Real Estate Investing Works in An Up and Down Economy
- March 7, 2023
- 10:00 am
Glenn and Amber Schworm, founders of the Home Flipping Workshop, know how to invest during an up-and-down economy flipping houses.
They have provided thousands of students with valuable strategies that will help them move toward success.
No professional expects to endure a declining economy or interest rate hike without a plan. Instead, Glenn and Amber are teaching individuals the secret advantages of profiting.
Remember that the economy has uncertainties, which could reflect in your favor. Real estate investing is a stable and valuable venture with many practical benefits when practicing the fundamentals.
There is cause for concern when you learn the steps and processes involved in investing from an experienced real estate investor.
Ultimately, real estate is one of the more stable investments when the economy starts to decline.
Rental property investing alone can provide a consistent income stream in an economic downturn but that is not where most people start due to a lack of capital or liquid capital to invest.
That’s just one straightforward tip, but there’s much more to learn. There is light at the end of the tunnel for the aspiring real estate investors.
Included in this article is how to thrive as a savvy real estate investor despite an up-and-down economy, including:
HOUSING IS A CONSISTENT AND STABLE NEED FOR ALL PEOPLE
Housing demand is a market-driven theory. Housing stability is every person’s immediate necessity, but it is also an existing deficit for far too many people.
People lack access to housing accommodations for various reasons. A significant reason for housing instability is affordability.
The demand for housing is high because it renders a chance for a quality life and a better future. The need for stable housing is beneficial for a variety of reasons.
The Benefits of Stable Housing
Housing stability is an attempt to sustain a roof for lodging; it is a fundamental human right. It ensures less stress, which strongly impacts our physical and mental health.
Housing is a constant and stable need for everyone, allowing families to establish themselves in safe and secure settings.
There are a lot of housing issues and homelessness rooted within the fabric of our society, and these issues enormously increase an already consistent demand.
With the rise in housing costs, the market fails to respond with an adequate supply to the demand.
The lack of housing availability is how savvy real estate investors make lots of money because the current market cannot keep up with the population growth.
Owning a home offers a solid foundation for Americans who are fortunate enough to do so, but the fact remains that many people cannot afford to finance their own homes.
Affordability is Key
Housing prices surpass income growth regularly, especially in certain regions of the country.
The American dream has become a nightmare due to stagnant wages.
Housing prices will continue to rise because of supply and demand. The unyielding demand that people need housing remains true.
Affordability is why there is such a high necessity for more real estate investors to engage in this lucrative market.
Remember, people need housing. As a result, there will always be a thriving and reliable market for real estate investing.
Owning a home is a long-term investment, and the value of that home will increase over time. Real estate investing is a smart financial move that builds wealth that can be passed to the next generation in your family.
Offering renters housing stability is an economic investment that benefits both entities.
Previous years of experience have taught us a lot about:
To best understand how to avoid unwanted mistakes, Glenn and Amber explain to students how to take advantage of past mistakes and new legislation.
WHAT HAS 2008 TAUGHT US
In 2008, the crumbling of the United States housing bubble impacted the world. The situation rapidly spread across the globe, causing significant disruptions to the real economy, consequently affecting global consumption, production, investment, trade, and employment.
The real estate market plays a major role in the economy and vice versa. Over the past two decades, investment strategies in the real estate market have significantly changed.
As 2008 gets further away in our rearview mirror, lenders are loosening their guidelines again.
The housing market is in good condition currently due to new lending regulations. Those regulations are there to protect the consumers during their home purchasing process.
Even still, the real estate market is much more cautious about financing.
Strict lending regulations are in place that call for buyers to raise capital before closing – this is where real estate investing took on a new meaning.
There are also new regulations that place security systems within the appraisal and underwriting processes.
The mortgage rules have changed because of the overwhelming impact of the 2008 real estate crash.
Risky loans and mortgage delinquencies have significantly decreased because of these measures that have been put in place.
Private mortgage lending remains restricted due to borrowers’ inability to get credit.
Getting a fixed-rate loan means that your interest rate remains unchanged during the life of the loan. An adjustable-rate mortgage means that your home loan could adjust depending on the market.
Easy credit and underwriting standards are no longer solutions for loan demands. Lenders evaluate the applicant’s financial dependability by reviewing their income and credit.
2. The credit determines if the applicant is likely to pay back their debts and qualify for a lower interest rate.
Risky loans are no longer readily available to subprime borrowers. Clearer guidelines enable lenders and borrowers to know what to expect over the life of their loans.
