I Thought My Advice to You was Correct…But…
The advice I have been giving my clients since May 2018 is, “Check your inventory!” It’s a great time to sell off any marginal cash flowing properties before the upcoming ‘market correction’ takes effect. If you have large equity in properties, it’s the time to do some profit taking and start banking cash.
My advice was based on my personal knowledge of real estate trends over the previous 35 years. Everything was and still is pointing to economic downturns, especially in the stock market, with real estate trailing behind. That was as we approached the second quarter of 2019. It told them that I’m predicting a lifechanging recession. I also told them that I may be wrong, or I may be right, so why not take the safe route and sell off any management intense or low performing assets, freeing up equity positions in others, while keeping those that are performing well. Simply stated: Clean up your portfolio.
Also, when I spoke to other investors who are not my clients, especially those in northern California where I’m now living, they dismissed my market predictions. Then as we began that second quarter of 2019, the real estate market began levelling off, and their thoughts started changing.
But…something curious happened. The stock market kept going up. Real estate values started dipping but did not fall fast. Sellers still sold their houses and buyers kept buying. Most of my clients welcomed having cash availability, and a few got upset that they had liquidated properties.
Now we got coronavirus that is drastically changing our lives, emotionally, physically, and financially. Most small businesses, because of the impact of the social and economic conditions, may not recover. Their employees have been out of work for several weeks in parts of the country and unemployment is skyrocketing – and it won’t be temporary as businesses permanently close down.
There are still those who believe that this is going to only be a minor ‘adjustment’ or ‘correction.’ They expect that once the virus passes in a couple of months that everything will jump back into full swing and all financial markets will recover. I beg to differ.
There are many people who are panicking about everything including fear of a huge real estate value drop. We have had a huge upswing of sellers calling us the last couple of days wanting OUT right now. Although ‘real estate’ practitioners have been deemed and ‘essential’ class, exempt from governmental ‘coronavirus’ stay in place orders, many Realtor® organizations are suggesting that their members stay safe and NOT list or sell property at this time. The inaction of real estate agents to list properties for sale are building up to what will probably become a panic listing spree – once the restrictions are removed. This will have immediate impact on the national real estate market as values quickly drop.
What I’m saying is that it may be too late to sell off your marginal producing properties.
Before you beat yourself up too badly for not selling those not-so-good residential properties, here’s another prediction of mine: In the past, especially during the recession that began in 2007 and times got tough, adult children – many with children of their own, moved back in with baby-boomer mom’s and dad’s. It worked out. However today, there is already a major lack of housing.
The number of baby boomers is down to 74 million, most of whom have already downsized their housing needs, with no space available for returning adult children. As this ‘correction’ begins to take on recessionary qualities, Millennials will not have the options of moving back in with parents as in the past. My prediction is that residential real estate rents will not be part of the economic downturn – but increase as rental housing demand increases. In turn, values of residential real estate should not be overly affected by this upcoming economic change and will, in all probability, increase in value.
Millennials (84 Million Strong) are very resourceful. As the market falls, this group of 84 million people, with nowhere to go, will begin to join forces (and money) to live together in a communal fashion. Although they enjoy spending their money on education, travel, and vacations, they have finally been entering the real estate market. The smart ones will buy the larger, multi-bedroom houses (that the baby boomers will be losing) for these communal purposes.
In a nutshell, residential rental real estate, especially multi-bedroom 1-4 unit houses and commercial multifamily residential (Class B or B-) properties should come out smelling like a rose. So, if you already are holding or you are acquiring anything, you may want to think about your options. This is what I am seeking…but this is me for me…you must make your own decision.
So, maybe my advice was correct – but my timing was off. Now, however, is the time!
With our abundance success, I’ll See You Over the Top,
-Alan David Kosinski, Life Extraordinaire
* * * * *
In each future article I’ll take you closer to a more enjoyable and wealthy future through thought provoking, empowering and educational writings.
Until then, see if you can discover
ways to immediately implement
what you learned from today’s message.
* * * * *