Is anyone selling off properties before the next recession?

[Jared Wild]

Is anyone selling part of their portfolios in overvalued markets before the next recession hits? If you’re in middle income areas are you prepared to make it through the next storm?? What are your strategies??

[Brittany R.]

Hold them...and probably just not raise the rent as much...keep making my net profit.

[Account Closed]

I'm actually trying to buy more, and I think my local market is overheated.  

We'll have recessions, but I don't think we will have a real estate "foreclosure wave" type crash again for quite a while, maybe a generation at least. Lending standards are just much different as far as I can tell, and there are many people circling the edges "waiting for the next recession," to try and buy up distressed deals. I think that will help keep things from bottoming out like they did 2009 etc. 

[Bill B.]

Buying more.

Are you Just sick of real estate and selling? You'll have 100’s of buyers. But then you’ll be stuck earning 1% for 5-10 years as you can’t put it in the stock market. You might lose more income and closing costs than you could hope to save by just holding or doubling down. 

[Mike Dymski]

For many of us, real estate is safer than alternatives should a recession occur.  And putting decades of savings under the mattress is not a strategy.

I am pivoting from value plays to more cash flow plays...and always adding value.

“It is your decisions, and not your conditions, that determine your destiny.” -Tony Robbins

[Shawn C Steider]

My area is definitely not overpriced and I doubt that a recession would affect my values very much as my properties arent worth a whole lot in the first place. Im going for cash flow atm while I have a decent job in this area. Ive thought of trying to invest in higher priced areas someday hopefully. 

[Sandy Gabin]

@Jared Wild

Buying more properties as long as I have the mortgage paid, then is all good with me!

[Jai Reddy]

I am on a mailing list for Newmark Knight Frank who is a brokerage for large apartment complexes. Of late, I’ve been seeing several apartment complexes from the Dallas, TX metropolitan area list for sale. Their owners are probably satisfied at what market value is currently, rather than wait for next year or so.

Could be a leading indicator of prices in a hot marble like Dallas

[John Teachout]

We're still buying but please advise me of when the market is going to go down so we can unload some properties at their peak.

[Account Closed]

ABB - Always Be Buying

[Account Closed]

Originally posted by @Jared Wild:

Is anyone selling part of their portfolios in overvalued markets before the next recession hits? If you’re in middle income areas are you prepared to make it through the next storm?? What are your strategies??

 I'm selling my properties that have substantial equity, (height of the market is best time), keeping the properties that have little equity but cash flow well, and using the proceeds to buy more cash flowing properties when the downturn hits. I'll have plenty of cash to buy, buy, buy. Of course, I am still in the game currently because the thrill is in the chase of finding great "off market" deals.

[Mary M.]

Fwiw, in the commercial market (apartment complexes ) the strategy is usually hold for apprx 5-7 yrs. so seeing this type of stuff for sale just means it's business as usual. 

Recession is part of the normal business cycle.... what happened in 2008 ish was not a normal recession and wont likely happen again the same way.  IMO it will be student debt that implodes. 

As for strategy- i am currently in contract to sell my 10 plex and upgrading to 20 units. Apprx 60%LTV. A modest amount of debt, coupled with desirable units priced right and excellent management is my plan .....

[Daniel Y.]

Originally posted by @Jai Reddy:

I am on a mailing list for Newmark Knight Frank who is a brokerage for large apartment complexes. Of late, I’ve been seeing several apartment complexes from the Dallas, TX metropolitan area list for sale. Their owners are probably satisfied at what market value is currently, rather than wait for next year or so.

Could be a leading indicator of prices in a hot marble like Dallas

What kind of cap rates are you seeing and in what class area and building?

I've been seeing a lot of overpriced and poorly analyzed multifamily being marketed in primary, secondary, and even tertiary markets. I reviewed a property in TX that was in a tertiary market a week ago. It was a C class building and maybe in a C+ area (C- or D+ block of a C+/B- general area). Talked to some brokers and the cap rate should be 8-12% give or take. The owners were trying to sell it at the 7.19% pro forma cap rate. That's right, you heard me. They based it on the pro forma NOI and not the actual, and they were treating this like an A class asset.

[Ricardo L Knight]

@Jared Wild I mean I would sell but I’m refinancing this extra income and interesting in investing in some large apartment complexes

[Kenneth Garrett]

@Jared Wild

I have sold off some of my not so profitable properties. My plan was never to sell, but if the cashflow isn't there and the value is then sell them off. The other properties I'm keeping low LTV under 50% and can withstand a market adjustment. Keep rents within the rental market don't go for the top end rents those tenants are most likely not staying. Retention of tenants is how you stay profitable. $50 a month rent can make a big difference. Even at $100 drop in rent it's $1200 a year. The cost of the repairs to the unit and vacancy is going to the be following:

Rent (average) (1 month vacancy) $1400

Rehab (paint/repairs) $2500

That’s $3900 versus dropping the rent $50-$100.($600-$1200).

Look at your negative return on your dollars. At $300 cash flow that will take you 33 months to make it up versus let's say $1200. That's a negative ROI of opportunity cost.

[Jai Reddy]

@Daniel Y.

The way Newamark Knight Frank lists is without any list price. All relevant actuals financials are posted and you submit offers. 

