May 30

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Recession Means Opportunity

When people hear me say, recession means opportunity, they look at me as if I have 2 heads. But, before you make any judgments about my sanity, let me give you the rational reasons for my opinion.

​First of all, I should explain, that the motivation for writing about this subject today is in response to yesterday's announcement that the U.S. Gross Domestic Product (GDP) for the first quarter of 2015 declined by 0.7%.

And, while this one quarter GDP decline certainly doesn't mean we're in a recession, or that we're definitely going go into one, it does bring the increased possibility of recession into one's thoughts (at least into mine).​

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All the​ speculation and excuse making as to "why" the GDP declined is irrelevant to the subject of this post. The only relevant issue, is that recession means opportunity for all types of investors, including real estate investors.

​Now, we've all heard the phrase, "Buy Low. Sell High." But, the question I've heard thousands of times is, "When can we buy low?"

​And, to the surprise of virtually everyone I've answered, my answer was and remains, "When the market is in decline." Or, in other words, when the economy is in recession.

And, as you may have thought my statement at the beginning of this post may have been just a flippant remark only intended to get your attention, so did most of the people I gave this answer to.

But, when we look objectively at the facts about markets, including the real estate market, in general, ​we all have to agree, that there are generally very few favorable buying opportunities, other than when a seller is in an unfavorable financial situation.

For example, in an expanding, or growing economy, prices are typically on the rise. And, unless you can find someone who's in a dyer financial situation and needs to sell ​at almost any price, it's not very likely you're going to come across another opportunity to "buy low."

However, when the economy is in decline, or in recession, there tend to be many more people who are either, 1) in an unfavorable financial circumstance and need to sell immediately, or 2) are among the majority of people who have succumbed to a pessimistic view of the world.

In either case, this economically and emotionally depressed state of a great percentage of the population creates an abundance of good opportunities to "buy low" for the investor.

While some have the opinion this reality sounds somewhat ghoulish, remember this - neither you nor I, personally, did anything to create the economic circumstance that others find themselves in. However, it would be foolish not to seize the opportunity that negative economic circumstances, or the financial foolishness of others, provide.

Furthermore, I've never thought it "ghoulish" or "vulture-like" ​to help a fellow human to extricate themselves from a bad financial situation by buying their property at a price that they fully agree to sell for. In fact, I think, that in addition to making a wise purchase, I'm also providing a benefit to that seller.

Just a final note on taking advantage of the misfortune (or the stupidity) of others; if you're of the opinion that you wouldn't seize the opportunity to buy from a seller who's in an adverse financial situation, perhaps you may want to re-evaluate your thoughts about being an investor.

Because, in the end, whether it's real estate, stocks, or any other type of investment, the best buying opportunity is always when the seller is at a financial disadvantage.

Consequently, for the real estate investor, there's an abundance of truth in the statement, that recession means opportunity.

I'd really like to hear your thoughts and comments on this topic.​


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