The stock market has strung together a lot of bad weeks!
Bitcoin just hit its lowest level since 2020.
Other crypto coins crashed completely. Luna’s fall alone has erased billions of dollars of wealth. Even the “stablecoin”, Tether, briefly lost its peg to the dollar.
So are bonds the safe play here?
Well in a rising interest rate environment the value of bonds could fall…a lot.
What about cash? That sounds safe, right?
Well, with inflation at record levels of over 8% and no signs of slowing down, your cash is losing its value at a record pace.
So what investments are the most secure right now that will actually be likely to give you a return higher than inflation?
Here is my list:
1. Buy an existing business with good cash flows:
It’s a lot easier to buy than to build and a lot of baby boomer business owners are looking to retire and many do not have an exit strategy. Find a business that meets these two criteria. One, make sure you can use other people’s money to finance it (there are plenty of creative ways). And second, make sure there is enough cash flow to allow you to hire a good operator.
2. Invest in a new skill or a side hustle:
Want to make more at your job? Great. Go invest in a new skill that will make you more valuable and increase your salary. Want to make enough extra money to leave your job? Even better. Make an investment in a side hustle: Learn how to wholesale. Get your real estate license. Learn how to do e-commerce or digital marketing. There are plenty of opportunities to start a side hustle that can quickly become your main gig.
3. Invest in real estate:
I saved the best (in my opinion) for last. Why do I like real estate? Well let’s start with the most common argument I hear against it now. Spoiler alert. I don’t think it is very convincing.
It goes something like this. Real estate will crash soon because that’s what happened in 2008 after prices went up. Well, it’s more than a little different this time around. Loans are harder to get (They don’t give out loans to people that cannot afford them anymore). There is a massive shortage on the home building side (This problem existed for nearly a decade before the pandemic and has accelerated since then). Zero down payment options are a lot less abundant now and this combined with appreciation have given most people significant equity in their homes (Therefore it seems unlikely for foreclosure to happen at the same pace they did in the late 2000’s).
I think real estate is the most useful of all asset classes. Everyone needs a place to live. You can’t say that we all need stocks, or gold, or Bitcoin. You can say everyone needs a house and right now the shortage is greater than it has ever been. The national vacancy rate is less than one percent. I think rents only go up from here.
But what if I am wrong and a price decline is coming? How do you protect yourself?
Always have a plan B with your real estate and the best plan B is to make sure you have one, or more, ways to create positive monthly cash flow. If you are flipping make sure it cash flows as a long term rental. If you are doing a short term rental make sure it cash flows as a long term rental. The more positive cash flow solutions you have the better you can ride out any downturn. Remember if prices go down you only lose money if you sell.
So my advice is to get started in real estate. You can house hack, do short term rentals, or flip. Just pick something and get started.