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How to Build Massive Wealth During a Recession: Master These 5 Principles

Expertise: Landlording & Rental Properties, Personal Development, Real Estate News & Commentary, Business Management, Flipping Houses, Mortgages & Creative Financing, Real Estate Deal Analysis & Advice, Real Estate Wholesaling, Personal Finance, Real Estate Marketing, AskBP, Real Estate Investing Basics
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silhouette of man wearing backpack climbing uphill in sunshine

What I want to talk about today is incredibly urgent. So, let’s jump into it.

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How can you profit from the looming financial crisis?

Now, I know that some people are going to watch this video and they're gonna say, "What a heartless P.O.S. I mean, profit from a recession? How dare he?"

Hopefully the rest of you, though, will understand that’s not what’s meant by this. Yes, it might sound a little weird to say “profit from a crisis,” but it only sounds bad if you carry around that limiting belief that by you winning someone else has to lose.

Wake up, people! That’s not how the thing called “the economy” works. Just because I find a way to profit during a recession doesn’t mean someone else is going to lose out as a result.

Are people going to struggle during this? Yes. Are jobs going to be lost? Yeah. Are businesses going to fold? Yeah.

Do men like myself only grow beards so we can have a place to catch food and enjoy it after? Yes!

But there’s no reason any of us have to suffer. In fact, I believe that by shifting our view about this kind of economic uncertainty and being proactive, not only can you help yourself, but you can help many other people, as well.

For example, I got into real estate back in 2007. Remember that?

The world melted down. We didn’t know what was coming. But over the next several years, as many of my family and friends were being laid off, I was hiring these people, giving them work, allowing them to put food on their table, and giving them a song in their heart.

That was super cheesy—but it’s true!

Related: Recession Prep 101: Investing in Real Estate During a Financial Crisis

I mean, not only did I build a foundation during the last recession that led me to become a millionaire as we climbed out of it, but I also helped other people in the process.

And consider this: Many massively successful businesses were built during recessions. I mean, Disney, FedEx, Microsoft, Instagram, Pinterest, Uber—you get the point.

So, how do we do it? How do we profit during times like these? Well, let me give you five basic principles for building wealth in a recession.

(And hey, big shout out to David Greene, my co-host on the BiggerPockets Podcast, for helping me put these points together. He helped me formulate these thoughts over a very long conversation. Any smart thing you hear today is probably from him.)

With that, let’s get to it.

5 Principles of Building Wealth in Times of Economic Turmoil

1. React to overreactions.

Recessions are largely driven by how the population on a whole is feeling about the economy—not the economy itself.

An example: Last year Tesla’s stock dropped 10% in a day because Elon Musk smoked some weed on the Joe Rogan podcast. It was nothing about Tesla’s business fundamentals changing. It was confidence in Elon that changed. Then what happened? Tesla’s stock bounced right back—because clearly the drop was an overreaction.

That is what the market, whether business or stocks or real estate or something else, tends to do—overreact.

Back when the real estate market crashed in ’08 through 2012, prices got really low—way lower than they should have been—because fear was driving people away from buying. So, I picked up houses for stupid-low prices—like 15 grand for this house, 90 grand for this five-unit, 60 grand for this triplex—way lower than the cost to build those things.

Why? Because the market was overreacting, and I chose to react to the overreaction. In other words, I bought when it was way less than it should have been.

Now, of course, I’m a real estate guy. So, that’s how I applied this principle in my life and how I plan to again should a massive drop in real estate values happen.

But this is more than just real estate. I mean, stocks might plummet and give you a massive opportunity to buy there. You might be able to purchase an existing business for pennies on the dollar because the owner couldn’t weather the recession—they need to sell right now.

The economy is going to suffer, and everyone and everything will overreact. And that’s why you need to be aware of it and react accordingly.

I, for one, can’t wait to pick up some more $15,000 houses.

2. Wealth is not really lost; it’s just transferred.

Look, right now, we’re in the midst of this COVID-19 social-distancing thing. And as you know, many restaurants are closed. Many of them will never reopen.

