Real estate shifts happen. And, they often times happen suddenly. Knowing this and living this as a real estate agents are two different things. It’s amazing how many agents will be caught unprepared for the next market drop.
As the Fed beings drawing back on “quantitative easing” to battle inflation we have many unknowns. Will the tactic work to ease inflation? Will the tactic spook Wall Street and cause a market drop for stocks, bonds, etc? Will the real estate market drop? If interest rates rise, how much will be too much for buyers to stomach? How much purchasing power will inflation erase?
I could go on.
The fact is, the most educated economists on Earth argue the answers to these questions on a daily basis. For me “to know” would be simply a bombastic assumption on my part. But I do know this; if you have consumer debt and no hard assets, you are going to feel the pain if inflation continues and Wall Street drops. Many of you will remember 2008-2010. Fewer of you will remember the rampant inflation of the 1970’s and sudden lack of confidence in our economy in the early 1980’s. These were very, very difficult times for all those impacted.
As real estate agents, we are used to living in 90 day cycles. Are you prepared for 180 day cycles? Or even one year cycles?
A couple tips from this very financially conservative writer.
- Eliminate all credit card debt. I don’t care how you do it or what you have to sell. Do it now.
- Pay off all auto loans. Drive nice/new but far below what you “can afford” until you can afford to pay cash.
- If you haven’t already done so, refinance your home if it makes financial sense.
- Own real estate. Heck, you’re a REALTOR for Pete’s sake! (Great hedge against inflation.)
- If you are going to buy rental property, buy with 20%-30% down. That will protect you in nearly any major drop. It will also allow you more cash flow.
- Create a six month reserve. Yes, six months. You are commission based. If you were salary based I’d advise three months.
“But Chris, you worry too much. You’re probably wrong.”
Ok. I’m willing to be wrong. I’m happy to be wrong. What would be the worst thing for you? That you slept better knowing you were out of debt except for your mortgage(s)? That you had financial reserves in case you or a loved one got very, very sick or suffered some tragic trauma? That you could give freely to those around you in need because you didn’t have to consider your bills first?
Be the ant. Not the grasshopper.
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