Transcript:
Hey Everybody, Casey Denman here from Tax Sale Academy.com.
Let’s talk about a real estate market crash.
You’re buying all these properties, flipping them, making loads and loads of good old cash, and then suddenly BOOM. The market collapses.
Now, let’s talk about that for a minute. First off, every market runs in cycles. Some of the points in this cycle might be better or worse than previous cycles. The so called experts say that a real estate downturn is coming, but it won’t be anything like 2008. It’s a cycle, that’s what happens. Don’t panic. Instead, learn to profit from it.
Now, if you saw my video from a few days ago, you know about my experience with market cycles – if you didn’t see that video, be sure to check it out – I’ll link it down below where it talks about my times during 2008.
So anyhow, I’m going to give you my three tips on dealing with market cycles, specifically the real estate market crashes. Although crash is probably a little bit of a strong word for what’s coming.
These tips aren’t from the so called financial geniuses and I don’t work at the US treasury or anything like that. These are from an investor who went through it last time and saw lots nad lots of people lose money, and others who made loads of money during the downturn. This is what I learned:
1. Be Somewhat Realistic – The best way to insure you go bankrupt is to needlessly and hopelessly go all in on something just because it’s working . . . right now. And I absolutely get it. Do more of what works. But don’t do it to the point where if it stops working, that you’re in financial ruins. Here’s a prime example: In 2005 and 2006 I saw some builders who were building, selling and profiting from spec homes non stop. They leveraged everything they had so they could do more, build more and subsequently make more money. Which is fantastic, until it isn’t. If the market slows down and you have 150 spec homes that you’re building at some point in the construction process and you’re typically a 9-10 home per year type builder, you can imagine they just won’t have the staying power to float or finish these homes until they sold. On that same note, maybe you’re a speculator where you buy, wait for the market to surge and then sell. If you do this long enough, there’s going to be a time when it doesn’t surge as much as you’d like or it doesn’t surge at all.
You also need to be realistic with your income and expenses. The moment you make your first $10,000 isn’t the time to go out and buy your first Rolex. Or the moment you make your first $1,000,000 isn’t the time to go out and spend it on an airplane or yacht.
I am ALL for having lofty goals, being optimistic and rewarding myself. But I can tell you, without a doubt, that the ones who suffered the most during the economic downturn was those investors with the pie in the sky, it will never end, and I have all the money in the world type attitudes. I saw it countless times.
2. See It Coming – I know, I know, if you can see it coming you’d be a financial expert. Here’s what happens to so many people, especially those that are making loads of money during peaks in the cycle: They get tunnel vision and don’t think it’ll ever end. Contrary to popular belief, the real estate market doesn’t just decide to crash one day. It’s not like you wake up on March the 21, 2021 and at 4:07am the market decided to crash. That’s what everyone envisions, but that just doesn’t happen. Depending on the specifics you’re analyzing, the last market crash took close to two years – home prices started to fall in late 2005 and the recession was said to have started December 2007. Two years. That’s a long time . . . if you can see what’s happening. I sell most of my properties in less than a month, so it’s a little easy to gauge the prices and fluctuations in values. I also only invest in foolproof investments, where there is PLENTY of margin if the market drops some. If you’re a longer term investor or a speculator, then you really need to keep your eyes open, watch the values in your area, pay attention to days on market, sales price increases or decreases, that kind of stuff. Don’t think the market will always be at it’s peak. Because it won’t.
3. And this is the one that really excites me the most . . . Make Adjustments. Ahh…something that took me a while to figure out. I know a number of investors who made substantially MORE money during the market downtown than they ever did when the market was at it’s peak. In fact, my personal returns were significantly higher during the recession. It took me some time to figure out what exactly works, but I did and my income shot up tremendously. When the market slows down or even bottoms out, you need to make adjustments. And make adjustments fast. What works in a prime market will not work in a recession. You MUST understand this. Don’t try to make it work, because you’ll end up losing money. Instead, figure out how to diversify property types, what properties are still selling and what investors you can work with and resell to now, and side note – there are ALWAYS investors buying certain product types. Make adjustments and press forward.
Guys, the good thing about tax sale investing is that these are tax defaulted properties. These aren’t properties that weren’t overleveraged and bank foreclosed or anything like that. These are properties where the taxes weren’t paid on them. The taxes owed on them will, usually of course, be substantially cheaper than the value of that property even it the market tanks 50%. If you do it correctly, and don’t try to force the same old investment strategy to work, tax sale investing is actually going to be your best bet when it comes to investing in down times.
Whether the market it up, down, or sideways, you can ALWAYS make money as a tax sale investor. Especially if you follow my tips: Be Realistic, See it Coming and Make Adjustments.
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That’s it for today guys . . . if you’re looking to get more depth information on investing in tax defaulted real estate and would like to get all the details and strategies that we’ve learned over the last 16+ years, head to TaxSaleAcademy.com. While you’re there, you can pickup my FREE book, Tax Sale Playbook, the book itself is FREE, I bought it for you, just cover the nominal shipping cost to get it from my warehouse to your door. Another great way to start is to go to the same website, TaxSaleAcademy.com and click on our Free Webclass link!
I’ll see you guys over on the site. Take care, bye.