But here’s the funny thing.

People aren’t NOT eating. Instead, they’re just shopping at the grocery store more, and they’re ordering more stuff from Amazon and other online businesses.

Many office buildings right now are shutting down, as well. But look at video conferencing software like Zoom. It’s more than doubled in the past two months in terms of their market cap, because recessions are periods of wealth transfer more than they are of wealth being lost.

Of course, the key then is to place your bet on the places that the wealth is being transferred to. What emerging technologies, innovations, niches, strategies, or businesses are going to thrive in a recession?

That said, I would also encourage you not to overreact and build a business or toss all your money into an investment that will likely ONLY do good in a recession.

Because as my friend New York Times bestselling author David Osborne recently said, “When things are good, don’t assume they’ll always be bad. When things are bad, don’t assume they’ll always be good.” I like that!

His point is economies are cyclical. They go up and down. Markets are cyclical.

So, it’s important to look long-term, which happens to be point number three.

3. Think long-term.

Look, 10 years down the road, if you want to build really big wealth, you’ve got to be thinking long-term, outside the normal ups and downs of the economic cycle.

For example, as I mentioned a moment ago, Uber was started in a recession. But Uber’s success was not a reaction to the recession. It really had little to do with that, good or bad.

Driving a modern car on the road.

Instead, Uber’s success came from the convergence of multiple emerging technologies combined with societal shifts in human behavior. In other words, more people were moving to urban areas. Less people want to own a car. And we carry around this supercomputer in our pocket all day long. Uber just put all that together because they were looking 10 miles down the road.

If you want to capitalize in a big way on a recession, build something that’s recession-resistant or at least recession agnostic. Maybe it’s an emerging technologic field, something like 3D printing or virtual reality or self-driving vehicles. Or maybe it’s something that is much more fundamental, like owning cash-flowing rental properties or building a business that sells toilet paper.

No matter what you choose, don’t just look at today, look at your future.

Let me give you another real, tangible example of how I am applying this in my own business—real estate. Like I said, I invest in rental properties, mostly cash-flowing stuff like mobile home parks.

And specifically, I see a trend happening in the world. The cost of living is going up and up and up. Housing prices are crazy. Almost all new construction has been built at the high end of the market—like super high-end rentals.

You know what’s not keeping up? Salaries of low-income Americans. So, I’m buying low-income housing, like mobile home communities, because I’m looking 10 years down the road and I see a huge opportunity to be able to fix a problem.

Yeah, I’m still buying. I mean, I just got a new park under contract like two days ago. I’m going to keep building this business during the recession.

I know others in this industry who are seeing a growing number of baby boomers who are going to get even older soon—and there are not enough homes for them. So, they’re entering the world of senior housing—again, looking down the road.

I mean, those are just a couple examples within our industry. I can guarantee you there are some big shifts happening in every other industry, as well. Why not use this time to begin moving in that direction?

4. Build a solid financial foundation.

It is pretty useless to try and predict the bottom of the market. Because despite what pundits and bloggers and finance gurus might tell you, no one—myself included—knows what’s coming.

Landscape concept with crystal ball or esphere in hand during sunset on beach

I remember back in 2013 when everyone was scared of a double-dip recession. And there’s a ton of talk about the economy tanking again. But that double dip really didn’t happen. It could have, or it couldn’t have.

The world economy is just far too complex and far too interconnected to predict exactly what’s going to happen.

Now, yes, we can spot trends and patterns and cycles—but stuff happens. Viruses happen. Wars happen. Natural disasters happen.

So, that’s why it’s so vital to stick to principle number four: Build your wealth on a solid financial foundation.

What does that mean?

It means don’t be stupid with your money. Have reserves in place in case something bad happens.

Good stuff happens; bad stuff happens. Regardless, don’t overleverage yourself.

Do everything in your power to build and maintain a good credit score. Pay off debt when possible. And in times of great economic growth like the last eight years in America, don’t be like other people who got lazy.

Some people, they started living to the very max. People earning six-figure salaries were living paycheck to paycheck, because their paychecks were always coming in. That’s crazy, right?!

