own eyes. But in reality, most of the counsel you and I receive is incredibly “un-wise”.
This is a long winded response to your question…but sometimes you can’t cover this stuff in one paragraph. Anyway, I’ll stop the Sunday School lesson!
One of the best places to obtain “wise counsel” is from people who’s ignored the “madness of the crowd” and prospered. The “wise counsel” I’ve received over the years has been from people who ignored the masses and prospered. Many of them enjoyed phenomenal success.
Their success is not limited to making money. They also had success in life, marriage, and family. On top of that, they did this over a long period of time….not a couple of months or years.
For example, my good friend Phil S. played a major role in my success.
Phil was worth more than $200 million when he died two years ago. He enjoyed phenomenal success in business, marriage (his second one lasted 40 years) and with family.
He patiently taught me to ignore the crowd and focus on the “money making formula” for any business I was considering.
Anyway, I’ve made money with real estate. But I’ve also avoided major losses! I didn’t lose a nickel in real estate from 2004-2009.
What’s more, I’m not underwater with mortgages or overvalued real estate. In fact, I paid cash for most of my real estate holdings before the run up and collapse of the market.
Fours Ways to Make Money with Real Estate in a Depression
Here are my four keys for doing it:
1) Buy at super deep discounts
I criticized real estate companies for their formula “buy a house”. But the difference is buying at “super deep discounts”. Real estate companies will always show you their “listings” first, and are not interested in deep discount deals.
2) Be patient for the right deal.
If you’re over anxious about doing deals you will lose money
Patient is waiting six months to a year for the right deal. You may find it in two weeks. But you’re willing to wait until you find the diamond.
3) Pay cash whenever possible
Heck…you can find a boatload of deals in Maine, North Carolina, Arizona or Indiana for under $30,000! It takes a lot of effort to lose money on a house or property when you only spend $30k.
4) If you own rental property beat your competition into submission.
This is a BIG deal in a depression. It means you need to stop thinking like “the masses” and raise the rents because you’re broke. Lower your rents! Improve the properties, add some amenities and respect your tenants (don’t just talk about it). Your competition can’t lower rent, improve spaces and respect tenants. So, let’s beat them at their own game and make money in a depression.
Are Foreclosures REALLY a Key to Success in Real Estate?
The problem with most foreclosure properties is finding a clear title. If you don’t have a legitimate clear title for a home, property or land it can be a major headache down the road….and a cash drain.
My good friend, P.K., is a developer in Las Vegas. He recently hired a company to perform a real estate title search. The title came back “clear”. However, the title company used old world methods and failed to discover a mineral rights lien on the property. Not good. This has been a major headache and cash drain for him.
Anyway, most of the foreclosed properties I’ve reviewed had varying degrees of problems including liens. I’ll cover foreclosed properties in another issue.
One thing about foreclosed property though…..
There are viable alternatives to buying foreclosed property. Such as buying mortgage free properties at bankruptcy and estate sales.
The bottom line is the “masses” are living in Wonderland.
The days of “Fix and Flip” are over….for now.
Granted, you can buy properties at super-deep discounts, improve the space and possibly sell them…”possibly” being the key phrase.
But let’s get real…
The fix and flip real estate market may not recover for 10 years…if ever. But there are still incredible deals to be had.
I’m talking about deals where you obtain homes, apartments, farms or timberland for 30-60% (or more) off the asking price. Patience is the key. Treat this as a ten year business opportunity. And simply wait for a seller to agree to your terms, and then rent the property.
If you do it right you, and you make sure you won’t be under water with the stupid thing, you can make money…..and especially if the depression widens and real estate values continue to slide.
Location is Still a Key to Making Money in Real Estate…Even in a Depression
Years ago I met a real estate magnate who made several fortunes in the market. After our third or fourth meeting his wisdom emerged.
Stan was worth about $50 Million…most of it from self storage real estate, college apartment buildings and ginseng farms. Anyway, he would always say to me “Always think like a woman when it comes to real estate”.
He said woman typically buy real estate or convince their husband to buy it based on nesting instincts. In other words, generally speaking, when a woman considers a home or real estate she’ll wonder how far it is to other kid’s homes, the supermarket, the playground, swimming holes, and shopping.
My friend made a lot of money “thinking like a woman” when he built homes, gated communities, apartment complexes and “gentlemen farms”. He always bought, sold, built or acquired real estate which had easy access to the things a woman wants for herself or family. On top of that, Stan made (and kept) a fortune during recessions, boom and busts.
This week I saw thousands of properties for sale in New England at deep discounts (including more than a dozen farms). But only a handful of these properties were listed at super deep discounts, but that’s where negotiation comes into play.
However, it looks like “the masses” are becoming more desperate to sell….if we move contrary to the masses, this could spell a buying opportunity for us.
What’s more, only a handful of the properties I reviewed had easy access to the things a woman wants like other homes, playgrounds, swimming holes and shopping.
Granted, some people are willing to live in the middle of nowhere. But generally speaking good location is still a key to making money with real estate in a depression.
You also need to acquire property at super deep discounts, be patient for the right deal, and pay cash whenever possible.
If you buy rental property beat your competition into submission by lowering rents, improving the space and respecting tenants.
I hope I answered your question.
The Catch for Getting Free Cash
The holy grail of beating the system… Free Cash.
It is possible to get free cash, grants, scholarships, and loans for just about anything. But yes….THERE’S A CATCH! Don’t kid yourself.
What makes the lucky few who tap into this wellspring of cash so different than you?
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“The King of Business Opportunities”
(Ed Note: Marc Charles is referred to as “The King of Business Opportunities” ….and for good reason. He should be known as “The King of Legitimate Business Opportunities”…because he’s launched, bought, sold reviewed and advised on hundreds of businesses and money making opportunities. He understands legitimate opportunities. Marc has agreed supply League of Power members with crucial updates regarding legitimate business and money making opportunities.)
*** Action Strategy ***
You can make money with real estate in a depression! Rejecting “mass think” or conventional wisdom is probably a good idea.
You can use the guidelines in today’s issue to identify great opportunities with real estate in your area.
Location is still a key…even in a depression. But patience is the key. The days of “fix and flip” are over. Approach real estate in a depression with “ten year business model” and you should be fine.