When deciding to borrow from the bank, it is essential to set a budget. Your budget needs to consider the following additional costs you will incur in the home buying process:
Not overspending is the objective, so being aware of your expenses will help overall. Thirty percent of your income should be the estimated target amount to spend on household expenses.
Gaining financial stability is the best option before making such a huge purchase. Remember, what you borrow will have to be paid back, so live within your means.
People are now distinguishing between their needs and wants, attempting to rebuild personal credit. As a result, investors who understand necessary plans and strategies can benefit from our fluctuating market.
Homebuyers are encouraged to opt for the 15-year fixed rate mortgage instead of a 30-year loan. It allows for a shorter mortgage period, enabling you to save money and pay less interest over time.
Although the monthly payments will be higher, borrowers build equity faster. In the long term, you will save money, which is the goal of wise investing.
Since the 2008 real estate debacle, savvy investors have capitalized on the concept of taking advantage of the seller’s market.
Investors have learned that when the housing demand exceeds supply, that is the time to strike while the market is booming.
Having a financial advisor and a detailed portfolio helps investors ride the wave of challenging economic cycles.
If nothing else, 2008 taught investors to keep their eyes open and be prepared to make wise financial decisions.
Savvy investors who learned from the 2008 real estate crisis are much more cautious about financing.
New regulations prevent lenders from engineering risky deals that caused the last crash. However, it is essential to raise capital the old-fashioned way, earn it from investments or raise it from investors or borrow from hard money lenders.
Either way, real estate investors are much more cautious about financing, including interest rates.
UNDERSTANDING HOW INTEREST RATES WORK
Revenue fuels the economy, which operates based on how people access money. So, the economy’s growth slows down when the interest rates go up.
As a result, high-interest rates can cause the economy to spiral downward into a recession.
On the other hand, with fast-rising interest rates, demand declines. The real estate market could start reducing productivity and experience higher borrowing costs.
Slow interest rate increases allow consumers to adjust to economic changes.
The Problems With Rapid Interest Rate Growth:
However, with the proper support, these difficult results do not have to be the case for your real estate business.
The Federal Reserve is promoting economic growth and steady inflation. Nevertheless, the threat of high inflation and the rapid increase in interest rates will significantly increase the possibility of a recession.
Only a small sector of consumers can qualify to buy, yet people still need to occupy homes. In addition, many of these people have the resources to do so.
Unfortunately, many people do not have the credit background to secure approvals for an affordable mortgage.
As a result, this means fewer buyers competing for each property for real estate investors. Here is where your investment in real estate comes in.
Rising interest rates result in less stringent real estate guidelines – this is an effort to maintain stability in the market. As a result of savvy investment strategies, the doubling of interest rates is unlikely to cause a crisis in the real estate industry.
What Does Doubling Interest Rates Mean For My Mortgage?
When you hear doubling the interest rate, that does not mean that your payments will double. So, relax. It is time to strategize for the upcoming market.
Five Ways Higher Interest Rates Can Impact You
2. Stocks and bonds are likely to lose money in the short term
3. High-interest gains in bank savings accounts
4. Slow down inflation rates
5. Create more job openings
The Fed has maintained interest rates at or near zero since December 2008 to support increased economic growth and bolster the economy.
There is one primary reason most markets crash, and that is when property inventory is limited. When this happens, those who previously profited from low rates refuse to sell.
A rise in the interest rate can cause a slight decrease in the housing market. Real estate businesses may have difficulty getting financing for projects.
From this perspective alone, rapidly rising interest rates can hinder your business growth.
With a slowing economy, interest rates could affect the buyer’s purchasing power. Meanwhile, a strong labor force prevents the real estate market from rapidly falling.
People need homes.
Rising property demands against decreasing property availability can impact the real estate market but benefit investors prepared for economic ups and downs.
These rising demands could cause a slowdown but not necessarily a crash.
Since consumers are encouraged not to extend themselves further than what they can afford, as a real estate investor, you have the opportunity to supply the demand – housing.
Be flexible when the interest rates change.
Expand your search for properties beyond your norm to prepare your business for interest rate spikes. Keep in mind that there are properties that remain affordable outside of what you have considered.
Do not get distracted — focus on the future.
The interest rate increase will undoubtedly influence the real estate market. Staying on top of the current changes is essential.
Therefore, establishing a network with the Home Flipping Workshop will benefit your business and help you stay in the game.
