Epic Real Estate Investing - How to Prepare for a Recession in 2020 | 787

Episode Date: September 26, 2019

The sky is falling, the recession is on its way, and it cannot be stopped! Therefore, Matt Theriault shares 5 defensive and 5 offensive moves he is going to make to prepare himself for the upcoming crash. Tune in and find out more! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. Success in real estate has nothing to do with shiny objects. It has everything to do with mastering the basics. The three pillars of real estate investing. Attract, convert, exit. Matt Terrio has been helping real estate investors do just that for more than a decade now. If you want to make money in real estate, keep listening. If you want it faster, visit R-E-I-A's.

Here's Matt. Hey, watch out. The sky is falling. The recession, it's on its way, and it can't be stopped. So, what are you going to do about it? Well, I've been through this more than once, and this time I know exactly what I'm going to do to prepare for the recession. And I've got five defensive moves I'm going to make, and I've got five offensive moves

I'm going to make. And that's what I'm going to show you today. So, is the sky falling? Well, I suppose it depends on who you listen to as there's seemingly never a sure that. shortage of people predicting an economic recession. And most of them, they predict that it's going to happen the following year, and most of the time they are wrong. But it is a numbers game. Eventually, they will be right. At some point, a recession will happen. You know, history tells us that the longer we go without a recession, the higher the probability becomes that one will occur. And today,

no surprise. We're seeing a lot of hand-wringing, right? A lot of people anxious about this possible session 2020 and by all the usual suspects even. But here's the thing. This time, they might be right. There are some concerning economic indicators that suggest that there could be a significant correction on the horizon. You know, the Federal Reserve's actions, or lack thereof, banks are laying off large numbers of employees and mid-sized companies are starting to see their credit ratings drop. And worse still, job growth seems to have hit a wall. Even with all these factors taken into account, a 2020 recession is by no means a certainty. What is a certainty, is that there is enough uncertainty to proceed with a modicum of caution. Not fear, but caution.

Here's what I mean by that. You see, there's going to be people out there who seek to take advantage of the anxiety that always accompanies periods of economic uncertainty. And some of these people, of course, will be offering you advice. And perhaps some of that advice will be sound, But how will you know? How will you know which advice is worthy of your attention and which isn't? Well, first, of course, consider the track record of the person doling out the advice, since many of them will be the same people who have spent the last decade predicting recessions that never happened. Another subset of would-be advisors to be careful with are those who are too young to have yet lived through a recession.

I mean, they may know how to thrive during a boom, but that's not particularly. difficult? Can they survive or thrive during a downturn? How will they really know until they experience one of these themselves? Well, my own rule of thumb, I've did the math, is that if the person offering you recession-oriented advice is under the age of 35, just nod and smile and take it in with a grain of salt. A healthy dose of skepticism wouldn't be a, that wouldn't be a bad idea in this type of situation with that type of person. As someone who is, shall we say, a bit older than 35, although I usually don't feel a day over 18, or act it, according to my wife, Mercedes. And as someone who has had a front row seat for both the dot-com crash in 2000 and the 2007

housing collapse, I can assure you that even the most well-read and well-intentioned mentor cannot adequately prepare you for the reality of a recession if they haven't lived through one themselves. They can read all the books. They can analyze all the charts and they can understand all the mechanics of what happened, but they still won't understand what it actually feels like and what it means to make the sort of adjustment someone has to do to survive a recession. Even having been there myself, I'm not going to pretend to have all the answers, but I'll give you some really good answers in just a minute. I mean, I do have recession experience, but I don't have any insider information, and I'm not an expert in

economics, no, not in the micro or on the macro levels. So I'm not going to give you any direct advice. Instead, I'm going to tell you what I am going to do myself in preparation for a possible economic downturn because I've been through this twice before and both times I did pretty well. I came out okay. So I'm going to look back at what I did after 2000 and what I did after 2007 and I'm going to analyze the consequences of those actions. Then I'm going to do more of what worked and I'm going to eliminate what didn't. What I've done is I've divided my plan into two parts, offensive and defensive. And I've got five moves for each.

So let's start with the five defensive moves that I'm going to make. Defensive move number one. Stop buying dumb stuff. I know. Super scientific, right? But if we're approaching a time when money might be tight, the very first thing to do is to stop wasting it on frivolous things. As obvious as this step sounds in theory, it can be very difficult to implement, depending on your

habits or your vices. For me, it starts with no longer indulging in my appetite for Air Jordans and designer sunglasses. I don't even know where I got these habits. I only have got two feet. I only got two sets of eyes, or no, just two eyes. But I have enough shoes and shades to outfit a small army. So that stops. It also means I'm going to put my ever-ending, expanding collection of wine on hold. That's going to be tough because I do love a good cab. And I can certainly, I can afford to chill on the fine dining thing too. My waistline's probably going to thank me for that as much as my wallet will. And there are a few other things that I can cut back on, but you get the idea. That's number one. Stop buying dumb stuff. Number two, I'm going to pay off my high interest consumer debt.

I don't have a lot of it, but I can't afford to pay it off, so I'm going to. In fact, I'm going to pay off all of my debt that doesn't pay me. You know, I've got good debt too, but I'm keeping In fact, I might actually go out and get some more of it and more on that in a second. Number three, I'm going to bump up my emergency fund. See, I've got a six-month safety net right now, and that feels good, but I'm going to bump it up to 12 months, just because. I mean, it never hurts to have some extra cash around during slower economic times. And finally, there's one thing I want to mention that you shouldn't do as a part of a defensive strategy. And it doesn't really apply to me this time around, but in past recessions that certainly did,

Number four, it's don't panic sell your investments. You know, the primary reason for massive losses during economic adjustments is it's panic selling. It's offloading investments due to fear that you're going to lose it all and then waiting too long to buy back in. I don't have many ancillary investments this time around, but if I did, I think twice, maybe even three times before selling out of fear like I did during the last recession. Number five, don't play to not lose. It's not a time to huddle when there's so much opportunity in front of you.