Related: The Essential Importance of Cash Reserves in a Crisis

But that’s what good times do. They make us soft. And in a recession, we pay the price.

As the great Warren Buffett quote goes: “Only when the tide goes out do you discover who’s been swimming naked.”

I love it. The tide is going out. Don’t swim naked.

Keep a strong financial position. Grow your business, your wealth, your real estate portfolio accordingly.

5. Become a leader in fearful times.

“Leaders aren’t voted upon in the barracks. They emerge in the battlefield.”

I don’t know who said that—I think I just made it up. But it’s true, right?

Chaos, uncertainty, pain, and trial—those are the breeding grounds for leaders to step forth into the sun and lead their team to victory.

So, you can sit around complaining about the economy’s falling apart. Or that you just lost your job. Or that the government isn’t putting enough free money in your bank account.

OR—you could become the leader. The leader that deep down you knew you were born to be.

This is a massive opportunity for you to transform. I mean, think about it…

A lump of coal isn’t turned into a diamond by cuddling a blanket. It’s got to be under tremendous pressure. So, ask yourself every single day: Am I becoming the kind of leader that my team, my family, my coworkers, my employees, my supervisor, my spouse, my kids, they need?

And if the answer is no, it’s time to step up. This is your moment. It’s time to prepare for an uphill battle.

Ten years from now, you’re either going to look back and say, “Wow, I wasted that recession playing the victim.” Or you’re going to look back and say, “Thank you, God, for that opportunity. I’m glad I stepped up.”

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What are your plans during the recession? After the recession?

Let’s talk—share your thoughts below!

