“Where there is no vision, the people perish…”
Proverbs 29:18
Well, we started with a Bible verse, so it’s a good time to
go into the story of Joseph in the Bible (located in Genesis 41).
To paraphrase, Pharoah, the leader of Egypt, had two dreams
that no one could interpret. His chief
cupbearer (and a former jailbird) remembered that he knew a guy in the joint
who had (successfully) interpreted dreams for him and his buddy a few years
back. He told Pharoah about this Joseph guy
and Pharoah had him sent for.
Joseph said God had revealed both of Pharoah’s dreams to him
and they had the same message; Egypt and the surrounding lands would have seven
years of incredible plenty followed by seven years of devastating famine. He advised, “Let the Pharoah look for a discerning
and wise man and put him in charge of the land of Egypt. Let Pharoah appoint commissioners over the
land to take a fifth (20%) of the harvest of Egypt during the seven years of
abundance… This food should be held in reserve for the country, to be used
during the seven years of famine that will come upon Egypt…”
He concurs and appoints Joseph to head this newly created
post and things go as predicted. Egypt
is the only place that has food when the years of famine come, and Joseph is administering
it on Pharoah’s behalf. The Egyptians
and the people of surrounding lands are forced to sell Pharoah all their
possessions and land just to get food.
To bring this back into the realm of real estate investing, landlords
are clearly in the time of plenty as property values and rental prices have been
on a growth curve for the last ten years.
To boot, interest rates have been historically low (and really still
are) which allow for low borrowing costs and has made for a robust sales market. Many landlords have used this as a time to
sell some of their “dog” properties, make improvements and raise the rents on their
existing properties, buy some new ones, and refinance/eliminate debt.
Recently, interest rates have more than doubled and many economists
(none with divine inspiration like Joseph to my knowledge…) claim a recession is
around the corner. If that’s true, the
housing market could take a sharp correction which could be a great opportunity
for prepared investors.
I have vague recollections from the last housing correction from
2008-2012. I did not buy any investment properties
then; I was too concentrated on keeping my existing rental homes afloat as rents
were low during that time period. I
remember that selling homes was really hard; buyers were scarce! Many sellers were just giving their houses
back to the bank or using “short sales” as the banks would take a loss on part of
the loan during the sale. I remember
thinking, “What’s wrong with me? As a wanna-be
real estate investor, how am I not buying homes now? These houses are going for a steal and they seem
to be all over the place!”
The thing that was wrong was that I could not get a decent
loan and did not have much cash on hand.
So, I needed to sit on the sidelines like most other people until the
economic waves grew more favorable. But
the buyers who were prepared got some great deals!
The investment challenge now is to be more like Joseph and be
prepared for any possible famine while things are favorable. If the right investment comes along during
any upcoming recessionary period, I’d like to be able to snap it up (while
simultaneously staying solvent during any prolonged economic slump). Preparation now can pay huge dividends later.
Happy Investing & Landlording!
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