You need to know how real estate interacts with the rising interest rates. Rising interest rates tend to increase the number of motivated sellers, which allows investors to acquire homes.
Many real estate investors may want to give up when they see the market take a downturn. That means less competition and an increase in clients.
As a result, you should optimize your business towards continued development of best business practices.
If you plan to stay in the game, these steps are critical to the success of your real estate business in today’s market.
With rising interest rates, finding offers may seem tricky. It could impact purchasing, but it will not paralyze the market.
During this time, the real estate market can be favorable for investing. The demand for specific properties becomes available due to the interest rate increase.
Sales may be slow, but acquiring properties during a rate increase is still possible and profitable.
HOW TO ACQUIRE PROPERTIES THE RIGHT WAY
Buying investment properties the right way is lucrative. Move quickly to acquire the right property that will lead to favorable returns.
Knowing your budget, location, and price range are just a few pieces to acquiring property. Utilize several channels to increase your property search.
Your financial stability is key.
Before purchasing additional properties, be sure to budget the money you may need for costs such as:
When acquiring property, you want to get a return on your investment. If the property you purchase is in the right area, it will be considered a good purchase.
During the 3-day course at the Home Flipping Workshop, you will learn what areas make for the right purchases.
For starters, doing your research and analyzing market trends will help in finding the correct location. Comparing property taxes, rental trends, and local pricing are steps to uncover an intelligent investment.
Seven Ways to Acquire Properties
2. Wholesalers
3. Off-Market Properties
4. Foreclosure Auctions
5. Direct to Seller
6. Cold contacting
7. Crowdfunding
I. On-Market Properties
The most common way traditional real estate investors acquire properties is through sources such as:
Real estate investors have access to specialty listing services, such as the Multiple Listing Service (MLS), a property sales database. These are known as On-Market properties.
On-Market properties are listed through entities like Realtor.com and Zillow. Various sites make it easier to find a property to purchase. However this is not the way to find your best deals.
II. Wholesaler Deals
Partnering with wholesalers can increase your opportunity. Wholesalers can find suitable property investments, contract them, and assign the contract to the investor.
Wholesalers will also increase the asking price to obtain their fee. Most real estate investors conclude that it is worth the find.
III. Off-Market Deals
Successful real estate investors work hard to find deals, the majority of which never appear as listed for public consideration. Finding off-market deals is the optimal skill for any real estate investor. Off market deals allow investors to focus on maximizing profits. A skilled real estate investor is always on the hunt, often using the following four strategies:
2. Bandit signs like the ones that read, “We buy houses,” cost very little but produce great results.
3. Direct mail driven by a strict criterion.
4. Lead generators provide a heads up about properties before the general public is made aware.
Learn more directly from Glenn and Amber Schworm about off market deals.
IV. Foreclosure Auctions
Another effective way of acquiring property is through foreclosure auctions. Foreclosure auctions take place state by state. It is an excellent channel to find properties at a low price.
With foreclosure auctions, you buy property as-is and without physically seeing it. Purchasing at a discounted rate will account for any risks or issues that may occur for unknown conditions.
V. Direct-to-Seller
Direct-to-Seller is putting together a list of potential sellers, contacting them through direct mail or email, and letting them know that you are interested in purchasing their property.
VI. Cold Contacting
Cold contacting is another off-market opportunity for fresh leads or potential clients. Walking through and around neighborhoods may be time-consuming, but it can uncover potential sales.
VII. Crowdfunding
Crowdfunding is another way to acquire property through a pool of investors. Multiple people pool their money to purchase a property as a venture.
Like any other real estate investment, real estate crowdfunding has advantages and disadvantages.
Several of the most popular crowdfunding sites offer access to real estate opportunities, but investors must do their research before leaping into online property investments.
Some examples of online crowdfunding platforms are Fundraise, Realtymogul, Crowdstreet, Yieldstreet, and EquityMultiple.
Expand your portfolio by considering ways of acquiring property offers and investment opportunities.
VELOCITY OF INVESTING
According to Glenn and Amber Schworm of the Home Flipping Workshop, focusing on lots of small wins is critical. Like how baseball games are won through base hits. Big wins come from the long game of investing, but investment velocity is critical to consider.
The velocity of money is defined as the speed at which you regain your initial investment. The faster your velocity of money, the faster you can reinvest and build wealth.
When you put your money to work through investing, you are working to grow returns on your investments.
Money Makes Money.