It just looks different, that's all. You can make quantum leaps in your finances by playing to win during a recession. So, on that note, let's talk offense because the strongest defense in the world is not going to win any games. Because to win games, you've got to score points. And points are scored when real estate is purchased at a discount. And so to do that, you want to have ready access to cash in order to take advantage of those types of deals because they're coming. So offensive move number one, what I'm going to do is I'm going to refinance. I'm going to cash out refi as much equity as I can. And this might seem like a defensive

move to some, but it's not. Well, I guess it kind of is. Yet it is also my first offensive move. See, it's defense because you now have pulled your cash out of your real estate and you've got it in your hand. And in the event that the real estate market starts to tank, they can't take it away from you. The market can't take it away from you. But I don't plan on stuffing that cash under my mattress for safekeeping either. No, if an adjustment does occur, I want the ability to take advantage of any opportunities that arise. And if the banks are already lowering customer credit ratings at this early stage, as I mentioned earlier, I don't want to have to rely on them for money if the economy really tightens up. If an adjustment comes, real estate values will most likely drop.

And if that happens, I want to have all that cash with me ready to seize that moment. Then offensive move number two, network. You know, I read a great book. some years ago called Dig Your Well Before You're Thirsty. And I can really barely remember the contents or who even wrote it. But the simple brilliance of that title has always stuck with me. At the moment from a networking standpoint, I'm not particularly thirsty. In fact, I've been a bit of a hermit lately, channeling my efforts into things that don't really require much social interaction.

And things have been good. And I haven't felt driven to seek out too many new opportunities. Opportunities have, they've just kind of been coming to me instead of vice. versa. But what if that stops happening in a recession as it's inclined to do? You know, the whole point of that book's title, of course, is that the best time to find opportunity is before you need it. If there's an economic downturn coming, I want to have opportunities lined up. So I'm going to make some calls. I'm going to rekindle some old relationships and I'm going to find ways to create new relationships. Offensive move number three. Keep buying real estate. You know, it said, don't wait to buy real estate, buy real estate, and wait. I think it was Mark Twain that said it. And if it wasn't, kudos to whoever did, because truer words have never been spoken. Also, it's a bit of a myth that the market slows down during a recession. Historically speaking, they don't necessarily go hand in hand. The right way to look at this is that as people's circumstances change, so will the opportunities. But there'll

always be opportunities. The shift won't be to fewer opportunities, but rather in what you're looking for and where to look for it. deal standards, won't change those, but I'll be adhering to them much more strictly than I might have in the past few years. And I'll be blaming the market for everything. I'll be blaming on the market for my lack of flexibility. It'll be like, Mr. Seller, hey, don't blame me. I'm not the bad guy. The bad old market. That's the bad guy. And that brings me to offense move number four. More follow up. Going to follow up more. As people watch their financial realities change, they naturally get anxious. They constantly reevaluate their

decisions. They might draw a line in the sand one day, then erase it the next, and then draw it somewhere else the next day after that. And for this reason, it is incredibly important to focus on follow-up during periods of uncertainty. You want to be in frequent contact with your sellers. This is not the time to disengage. And that is offensive move number five. Stay engaged. If the recession comes, I'm not going to fly to the Maldives to wait it out. I'm not going to pull down my blinds and curl up next to my money either. A little extra caution can be a healthy thing and I'm going to use it to my advantage. I'm going to let it motivate me to double down on my focus and my energy. I'm going to keep investing myself. I'm going to be strengthening my

skills. I'm going to be expanding my contacts and I'm going to be looking for new opportunities. And this is why right now, what I just said, that's why this could be the most important thing that you can take away from my personal recession plan. You see, A long time ago, I was in business with a guy named Ethan. We were good friends. We were really good friends. And when we decided to go different directions professionally, I mean, we parted amicably and we kept in touch.

But somehow, Ethan, he ended up over in Russia doing real estate seminars. I have no idea how this happened because I know he'd never been to Russia and I know he didn't speak the language. But there he was. Ethan was the sort of guy who could really just kind of make weird, improbable things happen. I really admired him for that. And when he came back, he had a lot of great stories. He had a lot of great stories about people who had flourished in the aftermath of the Soviet

Union's collapse. And these people, they were few and far between, but they all had one thing in common. All of them were either business owners or property owners. The most successful were both. This was some years ago. But that fact always stuck with me. And it's something that I think about even more when we seem to be on the verge of a downturn ourselves. You see, while nothing that happens here is likely to resemble what happened in post-Soviet

Russia, I do find it comforting that property ownership was resilient enough to provide security even in a situation of that magnitude. Even in the face of a full-scale collapse, the property owners, they came out okay. And thinking about that, it reminds me how lucky I am to live in a country like the United States. And it also confirms for me that recession, or not, come what may, I'm in the right business. Whether the sky does fall in 2020 or not, I'm ready. And with these defensive and offensive moves that I'm making, I'm going to be better off either way, regardless of what happens.

All right? Bye for now. Yeah, yeah, we got the cash flow. Yeah, yeah, we got the cash flow. You didn't know home board, we got the cash flow. This podcast is a part of the C-suite Radio Network. Top Business Podcasts, visit c-sweetradio.com.