Brandon Turner is an active real estate investor, entrepreneur, writer, and co-host of the BiggerPockets Podcast. He is a nationally recognized leader in the real estate education space and has taught millions of people how to find, finance, and manage real estate investments. Brandon began buying rental properties and flipping houses at age 21, discovering he didn’t need to work 40 years at a corporate job to have “the good life.” Today, Brandon is the managing member at Open Door Capital. With nearly 300 units across four states under his belt, he continues to invest in real estate while also showing others the power and impact of financial freedom.
    Gordon Eisenberg
    Replied 9 months ago
    Great article Brandon. I am hoping to buy a small mobile home park sometime soon.
    John C. Investor from New York, NY
    Replied 9 months ago
    Thanks, Brandon. This is the kind of positive thinking that is needed right now. Not fear mongering and trying to predict which way the market will go in the next few months/a blip in time.
    Wenda Kennedy JD from Nikiski, Alaska
    Replied 9 months ago
    I've owned a mobile home park, including the mobile homes, for many years. Those mobile homes are my rentals. You're right. It's a good investment and pretty much recession-proof. It also takes a LOT of hands-on management. I believe that the key to weathering this down-turn is to have a handle on one's debt-load versus cash flow and limiting one's personal expenses. I have friends who have 80% LTVs (loan to value ratios) on multi-unit buildings and they scare me to death. (I know one guy who has so many Federally insured loans between him and his wife, they aren't allowed to generate another loan. Every time they get a little bit of equity, they refi.) I tried to talk to people in my business circle about the fact that there can be loan-calls on commercial paper IF the RE market turns downward. I try to tell them what I saw happen in 1990. I've been trying to explain that working double-pronged program to become debt-free and to rehab my mobile home rentals one after another, out of pocket. Conversely, they've been telling me that I was handling things stupidly -- they retorted that I was being too conservative. I should be using my cash flow and my equities wisely to buy more and better properties -- not work on trashy old trailers. So, during this 2020 virus recession, we'll see who is left standing and who goes down with the ship. I am still doing the same old stuff. How did I go from stupid to smart in such a short time? Maybe I should think about buying some of their buildings if things get too tough...
    Brenda Cruz Rental Property Investor from Orlando FL
    Replied 9 months ago
    Thank you for such a Great article .
    Steve B. Investor from Centralia, IL
    Replied 9 months ago
    Thanks for the positive post
    Laurie Franks
    Replied 9 months ago
    Thanks for a great article, Brandon, and for the reminder to not succumb to short-term thinking. Society will be permanently changed by this coronavirus experience, providing new opportunities in wealth, innovation, and clean air!
    John Olu Real Estate Agent from Laurel, Maryland
    Replied 9 months ago
    I echo the words- Wealth transfer season! Thanks for not holding back as usual. Blessings
    Mariana Hernandez Rental Property Investor from Kansas City, MO
    Replied 9 months ago
    Thank you so much for writing an article that is practical AND hopeful! We need many more of these in this season!! :)
    Morgan Cordner
    Replied 9 months ago
    Good write! When things go funny its the proactive who get ahead of the masses.
    Sarah Pursell Flipper/Rehabber from Charleston, South Carolina
    Replied 9 months ago
    Great post, Brandon! My husband and I have been talking a lot about investing in low income (section 8 potential) housing. It's an area we've avoided, but I do see a need, and an even bigger need on the horizon. I love your positive, don't-be-a-victim perspective! YES! Let's be positive leaders...that's where we can create beauty from ashes.
    Tina Wicks Investor from Columbus, OH
    Replied 9 months ago
    We started in real estate investing back in 2008 and are right now are sitting on a lot of equity which I hope to use for the next wave. I do have another question. My husband and I are in our late 50s. My husband thinks it is too late for to really grow. I don’t. Do you know of any articles about this kind of topic?
    Gregg McMann
    Replied 9 months ago
    I bought my first property at 58. Sold it at a huge profit just before the crash in 2008 (sight unseen from some nut on the west coast) took that windfall and kept buying. I buy affordable housing just above the Section 8 level. It's now 12 years later and I own 92 doors generating $20K/month net. I plan to keep buying until I die. Don't use age as an excuse, especially with the amazing opportunities coming up in the next year or two.
    Barbara Willson
    Replied 9 months ago
    Hi Tina, Please tell your husband to get off his butt and get going. I started investing in real estate at the young age of 67 and I'll soon be 77 and still buying rental property. When I got tired of paying commissions I got my real estate license at the age of 74 in two different states. The rental income has been a blessing to my retirement portfolio as well as increased the overall wealth I can one day pass to my children. In addition my 56 year old son & wife bought a small resort in Tennessee just 2 years ago and are doing extremely well with it. I'm sure there are other successful seniors out there still going strong with their investment properties, you're only as productive as you want to be and age doesn't matter. Barbara Willson
