“How to Get Wealthy in a Recession Like This” sounds like some kind of get-rich-quick scheme or a real estate con like so many out there, but what I write about today is very real and is actually being done right now by my clients, family, friends, and acquaintances.  The stories I share are true stories, and I should qualify a couple of things up front.  None of these people are investing with “no money down” schemes or using maximum leverage and getting 100% loans or anything close.  None of them are living in poverty with dreams of becoming wealthy by investing in real estate.  On the contrary, these people have good paying jobs, excellent credit, and plenty of cash.  That will disqualify the get-rich-quickers and those who think there really is such a thing as a free lunch.  We all learned in Economics 101 that there is no such thing as a free lunch.  But for the qualified buyer who is discerning, now is an opportunity like we haven’t seen in 30 or 40 years in real estate.  I’ll show you a fundamental and logical answer to the question on how to get wealthy in a recession.

A couple in their late twenties have a good income between both of them.  This year they will each make a six figure income.  No, they are not millionaires, but they will be soon.  They have excellent credit scores, and they don’t waste money on frivolous nonsense.  Instead, they are taking every dollar they can and reinvesting it.  They’re not asking about how to get wealthy in a recession.  They’re just seeing opportunities and using common sense.

How to Get Wealthy in a Recession

Are they investing in stocks and bonds?  Absolutely not.  What a roller coaster that is, not to mention all the fraud on Wall Street that can steal your investment.  Between the politicians and Wall Street and the crony capitalism that has become so prevalent, investing in stocks or bonds, or investing in options or commodities has become the ultimate gambler’s racket, at least for the average investor who just wants a safe place to put their life’s savings and earn a decent return.  I know that most retirees moving to Sequim, Washington are not focused on how to get wealthy in a recession like this.  They are focused on preserving capital and their retirement income.  But many have lost 30% or more of their retirement in this crazy stock market in the past few years, and wise investing now makes sense.  That makes the issue of how to get wealthy in a recession a relevant issue for young couples and older couples alike.

Are they investing in gold and silver?  Absolutely not.  I learned many years ago that when an investment product shows up on the front cover of Forbes magazine, it’s too late.  So it is with gold and silver.  The T.V. ads say, “It’s not whether you should buy gold, but from whom.”  Pardon my french, but “non-sens.”  (more…)

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There’s a huge danger right now in real estate investing.  A gentleman from out of town asked me to take a look at his investment today.  He described it as a five acre parcel, and I subsequently learned there was a house on the property that burned down.  Part was still standing, and he told me that the building department approved the safety of the remaining foundation for rebuilding.  The owner has never seen the property and purchased it as a foreclosure in his real estate investing portfolio.  I assume it was rented, but apparently not insured.  Usually, insurance requires rebuilding, and this owner has decided not to rebuild but to just sell the five acres.

Real Estate Investing – Caution

Real Estate Investing – Profitable or Not

Real estate investing can be an extremely profitable business with real estate prices so low and with such a large inventory of homes no one wants.  If you have cash and buy low and rent the house, you have a piece of real estate that almost certainly will slowly appreciate over the next 5 to 10 years.  Granted, the appreciation is not likely to start for one to three years, but if you invest for the long run, now is the time to buy.  There’s no doubt about that.

Real Estate Investing – Trap for the Unwary

But there is a trap for the unwary cash investor right now.  I drove out and walked this property.  First, the road to this property is about one mile long, and it is a pot hole disaster all the way.  This is enough to turn most people away.  But as the commercial says, “Wait, there’s more.”  There is a nightmare at the beginning of this long driveway, a mobile home that has junk all over the yard, broken appliances, car parts, lawn mowers, and children’s toys that have been outside  apparently for years.  (I was already worried about real estate investing on this road.)

On this little journey, I passed several places with abandoned broken down cars and pickup trucks, and I could see “projects” down the muddy driveways that I presume are homes built by their owners (or renters).  Now I can appreciate anyone who does their own thing and builds their home debt free as they can afford to, but this is not the impression I got.  Have you ever found yourself in a neighborhood way out in the country and felt dirty?  Or unsafe?  (I was even more concerned about real estate investing on this road, but I could not turn around until I get to the end.)

Once I got to the property and looked at the home, or what was left of it, I realized I did not want to list this property.  There’s no way, not a snowball chance that I can sell this place, because the owner is going to want more than it is worth.  There was garbage all over, two abandoned vehicles, and a left over concrete foundation that no one will want.  It will take a lot of money to tear out this concrete, tear down and remove the remaining house and rebuild.  Surrounding this high spot where the house is built are wetlands.  Acres and acres of wetlands.  I could see water everywhere.

What’s the lesson for real estate investing?  First, if you are going to invest in real estate in Sequim and Port Angeles now, and if you cannot be present to examine the property, be absolutely certain you have a professional who will not sell you something like this property.  I doubt I could sell this property for $20,000.  Who would want it?  Second, buy something that will appreciate and is sellable.  Third, if you retain a good Sequim Buyer’s Agent, you can negotiate the best possible price.  Follow these simple rules, and you could earn huge returns on your money over the next 10 years.

Real estate investing is not for the timid.

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The uncertainties in the real estate market are part of a much bigger picture of concern for most Americans.   This has to be one of the most interesting, uncertain, and scary economic times we have lived in for a couple of decades.   Millions of Americans are looking for answers to difficult questions, such as:

1.   Is my retirement fund safe in the stock market (mutual funds)?
2.   Are my other investments in cash accounts and investment accounts safe?
3.   Should I convert more of my long term investments to real estate?
4.   What’s going to happen to the mortgage market?
5.   What will the real estate market do in the next year?   Should I buy?   Should I sell now?

My opinion, for what it’s worth, is that real estate is 100 times safer than mutual funds or stocks managed by strangers on Wall Street and largely controlled by exogenous variables over which you have no control.   Despite the craziness in the mortgage market, the government takeover of Fannie Mae and Freddie Mac, and the record foreclosures across the country, individual real estate owned by you cannot disappear, nor is it subject to the number one threat to your financial security.   What is that threat?   (more…)

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Where should your money be parked in tough economic times?   Should you be in real estate or in the stock market?   In the news today Wachovia Corp. reported a record quarterly loss of $8.9 billion, slashed dividends and announced 6,350 job cuts. The stock fell 12 percent in early New York trading in a single day.

I was talking with a client yesterday who has watched his retirement account dwindle in his mutual fund accounts over these last few quarters.   Now if your financial adviser and money management firm are good, your losses are small, but the majority of securities and money managers, in my opinion and experience, are more salesmen than professional investment managers.

Diversification is a solid investment principal, but if one had to chose between real estate and the unstable stock market, my argument is that real estate is far more secure.   Real estate prices may go up and down, but over the long run real estate has been a reliable investment, and real estate doesn’t go “poof.”

True Stories.   “Under McFadden’s management, Bradley Simon’s retirement fund dwindled from $700,000 to $267,000.” “Ron and Pam Yandell of Mansfield, Texas, turned over their $1.4 million retirement fund to a stockbroker who invested in risky tech stocks without their approval. They lost $230,000 in the tech crash.”   Read the full stories at Real Estate Still a Good Investment.

If all we had to worry about were the economic variables driving the stock market roller coaster, perhaps it wouldn’t be so bad, but there is another more insidious variable over which none of us have control–fraud.

(more…)

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• Those Wall Street Tokers
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• Is A Double Dip Recession On The Horizon?
• Those Wall Street Tokers
• Where should I invest my money now?
• Cash is King, Stock is Not, Real Estate is a Buy
• Buy Real Estate For Your IRA Retirement Fund

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