It’s a common cliche that says, “The rich get richer.” It is no secret that savvy investors look for the rate of ROI (Return of Investment). In real estate, your focus is primarily on investing in an ROI.
The return on capital is about getting the original investment you started with back quickly and maintaining equity.
The concept is simple: Having control over the movement of your money empowers you to determine the velocity at which your money works.
The short game is to get back your original investment, allowing you to reinvest while still producing residuals from previous investments.
The velocity of your investments allows you to earn money from multiple investment streams using only the cash you initially started with when making your first investment.
Equity in property is idle money that is receiving zero return. Instead, you can capitalize on several lucrative opportunities.
All you are doing is repeatedly reinvesting your gains.
Money quickly moves through our economy because people are repeatedly reusing it. When investing, you may want to ask yourself these questions:
2. Are there any risks?
3. What is the timeframe for a return?
Investors concentrate on the return on their investments. Learning how to make money is about the speed of getting the returns.
You can get from Miami to the Bahamas on a rowboat, cruiseliner, or speedboat. Glenn and Amber teach students how to get high-speed velocity financial results.
The most critical and pivotal point of investing is the return on your investment. The return is not always guaranteed. That’s why you need experienced professionals to teach you how to succeed.
Glenn Schworm said, mitigating risk is the objective when investing. Analyzing your return on investment will determine the kind of risk you could encounter.
The strategy provided by Home Flipping Workshop builds wealth by creating capital profits that allow you to reinvest in ways that will accelerate your success.
REAL ESTATE INVESTING, DESPITE AN UP AND DOWN ECONOMY
Your reaction to the economy’s health is vital to your business’s success. Good or bad, up or down, the main thing is in how you respond and continue to create value.
The a unique difference between an up vs. down economy:
These economic ups and downs can affect real estate investing. Yet, investment transactions will take place in the American economy no matter what.
A downturn is a suitable time to put together a plan to maximize your profits.
Your portfolio may suffer when the economy is down, but investing and cashflow opportunities can arise if you are paying attention. That is a proper time for a knowledgeable investor to make money moves.
Available money at the right time is essential during any market or economic fluctuation. Not having an investment strategy is a red flag pointing toward the direction of the unsuccessful.
Planning in an uncertain economy puts the odds in your favor. The less you stand to lose in a down economy, the more you will have working for you during the recovery.
Investing in rental property is a steady investment because people will always need a place to live. Investors can count on that steady stream of income and we call that cash flow.
Also, with a downturn in the economy, the housing market could present investment opportunities for a discounted cost.
An uncertain and unpredictable market will show some of the most excellent opportunities. However, it could come with considerable risks.
Investors usually evade risks by diversifying their portfolios to survive the economy’s troubles.
A diversified portfolio is valuable for long-term endurance. It demonstrates its value when the market is down, and the economy takes a downturn.
As an investor, it is also essential that you pay attention to the real estate cycles. Knowing when to buy, hold or sell is imperative.
Four Identifying Real Estate Cycles
I. Recovery Time
During the recovery time, it is the best opportunity to purchase below-market properties. These properties are ready for sale or rent once the economy shifts.
II. Expansion Cycle
The expansion cycle is when the economy starts to improve and grow. There is an increase in demand for housing, and the market will sell for more than the market price.
III. Hyper Supply
Hyper supply is when there is a frenzy to meet supply and demand. As a result, the supply outgrows the demand causing a shift in the economy. When this happens, it will cause property owners to sell in fear of having unsold properties. That is an exciting investment time, implementing the buy-and-hold strategy for the following real estate cycle.
IV. Recession Phase
The recession phase offers opportunities to invest in foreclosed and repossessed properties. These properties can be held and ready when the economy recovers.
Demographics, interest rates, government policies, and the general economy are some of the main contributing factors that will affect the ups and downs of the real estate market.
ASK QUESTIONS, PREPARE FOR SUCCESS, AND GET THE SUPPORT YOU NEED
An investor needs to understand these patterns, phases, and processes of real estate investing in an up-and-down economy.
Whether exemplary or a lousy economy, understand that significant shifts will occur, but your real estate business can continue to thrive with the right support.
Glenn and Amber Schworm have decades of experience and an eagerness to share during their upcoming Home Flipping Workshop.
During the 3-day course, you will learn how real estate investing works despite an up-and-down economy. You will also see that success in real estate boils over when investors know expert tips.
Visit the Home Flipping Workshop to register for the upcoming virtual course that will equip you with all the resources and tips you need to thrive regardless of the economy.
