While I am no authority on the matter, I was lucky enough to experience the 2007 market crash as a real estate agent and as an investor. The lessons that I learned from it were invaluable, and anyone else who experienced it I’m sure can confirm that the market crash carried with it both financial burdens and once in a lifetime opportunities as well.
While some agents got out of the business during that time, others flourished; while some investors lost it all, others bought properties pennies on the dollar. Those were scary times for most of us, including myself.
I remember going from being a top producer to contemplating my future in the business, but I persevered and looked for ways to squeeze water from the proverbial rock.
After accepting that the traditional way I learned how to do real estate was totally out of the window, I looked for people who were thriving. This meant looking for new connections and a new book of clientele, so I could adopt new ideas and get back on track.
I soon learned how profitable the distressed market was, and I immersed myself into a whole new side of the industry. I quickly dug myself out of the negative spiral I was in due to all the commentary around the office and from the media.
The months and years that followed were some of the most profitable and eye opening that I could have ever asked for. In fact, the economy as of the date of this blog has not stopped expanding, which is why I’m writing this piece.
If anyone tells you that they can predict or time the market, they’re either a fool or trying to sell you something. The truth is that no one can tell you what is going to happen tomorrow.
The top three longest periods of market expansion in U.S. history have been the following:
- Vietnam: 108 months from February 1961 to December 1969
- Tech bubble: 120 months from March 1991 to March 2001
- Current market: 120-plus months from June 2009 to June 2019
So in other words, we are statistically overdue for a correction, recession or even worse. But what do these words even mean? They get thrown around pretty freely and interchangeably, so let’s dig into that first.
So now that we can tell the difference between one event over another, what can we do if we were to face a contraction or potential crash in our industry?
Well in the balance of this article we will cover how to prepare, spot opportunities and thrive more than you have ever before while others run for the hills.
Prepare
- Acceptance is the first step in preparing for a changing market: While most people try to do more of what is not working, your job is to accept that the rules are changing and so must your business strategy.
- Have 15 percent to 25 percent of your assets in cash: Use this money to try new marketing strategies, expand your territories and make necessary hires. While others contract, this gives you the opportunity to take over markets that were once impenetrable.
- Avoid large luxury purchases: You don’t need that new mansion just yet. Besides the fact that you will be able to get one for a steal later, you must be in a low-liability and high-liquid asset position to take full advantage of any opportunity.
- Cash out on investment properties now: If you have equity in cash flowing properties, take the equity now. In a bad market, banks are reluctant to lend on real estate. Not only that, but take this opportunity to pay off bad debt, which will raise your credit score. Increasing your credit score now will make you a great borrower later when banks become more strict.
Opportunities
- Don’t fall prey to the hype: Fear is the biggest motivator, hands down, so when there is blood in the streets, you can fly in as the expert who is not phased by the new challenges in the market. Sellers will be looking for confident and educated real estate agents, so start studying market trends and human psychology now to impress them when the time comes.
- Focus your efforts: There will be a lot of inventory for sale and “on sale” during a down market, so this means that homeownership becomes more affordable. Learn how this will impact the cost of ownership, and target all those clients who were priced out of the market in the past.
- Take advantage of distressed assets:An investor’s dream come true! In our current market, everyone is calling themselves an investor, but the truth is, most of these “investors” will be out of the market when the sh*t hits the fan. So this will be a golden opportunity for investors to load up on inventory. During this market, you will need a database of seasoned investors to be able to capitalize on all the newly distressed assets. Also learn how to incorporate yourself in real estate investing because we should always practice what we preach.
Dangers
- Don’t let fear win: Letting fear consume you is the biggest mistake anyone can make, I found myself in this category during the last recession. Avoid listening to fear-based mass media because it found out long ago that the ratings go up when people have the bejeezus scared out of them. So if you constantly live in fear, you will spread that to your clients and, even worse, yourself. During these tough times, only listen and watch people who are thriving and finding ways to make champagne out of lemons.
- Don’t just do what everyone else is doing: Following the flock during scary times will get you in trouble. I know it is easier not to go against the grain, but keep in mind that 1 percent of the population controls 99 percent of the wealth in this world. Thinking outside the box and creating your own market might seem difficult, but not being able to pay for your mortgage is much scarier, believe me.
- Get in the right frame of mind, and look for opportunities: Lastly, mindset is the most important and dangerous part of the entire equation. It starts with conditioning your thought patterns, when anything bad happens, find opportunity in it. You will miss the opportunity if anger and fear is consuming you, so stay cool and collected always. Become attractive inside and out. Money and business seams to find attractive people, have you ever noticed that? I don’t mean fashion model attractive, but rather people who are a pleasure to be around because of their contagious smile or outlook on life. This way of carrying yourself can be learned, but it starts with a healthy lifestyle and during a crash, only those at the top their game mentally and physically will prosper.
In closing, surviving and thriving during a down market is not going to be easy, but nothing that is worth having is ever easy. You will need to surround yourself in a positive atmosphere and find a like-minded support system to keep you on track.
Now, instead of fearing a looming crash, you can now embrace the possibility of a changing and challenging market. Remember the market only exists in your mind, you have the ability to see gushing springs when everyone else sees a dry well.
Luis Leiva is the CEO and broker of record at New Jersey-based Culture Estate. Follow him on Instagram or subscribe to his Youtube channel.
