Investing In A Downturn

On today’s show we are talking about how to navigate economic cycles.

In a rising market, everyone looks like a genius. The rising tide lifts all boats and celebrations abound each passing month. Some of that is real wealth creation, and some is paper wealth creation that might take a very long time to realize.

We are absolutely in a destructive environment for many on a global basis.

At the same time as we are experiencing supply side shocks to the economy, our government and central bankers are trying to tame inflation by increasing interest rates to reduce demand.

An interesting thing has happened during this economic cycle in real estate. We have not lowered our standards for underwriting in order to meet the more competitive market environment. We know that economic cycles happen. The cause might be unknown. The timing is unknown. The depth is unknown. But you know that there will be an up cycle and a down cycle. Anything you do in the world of real estate investing has to be designed to span economic cycles.

When you buy a building and sign a loan agreement with a 25 year or a 35 year amortization, you know that there is going to be a recession during that period. There might be three recessions or maybe five recessions during that period. Nobody knows how many. But you had better design your project to survive those up and down cycles.

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Host: Victor Menasce

email: [email protected]