    Faye Carroll Real Estate Investor from Stafford, Virginia
    Replied 9 months ago
    Thanks Barbara!
    Jonathan Fletcher from Louisville, KY
    Replied 9 months ago
    Tina, I am 65 and am just starting. Unless your husband is planning on dying in the next few years (I'm not) there is still PLENTY of time.
    Alvaro Marquez
    Replied 9 months ago
    Good stuff, Well said! I’m closing on 2 more doors this month. People need a place to live. Worst case I can lower the rent for a year. Stop being scared the world in not going to end. Scary money don’t make no money!
    Susan Maneck Investor from Jackson, Mississippi
    Replied 9 months ago
    All my houses are full and I'm only $500 behind in collecting all my rents. What makes me nervous about buying houses right now, is that they might stay vacant too long. I can spare the rent but vacant houses get vandalized where I live and buy.
    Shelly Browne
    Replied 9 months ago
    I've often thought that having someone like a handyman without lots of baggage, to let him stay rent free for a time in vacant properties to keep them occupied while showing them. Not while rehabbing...or a person who is a bit transient, minimal staging so they can sleep and eat.
    Amanda Dehaas
    Replied 9 months ago
    Yep! We've been "waiting" for a recession! We've built up a huge pocket of savings, own lower income type of rentals....thanks so much for this article. I needed a good validating read : )
    Rehan A. PT Investor from Farmington, Michigan
    Replied 9 months ago
    Is this a good time to start a Property Management or a flipping business?
    Daniel A Kallaur from Charlotte, NC
    Replied 9 months ago
    Great way to re-frame a negative situation into a positive mindset. Too many, as you say, play the victim. I've been one. Thank you for the wake up call!
    DONNELL BROWN
    Replied 9 months ago
    Great that you woke up
    George Ankapong
    Replied 9 months ago
    Great article.
    DONNELL BROWN
    Replied 9 months ago
    Thanks for this article that i shared with my friends that are still in the thinking stage. I myself am looking for the diamonds in the rough with my first purchases during this wealth shift. Im definitely looking forward to being on the right side of the fence. Im 30 years old being self employed for 10 years and im ready to make my money make money. Im from the bahamas so our market is a bit differnt but your strategies will set me apart and make me look like a super smart ass! I can imagine bankers asking my partner and I if we went to school for this. And my respone will be yeah school for bigger pockets lol
    Steve Shewmake Realtor from Monett, MO
    Replied 9 months ago
    Great Post Brandon, I agree with you , recessions create opportunities . Sometimes all that’s necessary is to change the way you think.
    Nick Uhas
    Replied 9 months ago
    love this so much, recessions are great opportunities and they are equally scary for everyone... time to get to work!
    Kris Canaday Investor from Greater New Orleans area
    Replied 9 months ago
    Awesome article Brandon! Hit the nail on the head, as always!!
    Mark Broadway Real Estate Agent from Springfield, MO
    Replied 9 months ago
    Great observations. Just making sure if everyone stays within their lines financially and not react to economic swings, stay true to your knowledge, you can survive most anything.
    Frank Mangano
    Replied 9 months ago
    Weak
    Frank Mangano
    Replied 9 months ago
    I love it! I love it! I love it! I bought my first of 9 mobile home parks near an excellent interstate hub 20 years ago, back when they were called trailer parks, now they’re called mobile home community communities. I have mortgages no more than 20% of their value and corporate America is calling me wanting to buy them all for $50-$60 million. No thank you! I’m building RV Parks now
    Frank Mangano
    Replied 9 months ago
    BTW, why were some of the replies “a small mobile home park“ or “I’m thinking about with my wife”, Grow some big ones if you wanna have big ones.
    Jared Stasch
    Replied 9 months ago
    weak
    Matt Everling Rental Property Investor from Temecula, CA
    Replied 9 months ago
    Bravo, Brandon!
    Alethea Webster
    Replied 9 months ago
    Great article. We are watching the market and hoping to acquire more rentals in the upcoming years. During this recession we are also studying for our real estate license so we can become more savvy. We're also interested in providing low income housing. There's a market for that! Great insights
    Mark Stedman Investor from Nashua, NH
    Replied 9 months ago
    Be careful of low income housing. There is absolutely a market for that. It’s one that most of us choose to steer clear of for many reasons.
    Diana Trushell
    Replied 9 months ago
    Hey just a heads up I believe you got the quote backwards: you wrote “When things are good, don’t assume they’ll always be bad. When things are bad, don’t assume they’ll always be good.” but it should be “When things are good, don’t assume they’ll always be good. When things are bad, don’t assume they’ll always be bad.” I also believe your writer friend cribbed that from Obama.
