If you follow the news, then you will know that the economy has been growing like crazy—and it’s been doing it for a while. But what goes up, must come down. The same is true when it comes to the economy as recessions are a normal part of the economic cycle.
The only questions remaining at this point is when will the next recession start and how bad will it be? With that in mind, here are four ways to get rich in the coming recession.
1. Cash is king
You might think that this would be a good time to take out a second mortgage and then put it into the market; after all the market keeps going up every day. However, this is exactly what you shouldn’t do. Instead, when you see others running toward an investment, this is the exact moment you should run away.
The market is ruled by irrational behavior and therefore you need to be wary of the herd mentality. Given the current period of economic expansion (one which started at the end of the Great Recession) has gone on for longer than most economists ever expected, this means that you need to protect your cash for the inevitable downturn.
Cash really is king and if you want to be prepared for the next recession, then you want to make sure most of your portfolio is liquid enough to make sure you will be able to buy when the rest of the market is for sale.
2. Who’s in default
Did you know that most states publish lists of properties in default? This is a great way to snap up a prime real estate for pennies on the dollar. Just don’t think you are the only one with access to this information. In fact, buying properties in default is the prime way experienced real estate investors build their empires.
It doesn’t matter if you want to acquire property in rural Montana or if you are looking for something in of the country’s major cities, reviewing the lists of properties in default is a great way to start.
One last thing to discuss is that these auctions are cash affairs. As mentioned above cash is king and as such you don’t want to win a property and not be able to pay for it. So, bid, pay in cash, and if you need to then take out a mortgage on your new real estate investment.
3. Divorces and deaths
Ok, this might be a bit morbid, but checking the newspapers and other public registers to who’s filed for divorce or who’s recently shuffled off this mortal coil is a great way to pick up assets on the cheap. Think about it for a moment, the sellers in divorces and estate sales are extremely motivated and this means you can find great deals.
Here is a secret about recessions, they tend to put pressure on married couples who are living with debt, so much so that many decide that it is the time to get a divorce. This means that there will be blood on the streets – which is the best time for an investor to make money.
As such, when the economy starts to turn for the worse, this is the time to start looking for short sales tied to divorces start to pick up and with it is your opportunity to get rich in the coming recession.
4. Get interested
The market is going up now and so are interest rates. This has not only made it more expensive to use debt for certain investments, it has also sparked a bond market collapse as investors generally pay more to get the higher returns.
When a recession hits, the inverse starts to happen. For starters, central bankers around the world will begin slashing rates to stimulate economic activity. By extension, the interest rates tied to bank loans will begin to fall and this makes it easier to justify the use of debt in some investments.
The next thing that happens is that some investors will leave the bond market, and this means that issuers will have to ‘pay’ more to get people to buy their debt. As such, you want to get interested in interest rates during a recession. Doing so will help to boost your returns during a recession.
As you can see there are many ways to make money when the economy turns for the worse. Remember, no investments are without risk, but if you can keep your mind when others are losing theirs, then you will find yourself getting rich in the coming recession.
DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation for writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.
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