Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes
9y
@Chris Purcell, investing in a declining market is scary. Not knowing it is a declining market is worse. I guess if you truly fear a decline in the near future, then invest accordingly. Buy with some equity built in by getting either great deals or distressed properties you fix up and increase the value on. Invest in nicer neighborhoods, they resist price drops a bit better. Give yourself an extra bit in your calculations for vacancies. Instead of using say 8% use 10% or more. Do longer terms on loans with plenty of safety margin, like a 30 year instead of a 15 or 20 year loan. Finally, look for value. Can you buy cheaper than you can build a house? How good is the job market? etc. Good luck in your investing.
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
9y
Chris Purcell Strategy: keep higher levels of reserves. In many ways it's just that simple. But how many first time buyers on BP mention they have 6 month reserves (pay mortgage, expenses, property tax, insurance, etc.) just in case the unknown happens? I don't see too many people talking about that. If you do have the reserves then it's probably a trade-off: great interest rates today vs. perceived economic risk (or RE risk) tomorrow.
Hey I've been battling over the same issues. It comes down to this..you don't want to be over leveraged..so don't! I used google drive sheets to outline picking up properties and how long the pay down takes. I overlapped properties based on the years of accumulation and figured out how many mortgages I would have outstanding at any given time. Now, I figured out what I can withstand.. I even looked at 6 months of pure vacancies..where would that leave me. Once I accounted for all my worst case scenarios (with reserves or other income streams) I felt much better moving forward! I can share it if that interests you.
Also, something to always remember..if you buy right (20% discounted or more) you can withstand a 20% correction even with low money down and get out. Something I like to remind myself of. I think if you are buying right, you can mitigate risk in the event of a correction.
@Chris Purcell, investing in a declining market is scary. Not knowing it is a declining market is worse. I guess if you truly fear a decline in the near future, then invest accordingly. Buy with some equity built in by getting either great deals or distressed properties you fix up and increase the value on. Invest in nicer neighborhoods, they resist price drops a bit better. Give yourself an extra bit in your calculations for vacancies. Instead of using say 8% use 10% or more.
Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes
9y
@Chris Purcell, I suppose vacancy rates of 50% or 75% are possible, but pretty unlikely. This is not the great depression. There are some parts, like Detroit where property turned worthless, but they were dicey areas that got worse. No one can guarantee true safety of any investment, not even a bank CD, The trick is to do it smart and build in margins of safety. You can use some diversity to help out.
Wholesaler · Sterling Heights, MI · Member since 2014 · 335 posts · 105 votes
9y
@Chris Purcell - It's impossible to time the market. Just have to adjust your investing strategy differently. For instance, I've slowed down on my buy and holds and have focused on wholesaling more. That way it's revenue generated without holding onto an asset. I just allocate more of my funds to gold and silver.