    Michael Slockers Real Estate Entrepreneur from Owasso, OK
    Replied 9 months ago
    yup you got it!
    DeMarcus Williamson New to Real Estate from Des Moines, IA
    Replied 9 months ago
    This is just the article I needed to start my week off. I'm ready to step up and lead.
    Raul Villanueva Investor from San Juan, Puerto Rico
    Replied 9 months ago
    Great read and advice Brandon. Thank you. My plan is definitely cash on hand for real estate and stock opportunities to continue building my portfolio. PS There are a lot of $15,000 houses in Puerto Rico ...
    Derek Stalhut Rental Property Investor from Vero Beach, FL
    Replied 9 months ago
    Hey Raul, My wife and I are moving to the island this summer. We are selling our house in Florida and want to use the cash to buy some investment properties. What is your opinion on the local rental market recently? Also, are flips a viable plan there? Muchas Gracias Ustedes
    Jared Stasch
    Replied 9 months ago
    No one should feel bad about making money during a recession. There is no guarantee anyone will make money in real estate or any other business.
    Alan Brown Rental Property Investor from NY MA CT VT MT, MO
    Replied 9 months ago
    yep I've had people thank me for taking things off their hands in a pinch, getting them out of trouble. And I've been thrilled to walk away, hemorraging cash, from a deal as well. Never thought badly of my savior!! Took em out to dinner!
    Jonathan Fletcher from Louisville, KY
    Replied 9 months ago
    Hey, Brandon, will you call my wife and explain this to her, because she is NOT listening to ME!
    Charemon Tovar Real Estate Agent from Gig Harbor, WA
    Replied 9 months ago
    Hey Brandon, is it a better idea to sit on cash and wait a while (month or two) to see what the market is going to do? Or should we hop on any good deals we see now? Wouldn't want to buy it now only to find I could have gotten it cheaper in the next few months...thoughts?
    David A.
    Replied 9 months ago
    "Wake up, people! That’s not how the thing called “the economy” works. Just because I find a way to profit during a recession doesn’t mean someone else is going to lose out as a result." No, they won't lose as a result of you profiting- your profit comes as a result of their previous loss. Do what you're going to do, but spare me the justification.
    Mark Stedman Investor from Nashua, NH
    Replied 9 months ago
    There’s a name for such a scenario...it’s called “a zero sum game.” The commodities markets are an example of this: for every “winner” there must be a corresponding “loser.” Real Estate is NOT a zero sum game, and neither is the stock market in general. They are tides that rise and fall such that everyone involved can be winning or losing, more or less together.
    Mo Abour Developer from Chicago
    Replied 9 months ago
    Very well said
    Shelly Martin
    Replied 9 months ago
    Great read and it’s inspiration during this weird time. I closed on my 6th rental right in the midst of everything shutting down. I almost backed out of the deal because I thought, I have other units vacant right now and no one will want to move during this crazy time. I was wrong. The phone kept ringing and I was able to get all of my vacancies filled - with people who have job security in this pandemic! Now I would love to get my hands on a flip or two to generate some more cash for rentals.
    Mark Stedman Investor from Nashua, NH
    Replied 9 months ago
    Just as the traveling gurus who still try to get people to spend $20,000 on their “wealth through Real Estate using other people’s money” personally-guided course, the real money is in being one of those gurus. If they truly had all the secrets, they would be using them instead of trying to sell them to the masses of people who dream of escaping their careers in the corporate rat race.
    Michael Slockers Real Estate Entrepreneur from Owasso, OK
    Replied 9 months ago
    Great video! Thanks Beardy!
    Dale Miller Realtor from Tonawanda, NY
    Replied 9 months ago
    Thanks Brandon very interesting. You are a rockstar!
    Tomer Versano Investor
    Replied 9 months ago
    Thanks Brandon! You're an inspiration to many.
    Mark Stedman Investor from Nashua, NH
    Replied 9 months ago
    As Rodney Dangerfield said on his golf bag phone on Caddyshack: “ They are buying? Then sell! sell! Sell!! What ? They are selling?? Then Buy! Buy! Buy!” Just zig when everyone else is sagging.
    Mark Stedman Investor from Nashua, NH
    Replied 9 months ago
    Zagging - not sagging
    David Mincey Flipper/Rehabber from Randallstown, MD
    Replied 9 months ago
    Awesome article! Keep 'em coming!
    Sean Nepomuceno Rental Property Investor
    Replied 8 months ago
    Great article. Thanks, Brandon! I just discovered BP last week and been following you all the way from the Philippines. I love it when you stated — Build your wealth on a solid financial foundation. Several years from now, our grandchildren, or great grandchildren will look back and ask us about the Covid Pandemic. I hope we can answer them insightfully and tell them, “I stayed home and discovered a new skill, or sharpened my skillset further”. Rather than answering them with “I just stayed home and binged on Netflix all day long”. 😊
    Adaora Nwogbo New to Real Estate from Arlington, TX
    Replied 8 months ago
    Thanks for the article. The alternative video was helpful for visual people.