How to Build Wealth During a Crisis
Updated: May 21, 2020
Many people will judge investors of all kinds for profiting from any crisis. However, let's be honest... One of the best ways to build long-lasting wealth for your next 5 - 20 years of life is having a good understanding of crisis times.
The common understanding is that by us winning someone else has to lose. NO! This is not the case in all instances. As a matter of fact, we know jobs are going to be lost, debt will be created and health systems will struggle. If you are able to see this situation as opportunities for investments, you can be a part of the growth cycle that will come once the pandemic is over. It is a great opportunity to build solid business foundations and foster new relationships.
Our Tips & Strategies
React to Over-Reaction
Remember when Elon Musk smoked weed in Joe Rogan's podcast and Tesla's stock lost credibility? That was a great example of how markets react to news and situations. Yes, there are a lot of things to worry about with COVID 19 and any crisis. However, don't just react. Look at the situation and see if your move is the best for what is coming. Plus, you can profit from people's fear. While everyone defaults, you wait and catch the downslope. Then, when the economy starts recovering, you profit.
Wealth is not lost, it is Transferred
We need to understand the principle of substitution. As economies and industries are negatively affected, look at the industries that are thriving or could thrive. For instance, dine-in restaurants will suffer, but grocery stores and pharmacies are still considered a necessary business. Therefore, look at the future developments in technology and housing to place your bet in one of these sectors. Maybe you go into low-income housing or senior housing. These are markets that are currently under-served. Place your bet wisely by understanding what society 2.0 after COVID 19 will look like.
Look at 5 to 20 years down the road
Well, this is a must if you are getting into real estate. If you don't know what the land or infrastructure could look like 5 to 20 years from now, how do you invest? Research things like land use, new developments, foreign/local investments being made, and niche societies growing. These could give you a clue as to what will be needed.
Build a solid financial foundation
Today, cash is the best resource you can hold on to while you ride the storm. Nevertheless, take advantage of fixed low-interest rates to acquire debt at a better price than years before.
Become a leader during uncertainty
Yes, you will see your family and friends lose their jobs as we go deeper into crisis. Remember, in real estate or any investment, it is not only about the house or business. It is about the ecosystems created around the economy of that investment. So, you could create jobs as you create your portfolio.
Be willing to Change
Let me give an example, as a baseball player gets ready to bat, he/she uses a heavier bat to practice and become stronger. Then, when he/she steps into the batting position, he/she will be strong and ready to take on the bigger challenge... batting a home run! So, see this situation as the heavy bat practice. When you look back, you will know you learned valuable lessons and grew as a result of the efforts made.
It is not all about money
As said before, many people look for leaders. This is not the time to look for massive profits. It is about creating opportunities and positive situations for you and others. Investing in human capital is one of the best things you can do. Build trust and a circle of people you can rely on for the future of your businesses. As Carlos Muñoz (one of our favorite speakers) said, you will work 100% to make 70% during the crisis. However, that makes you resilient and stronger when things are easy and moving forward.
Learn to be patient and adapt
Saw a good deal going around, but you are not sure? Take a step back. That deal could be even cheaper or more beneficial in a week or a month. This is an investment for years to come, not to make quick cash.
Set your criteria in stone
This is a great time to sit down and really set your north straight. Criteria like the type of property, location, condition, price, profit, etc will help you have a clear idea of what to look for.
Lead generation is a must
Whether you are working with a realtor like us or finding deals thought a wholesaler, make sure you are constantly finding new opportunities in the markets you are in.
Analyze deals constantly
As an exercise, you should set a goal to analyze at least 1 deal per day. This way, you are in touch with the market trends that may arise and can place your next bet quicker. So, get those excel sheets ready and dive into the data.
Check out our podcast on this topic
We hope that these give you some peace of mind that there will be opportunities in this crisis. It is all about how you see the situation. Remember, we are in the business of helping societies grow and creating wealth. So look for opportunities that help you do just this. If you need help or would like to receive a weekly list of investment opportunities, subscribe to our weekly investment list or schedule your complimentary investment consultation.