The rules of money have changed! The old rules said go to school, get a good job, work hard, stay out of debt and save with a portfolio of well-diversified mutual funds! With the economy in recession and constant turmoil, people who followed the old rules are facing foreclosure and wondering why they can’t seem to stay afloat financially.
As an example, lately on financial TV stations, the reporters have been talking about the run-up in gold prices and asking, “Is it time to invest in gold and gold stocks?” I feel that is a ridiculous question! Now isn’t the time to be investing in gold or gold stocks that time was 10 years ago, when gold was below $300 an ounce. Investors should have taken substantial positions when gold was cheap. For reporters to be talking about gold today is no different than them reporting on the hot real estate market in 2005, just before the top blew off.
A few days ago, a friend asked me if I was losing money in real estate. My reply was, “No, I’m making money.” Confused, he asked, “How can you be making money during the subprime disaster?” I explained that since the real estate market took a downturn, there were more people renting rather than buying, which is great for my rental business. I also informed him that I’m raising rents since demand for affordable housing is so high. When someone moves out, I increase the rent and new tenants line up. That means my cash flow is increasing! This may seem calculating or cold, but it is the reality of today’s market. It is called supply and demand and that demand is high right now. I feel it will continue!
I have said for years, to my investor friends, that I like working with small town banks and wow, is that ever true today! The rules of lending have changed for them also, but nothing like the large nationwide bank chains. These small town banks and my investment properties have been my life boats in this current economic ride on the Titanic. I have also felt the effects in this economic storm, but I continue to fall back on my flexibility of hard assets like real estate! Today is the day to buy real estate, just like 10 years ago was the time to buy gold.