Real estate markets are cyclical. 

No one knows when the next downward market will begin, but when it does… you’ll wish you were a “safety first lender”  collecting predictable and secure cashflow rather than a “property owner” holding on to a property that is declining in value.


At Hassle-Free Cashflow Investing, we are preparing to thrive during the upcoming downward market cycle. 


You see… fortunes are made in “down” market cycles, not “up” market cycles like we are currently in.


We’re excited for the upcoming buyer’s market, but the transition from a seller’s market to a buyer’s market requires a lot of patience and can be very painful for those caught unprepared.


Here’s the Hassle-Free Cashflow Investing  solution for thriving during the upcoming market shifts:

(1) Sell real estate equities while it is still a seller’s market.No one knows how much longer today’s seller’s market will continue,but there are plenty of warning signs indicating it may not last much longer.


(2) Convert your “at risk” equity based investments,  into “safety first” investments as a private lender / mortgage investor.


(3) Collect a predictable stream of income from your mortgage investments while waiting for the next buyer’s real estate market.


(4) When the buyer’s market cycle has arrived, sell your mortgage investments and use the cash to buy positively arbitraged investment real estate.


(5) There’s a season for buying, a season for selling,  and a season for just holding what you have.


A huge part of being a “Hassle-Free Cashflow Investor”is lowering your risk by  sitting out of the equity market during the worrisome transitional times.


While no one know for sure what lies ahead in our economy,however it’s our belief at Hassle-Free Cashflow Investing that the current rewards of direct real estate investment do not outweigh the risks. 
Don’t get me wrong,  there are people who will make money buying real estate in today’s economy.  I just think they are taking a bigger risk than they need to.  I love owning real estate and while there are LOTS of benefits of real estate ownership there are also lots of risks.

When the investment risks outweigh the upside potential, you need a different investment strategy.  This is exactly why in 2015 my company changed its focus from helping clients acquire real estate investments to  helping clients acquire mortgage investments.

Here is the “risk versus reward” concept in simple terms: 

If you could flip a coin and triple your money each time it came up heads and lose 50% of your money each time it came up tails, you’d be wise to make that bet as often as possible. If you could earn 10% profit each time the coin toss came up heads and lose 50% of your money each time it came up tails, you’d be foolish to ever make that bet. In both of these examples the risk is the same (lose 50%), but the rewards are drastically different (10% profit versus 300% profit).

In today’s real estate and stock market, the risk of loss is not significantly more than it was a few years ago, however the potential for gain has dropped astronomically.This risk-reward analysis has pushed me out of acquiring direct ownership of real estate and into debt based investments.  For those who are relatively new to my newsletter, you’ll know that I’m not a fan of the stock market.  While I still happily own a lot of investment real estate as a tax shelter and hedge against inflation, the majority of my personal investing has shifted to mortgage investments rather than real estate.

A debt based investment like mortgage investing is a guarantee of a specific outcome.  You will either: (A) get the interest rate stated on the note or (B) you will get to foreclose on the real estate collateral for a fraction of what the market value of the property was as on the date you made the original investment.

If your investment horizon is long enough you’ll probably do great as a property owner even if you buy at the top of our current market cycle.  After all, while we are currently in a seller’s market of real estate, we are in a buyer’s market for long term debt. Real estate prices are at all time highs, while mortgage interest rates remain at all time lows. I would rather “over pay” for a property once and “under pay” for my interest rate every year for 30 years than vice versa. It’s very possible that today’s interest rates are a once in a generation phenomena, so if you are young enough it could very well make more sense to load up on as much positively arbitraged real estate as possible rather than investing in the security of mortgage investments.  However, a lower risk / potentially higher reward formula (especially for older investors who have less time to benefit from the asset of extremely low long term fixed interest rates) is to acquire positively arbitraged mortgage paper and wait for the reward side of real estate investing to increase.

Don’t you wish you could go back to the buyer’s market of 2011-2013 and double down on direct ownership of real estate? If you’ve been investing long enough, don’t you wish you would have sold everything in 2007 and just sat out of the market for a few years?

You might consider stripping the ‘at risk’ equity out of your current rental properties (through sale or refinance) and then place that equity into a safety-first senior mortgage investment until the next buyer’s market comes around.  Done correctly this will increase your cashflow and profitability while simultaneously reducing your macro investment risk.  It will also keep you in a relatively liquid position for when the next buying opportunity arrives.  Mortgage investments are much more liquid than real estate investments.  Any time I can increase yield while simultaneously lowering risk,I definitely want to pay attention to that opportunity.


Our company sells mortgage investment opportunities that could provide you with the benefits of increasing your yield while lowering your risk.  To access current investment opportunities, send an email to David@HassleFreeCashflowInvesting.com  or use the link at the bottom of this blog post to schedule a time to talk about your personal investing situation.


Here are links to a few of my blog articles where I discuss these risk reward concepts in more detail:


How to Predict Real Estate Prices

http://www.hasslefreecashflowinvesting.com/how-to-predict-real-estate-prices/


Borrowing To Invest Can Increase Cashflow and Lower Riskhttp://www.hasslefreecashflowinvesting.com/borrowing-to-invest-can-increase-cashflow-and-lower-risk/

 

Here are a few podcasts and webinars where I discuss the nuts and bolts of mortgage investing:  
http://www.hasslefreecashflowinvesting.com/media-2/ 
http://www.hasslefreecashflowinvesting.com/video/video-series-investor-financing/

 

If this blog post was helpful to you, please consider sharing it on social media and/or forwarding a link to your friends.

Best regards,


David Campbell

Real Estate Investing Strategist

Office: (866) 931-9149 Ext. 1

Cell: (707) 373-9966


You may schedule a no cost investment strategy consultation with David Campbell

using this link to his online calendar: https://my.timedriver.com/WBYTQ

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2 Responses to Increasing Profits While Lowering Risk In A Cyclical Market

  1. Great Post. It’s true, they are cycles. Many new investors fail to understand this and invest during a cycle which might not provide them a bigger profit.

  2. Definitely true that money us made in the down markets. Wasn’t it Carnegie who said (I might be wrong), “when there’s blood in the streets that’s the time to buy”?

    I think that’s surely true and is a rather conservative way to protect capital and investment principal. Good info.

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