“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.”
Are they investing in government bonds? That’s a big negative! Maybe insurance annuities? That may be a good way to protect your capital, but it is a slow train to Peking with no big reward when you get there.
This young couple is doing something logical and simple. They are buying single family houses in really good areas with great floor plans and at really killer prices. In the past two years they have been carefully watching, shopping, looking, analyzing, and carefully buying. They aren’t focused on how to get wealthy in a recession or dreaming of becoming millionaires, but today they own their own beautiful home and four more homes they rent to very good tenants. Sounds almost too simple, doesn’t it? But this couple is going to come out of this recession millionaires. The homes they are buying now will probably double in value in the next 10 years, and that assumes a very slow recovery in this real estate market. Meanwhile the tenants will be paying off their mortgages, and this couple will be building equity faster (over the next 10 years) than any time in real estate in the past 40 years. And of course, rents will be increasing over the next decade and beyond, so this couple will eventually own these five homes free and clear. The homes will double in value, and this couple will receive increasing monthly rents during their retirement years as long as they own the homes. But you know they won’t stop at five homes. My guess is that over the next several years they will buy five more.
This young couple realizes that this gravy train will soon end. Interest rates are at historical lows. When they jump up, this kind of investing won’t make pencil out, unless you have all cash to buy a home. They also realize that the best homes are selling, and what will be left are the less desirable foreclosures and other homes in unattractive areas. In other words, as in most disruptive economic times, there is a small window of opportunity, and it will soon pass.
How to Get Wealthy in a Recession the Old Fashioned Way
If you have a good income, good credit, and enough cash to put down 20% or more for down payments, you can implement the same strategy. Clearly cash is King in this market, but so is a good credit score.
Another friend just purchased a commercial building for $250,000 cash that is earning a nice monthly income. The building and business are probably worth $1.5 million, but since there are few people buying with cash, this investor just bought a cash machine and picked up incredible equity instantly. This is not a time to be flipping properties for profit. These investors are buying and holding onto their real estate for the long term. That’s how they will become multi-millionaires. This is how to get wealthy in a recession.
Now is not the time to get reckless with precious retirement funds or current income, but some will see the opportunity to invest in this recession, and with very careful decisions, some will become millionaires over the next 10 years. It will be a slow process, but it is safer than most investment opportunities today, and it may be one of the best ways to protect capital while taking advantage of the potential for both huge equity increases as well as a reasonable income return (ROI). I believe in old fashioned solid principles of investing, and it takes money to make money, and that’s part of the key today on how to get wealthy in a recession.
If you’re old enough to have been through a few recessions and cycles in your adult life, you can recall that many millionaires always come out at the other end. If you’re like me, you’ve kicked yourself and said, “Darn, I could have done that!” Well, here’s a wake up call. What are you going to do? What is your answer about how to get wealthy in a recession like this?
Last Updated on November 9, 2011 by Chuck Marunde