What are your thoughts on a recession?

Question

Everyone has a different opinion on where we are in the market cycle. What is yours? Do you have a guess on when they next recession will hit and why?

John Warren · Answer

@Kenny Berrios I started investing in 2015. Everyone was saying that there was a recession coming soon and not to invest. In 2016 the economy was better and everyone said not to invest. I should have been buying everything in sight in 2016. In 2017 the market was too hot and things were going to turn soon. I bought a 20 unit and a 9 unit that have both been great deals. In 2018 the sky was going to fall any day and I purchased a gut reno 19 unit locally here in Berwyn that is definitely my most exciting deal to date. In 2020 the recession will definitely happen (cue eye rolling).

Just make sure you keep strong cash reserves, and make sure your properties have great cash flow. A temporary reduction in cash flow, while painful, will not mean the loss of the asset.

Scott Mac · Answer

@Kenny Berrios

Hi Kenny,

Different areas experience recession at different times.

New York City may be at a different time than California, and Texas may be at another time yet.

Some areas are for all intents and purposes "always in a recession" they never recovered from the 1980's when many jobs were sold off overseas to allow middlemen importers to make killing vs keep america working.

Some areas are more immune than others due to large segments of their populations income and housing coming from the taxpayers. They don't have to work to maintain area stability--it's handed to them every month, plus debit cards to buy food with, free cellular phones and free health insurance.

America seems to be having some of the best job and wage growth it's had in a long time do to the efforts of the current President, if that were to change back to business as usual (like we had before), the upward swing would probably go back to where it was before--not as good--Nationwide vs. just individual areas flexing up and down in a natural manner. In which case the taxpayer supported areas would probably grow in number (like it was before there were so many jobs available).

The media "has a dog" in this fight and it is championing trying to get people to believe bad times are looming. Be wary of believing much if anything they say.

Good Luck!

Calvin Ozanick · Answer

I think we are reaching a peak as of right now. As far as investing goes, I think the need for providing good high quality units will always be there. If a landlord purchases a nice unit and provides for their tenants, the value of the property will not make much of a difference when you have well placed tenants that make the unit cash flow.

Arsenio Braza · Answer

@Kenny Berrios

Economic recession come and go, tell you, there are more opportunities during recession than not.

Syed H. · Answer

Eventually is my opinion. And honestly I don’t care. For my rentals, I make sure I have a large buffer so I’m never at major risk.

For flips, I’ve alrdy transitioned to quicker smaller flips.

I know prices will come down in a recession, but it’s the guys who are always active that make real money. I’ll be buying now and I’ll def be buying in the recession.

Joe Splitrock · Answer

@Kenny Berrios the reason people keep predicting a recession and housing crash is because of recency bias. That is the tendency to look to the recent past and use that to predict the future. A simple mind says, housing prices went up and we had a housing crash in 2008. Housing prices have gone up again, therefore we are "due" for a crash.

If you look back 100 years in history at every bust and boom cycle, you will find that no clear pattern emerges. No single cause and no single outcome occurs. In fact, the factors that lead to the 2008 crash are LESS likely to repeat because of focus on the underlying causes. That means the catalyst for the next recession is likely to be something different.

Most everyone making predictions is just repeating something they read. So you ask for opinions, but what you will get it information regurgitation. That is like eating food that someone vomited.

The reason the future is hard to predict is because it is always changing. Ultimately it doesn't matter what happens tomorrow if you planned appropriately today. Get your financial house in order. Be agile and ready to shift as the market does.

Karl B. · Answer

I know intelligent people who have been predicting a recession since 2014, shorting stocks. And here we are five years later, steaming along.

All I can tell you is the longer the bull run goes, the sooner a recession will come. And although some people can tell you what will cause the next recession (government debt, etc.) they are unable to give a proper time frame.

So, as mentioned above, simply buy great deals.

Nathan Gesner · Answer

Fuhgeddaboudit.

If you're buying right, a recession won't hurt you. Your existing rentals will continue to perform and you'll be fine. In fact, your rentals may start to perform better because people stop buying and want to rent. And if you are constantly watching the market, you'll be ready to pounce when properties are cheap again.

Dean H. · Answer

@Kenny Berrios

Kenny, recessions come and go in a cycle. As @Taylor L. mentioned above the best coarse of action is to always invest with the mindset that you will always have to survive a recession, the real worry is how long and how deep it will be.

Personally, for the way I invest a mild recession would probably just be a buying opportunity. Things are a little to "Hot" right now.

The economy will do what it may, keep yourself in a position to survive or prosper

Taylor L. · Answer

I do not have a guess. I used to guess and I was always wrong. People have been projecting the next recession for the entire course of the current cycle. I buy properties that I can expect to weather recessions! Too many people use sitting on the sidelines "because of the coming recession" as an excuse to not take action!

What are your thoughts on a recession?

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