Investing before a Downturn

[Nick Weston]

I am looking to purchase my first rental (first investment in general) and looking for advice. I am getting skeptical I am not doing the right thing due to timing with a looming recession. Coupled with that I am in Chicago so the price point is high. I am in my first year out of college so I don't have a ton of capital. Tax law in Illinois is ridiculous as well.

My gut reaction is "just do a deal". There are always reasons it may not work out, so I am leaning towards just finding a property I know will cash flow and doing a house hack -- even though I see a lot of negatives regarding timing and location like I mentioned. 

Does anyone have any advice or thoughts they could share? Thank you!

[Jim K.]

@Nick Weston

Four years ago, we had people on this site predicting an imminent recession and the world's end. They had charts, they had indicators, they had confidence galore that the end of the bull market was nigh. The recession was on the way -- it was obvious, for this and this and this bunch of crystal-clear reasons, backed up by this and this and this bunch of crystal-clear datasets. Only an idiot could disagree. The year came and went -- no recession.

Three years ago, we had exactly the same pattern -- different prognosticators, different reasons, different datasets, same story in the end.

Two year ago, same.

Last year, same.

Congrats, Nick, for being the first here to predict the end of the line in the New Year.

Of course there's going to be an end to market growth. I made 23.68% real profit off my investments in the stock market last year, and I'm fully invested in broad-based index funds. That's just not sustainable. But WHEN is this, the longest prosperous period on record in the USA, going to be over? Nobody knows. Will the real estate market suffer a catastrophic meltdown as well? Again, nobody knows.

If I were you, I would get myself into the most recession-stable job possible and buy a modest side-by-side duplex as near as possible to my place of work. Live in one side, rent the other out. Learn how rentals work with this first investment, DIY as much of your own maintenance and property management as you feel comfortable with, get your feet properly wet and your hands property dirty. I can't see how you would likely lose big given that choice.

And that's the same advice I would have given you last year, and the year before, and the year before that.