MARKETS & TRENDS
ECONOMY
How to Prepare for the Economic Reset A LOOK AT A RECESSION-RESISTANT ASSET CLASS
by Glenn Stromberg, a Think Realty Resident Expert
istory shows that every 7 to 10 years America has a major eco- nomic correction. Full disclosure, I thought it was going to happen three years ago and I was wrong, but I am almost sure that it’s going to happen again and soon. Here’s why: First, the last one was in 2008, so we are definitely due for one. Second, the Fed is printing money like they never have before. In 2008 they bailed out the banks printing $700 billion; today that is a round- ing error! Today they are printing trillions a year and inflation is the highest it’s been in decades. No country in the history of the world has been able to print money like this without severe consequences. Several experts who are much smarter than I am say, “this will not end well for America.” Even some politicians are warning us about a great reset is coming. So as real estate investors, what is a safe place to have your capital when a crash happens? Let me tell you my 2008 story. My company was and still does buy manufactured homes on land—not to be confused with mobile home parks. We typically buy 1,500 to 2,000 sq ft double-wides on a half acre to one acre of land. They all have a deed of trust or a mortgage on them, just like a single-family house. In 2006 and 2007 we were buying, fixing, and flipping them. We were
crushing it, then the crash hit. When it happened the capital markets froze, and it was virtually impossi- ble to get financing on anything at that time. I had 18 properties with private investor notes on them and I’d rather die than not pay my inves- tors! So, I didn’t have a choice; I had to change my model and learn the rental home business. I met with the best property management compa- nies and real estate investors and took the best of what they did and created a new business model. It really turned out to be a blessing in disguise. I learned that when crash- es happen and the capital markets dry up, the demand for affordable home rentals skyrocket! This also happened the first couple of months of the Covid pandemic. The demand for affordable rental houses was triple. Our collections remained at 97 percent all through Covid, and rents actually increased!
Why? Because our tenants knew they could not go anywhere else to find the same size home and land. What did I learn? Affordable housing works great in good economic times, but even better in bad economic times. My attorney says never use the term recession-proof, so I don’t. I say recession-resistant instead! I have learned in almost 40 years in the real estate industry that no matter how bad things get, there are two things people will always do: eat and have a roof over their head. That’s why I believe with all my heart that afford- able housing is the best and safest asset class to be in both in good times and bad times. • As founder of MobileVestEd, Glenn Stromberg is an expert in mobile home real estate investment. He wants to help every investor find success in the market, and believe that mobile homes are one of the best – and easiest – methods to do it.
80 | think realty magazine :: october 2021
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