It’s in the press in the past few months: Slower 4th Quarter 2016 Napic report for real estate, indicates that the recession has set in.
Despite the dark forecast of grim years ahead, every cloud has a silver lining — and a recession is no different.
In fact, the best deals come from the 3 Ds; deaths, divorces and defaults — three things that spike in any recession.
It’s in recession that’s where you get the best deals.
Sure, it may not bypass everyone’s moral compass; however, the fact remains that one man’s misfortune is another man’s gain! On the other hand, it could be a case wherein in actual fact you are helping the man to resolve his misfortune or sufferings expeditiously.
Now that we’ve got the conscience out of the way, let’s look at the opportunity. Here are five ways — including the 3 Ds — you can prosper from a recession, much like the crew from the hit movie The Big Short.
Ways the Next Recession Can Make You Rich
- Leverage your equity.
In other words, don’t splurge or buy yourself that new car you’ve wanted. Sit on that equity. Sitting on your equity allows you the luxury to take out a cheap home equity loan to deploy to another investment. With low interest rate on property mortgages, you don’t really need the world’s greatest cap rate to expand your portfolio.
But if you’re looking for deals, simply look through the lens of 3D. Deals are plenty during the recessions.
- Take advantage of defaults.
It’s often a cause and effect thing. During the past downturns, when the economy tanks, we saw many people lost their homes. It will be no different from this recession too.
It’s when the market plummets; properties can be yours for cents on the ringgit. Once the market recovers — which it historically has always done — you not only have a good cash-flowing property, the value is “back to normal,” and you cash in on the recovery.
- Keep an eye on divorces.
According to Forbes, divorce rates go up when the economy goes down, with economic uncertainty putting a strain on happy homes. And when couples split, the assets have to be divided evenly, opening up opportunities for shrewd investors.
It happens be it in US, UK or in Malaysia. With divorces and settlements, you sometimes have to liquidate fast — especially to satisfy court rulings on net worth splits you may not necessarily have in cash. The affected parties just want to get it resolved fast and moved on with lives.
Fortunately for you savvy investors out there, one man’s heartbreak is another man’s profit!
- Help with the fallout from deaths.
With deaths, there’s often an overwhelming amount of emotions to deal with, as well as a mess of heirs not knowing what to do — sell, keep, split.
Oftentimes, the property is older, may be the family’s free and clear, and possibly has gained a fortune over the past 20-25 years — a very common scenario in property markets.
Liquidating the property is the easiest when siblings are not well off and with medical, funeral and legal costs are piling up. These costs have to be covered.
- Watch for bank lending policies
In the collapse of the real estate market in1997, many banks tightened their lending standards to such a degree that obtaining a mortgage became next to impossible for many. We are currently experiencing it in the real estate industry now. Cash is king now.
Banks are tightening their credit to preserve their loan portfolio, as they have given out ample loans during the boom period and now they have to preserve their collaterals. It is a normal human psychological behaviour to protect one’s interest first when things are not expected to do well in the near future.
However, those with good credit ratings will benefit from the low interest rate. Generally, when the economy is down, the opposite tends to happen; interest rates go down.
Please feel free to share any other ways that you think can make one richer during the recessions