For the sake of full disclosure, you should know that I am a real estate investor. You should also know that I know what I am talking about when it comes to real estate. I have invested in more than 4,000 apartment units, and I have no plans of stopping any time soon. Here’s one more thing you should know: I do not speculate in the stock market, and I never will. Here is why.
We started 2022 with reports of the stock market having its worst week since the start of the pandemic. And reports like that are nothing new. We see headlines all the time saying stocks are plummeting, plunging, and tumbling. Every time it happens, people are shocked and worried.
What shocks me is that people are shocked by that kind of news. How could you possibly be shocked at the natural, historical course of the stock market? It has behaved that way for more than 100 years — up and down, up and down. In fact, we have seen that type of behavior 18 times during that period. If you are shocked, then you are not facing reality.
It is as if people are in a state of delusion when they continue to believe that the stock market will always go up. They refuse to believe that it won’t crash at the worst possible time, which is right as they retire. That attitude, which is embraced by far too many people, is nothing more than mass insanity. It is living outside of reality.
I, personally, like to live in reality. The question is not if the stock market is going to crash, but when it is going to crash. And the good news is that when it crashes, it will recover.
The reality when it comes to real estate is that it will follow suit with the stock market and will crash again as well. It is not if; it is when. How do I feel about the reality that the real estate market is going to crash? I don’t care. I know it is going to happen, so let it come.
The truth is that I am praying for a crash to happen sooner than later. Why? Because I make more money following a crash than I do in an up market. When the real estate market crashes, I have more renters competing for my apartments, which means my cash flow goes up. I also can buy more real estate at the now discounted prices.
Think of it like this: Heads, I win, and tails, I win. As a real estate investor, I win either way. In 2007, my property values dropped by more than $100 million. Did I care? No. My monthly cash flow went up as rents skyrocketed. If I was making $80,000 a month, I was now making $85,000 a month. People who speculate — who buy low to sell high — always lose in a crash. Investors who buy for cash flow win either way.
In case this article gets you thinking that you should be investing in a Real Estate Investment Trust (REIT), let me discourage you from that, too. REITs are not real estate investing. They are speculation. I know that to be true because I sell property to them all the time at full price or higher. I see how they operate. They don’t know what they are doing.
What really amazes me about investing is that people would buy anything that doesn’t provide cash flow. You have the choice between two assets, both with the same risk level, but one provides cash flow each month and the other doesn’t. Why would you buy the one that doesn’t? I really don’t understand this.
If any of the recent stock market tumbles had you shocked or worried, then you need to stop living outside of reality and stop worrying about things you have no control over. That is unhealthy. Face reality and get out of speculative products like stocks and into investments like real estate that provide cash flow. If your investments are in real estate and the market crashes right before you retire, it won’t bother you. You will still have your cash flow and, more importantly, your peace of mind.
I do hope this did not come across as too harsh, but if it did, I don’t apologize. You need to know the truth about investing.
Author Steve Davis is the CEO of Total Wealth Academy, LLC where he mentors tens of thousands of people on how to use real estate to build wealth and create passive income to live a life worth living. He is focused on helping middle America achieve financial independence through one-on-one coaching and his daily radio show.