Recessions will make you BIG $$$$

Most people cringe at the thought of a recession; people losing jobs, businesses closing their doors, stress, uncertainty and more, yet every 5-10 years it's a fact that there is an economic correction of some kind.

           The good news is that if you understand how recessions work and are in tune with the world, you begin to feel the ebbs and flows of the economy. While none of us have a crystal ball and can predict exactly what will cause a recession and exactly when it will happen, there are signs.

           In February 2018, I remember clearly feeling the party was over. I had done over 100 transactions the year before and the real estate market was on fire! One day in February it hit me like a ton of bricks, WACK! The market was turning and I felt it. The good news is that real estate is not like the stock market (it's a slow moving ship), but the signs were there. Hard money lenders were lending 95% to anyone who ever watched a fix and flip show, banks were being very tough on values, there was tremendous competition in the space, and prices were going up at a rate I felt wasn't sustainable. At that point my guess (and I was very public about this) was we would enter a small recession in Q4 of 2019. I was one quarter off and I had no idea Covid would sweep across the world, but my feeling was right.

The systemic or self-inflicted issue that causes a recession is always different, however, the results are always the same. People stop spending, banks stop lending, cap rates rise, values drop, and the government steps into supply aid via lowering interest rates and spending money. The interesting thing is if you track the recessions of the last hundred years, you'll notice a pattern. A major recession occurs that takes approximately 8 years to climb out of (such as the great recession) and the following recession is a much smaller recession that takes approximately two years to recover.

           I'm no magician and I don't claim to have a crystal ball, but I do believe that the most money is made in recessionary times. My advice is to be smart and patient; live lean, save cash, and get educated. This way when markets dip you have the knowledge and financial means to jump in and ride the cycle up, up, up!

By Charles Weinraub AKA The Handsome Homebuyer