[Bill F.]

Originally posted by @Jared Wild:

Is anyone selling part of their portfolios in overvalued markets before the next recession hits? If you’re in middle income areas are you prepared to make it through the next storm?? What are your strategies??

This entire question presupposes that the next recession will have an impact of the local REI markets. While this happened in 2008, this doesn't mean the same holds true for the next recession.

Look at the Case Schiller for San Francisco, New York, Dallas, and Chicago for 1989-2014 ( I necked the data down so we could clearly see the three recession periods that occurred)  

During the 1991 recession, all metros saw a decline, but it was a trajectory they were already on. In the dot com bust, only San Francisco saw a decline. Most RE markets and the stock market are not terribly correlated. 

Selling because a potential recession of unknown cause could impact your investment is not the world's best reason for selling. 

Assuming you had a reason for buying an investment and somethings has changed to make that reason no longer valid, then selling is a good idea. That could be linked to a potential recession, for example a large Fortune 500 tech firm building a new office in your area so you bought a lot of high end rentals. However, you aren't selling because of the recession, you would sell because the original reason for your investment didn't pan out. 

[Steve Vaughan]

Originally posted by @Jared Wild:

Is anyone selling part of their portfolios in overvalued markets before the next recession hits? If you’re in middle income areas are you prepared to make it through the next storm?? What are your strategies??

 Not positive my market is 'overvalued ' or that a recession is imminent but there should not be an always or never in investing. 

Always be buying? Always be selling?  Case by case. Buy and homework. Have a plan but pivot as needed.

I've been selling one a year for a few years by owner  They were headaches that came open in a good season and good market.  One per year limits the tax ramifications for me. Rarely a good idea to sell a bunch the same calendar year unless exchanging or something.  Plan ahead, not just in April. 

I've been buying a few per year also as people I know (mostly) gave it a go as hobby landlords or want to retire.  Belly to belly direct buying or selling. No middlemen for a more consistent nap schedule.

Case by case evaluation is my strategy.  Always and never or vague emotions are not in my vocabulary as a strategy. 

[Manny Cirino]

   I don't understand that idea that we absolutely have to have a recession there is no rule stating this is absolutely mandatory. I see a slight correction maybe a pullback, but I dont see the recession like we had in the past. 

   I see lenders doing a much better job qualifying people, so you wont have the subprime crisist we had before. And I don't see and major industries equivalent to the auto industry failing. 

  The only thing I see that concerns me is subprime auto loans, but I'm not entirely sure how that leak would form. Hold you properties and weather the storm. There is always a new ceiling after every storm passes

[Sam Josh]

@Jared Wild

I know several dudes who sold 4 years back in anticipation of the next Great Recession.

[Roger Hefner]

@Jared Wild refinancing all my sfr I have at moment buying 2 to 4 plex properties.. buy not selling anything..

[Keegan Burkholder]

@Jared Wild I priced it in to the best of my ability when I bought the one's I have now. Bought them all well below ARV to protect my equity, and did my best to purchase in good rent areas that would withstand any bad runs. On the plus side, if we go through a foreclosure mess again homeowners will become tenants again. IMO if you didn't buy with that in mind it may be a rough sea to navigate.

[Keegan Burkholder]

@Bill Brandt that is very true! Appreciate that outlook.

[Keegan Burkholder]

@Mike Dymski I like it, smart!

[Account Closed]

Originally posted by @Jared Wild:

Is anyone selling part of their portfolios in overvalued markets before the next recession hits? If you’re in middle income areas are you prepared to make it through the next storm?? What are your strategies??

 Yes! And not buying anything until it happens. Except class B multi family 200+ units that aren’t going away and won’t experience much of a rental drop. My strategies other than that include rental arbitrage which puts the liability in someone else’s hands, very lean service bases businesses and I’m looking at building rentals but only if they’re considerably less than acquisition. 

There Will be a correction and with the flood of houses on the market from the baby boomers dying off and selling homes to go live in retirement communities will create an Over supply of SFH and I believe that it won't be going back up for a long time.

[Jay Hinrichs]

Originally posted by @Bill F.:

Originally posted by @Jared Wild:

Is anyone selling part of their portfolios in overvalued markets before the next recession hits? If you’re in middle income areas are you prepared to make it through the next storm?? What are your strategies??

This entire question presupposes that the next recession will have an impact of the local REI markets. While this happened in 2008, this doesn't mean the same holds true for the next recession.

Look at the Case Schiller for San Francisco, New York, Dallas, and Chicago for 1989-2014 ( I necked the data down so we could clearly see the three recession periods that occurred)  

During the 1991 recession, all metros saw a decline, but it was a trajectory they were already on. In the dot com bust, only San Francisco saw a decline. Most RE markets and the stock market are not terribly correlated. 

Selling because a potential recession of unknown cause could impact your investment is not the world's best reason for selling. 

Assuming you had a reason for buying an investment and somethings has changed to make that reason no longer valid, then selling is a good idea. That could be linked to a potential recession, for example a large Fortune 500 tech firm building a new office in your area so you bought a lot of high end rentals. However, you aren't selling because of the recession, you would sell because the original reason for your investment didn't pan out. 

89 to 92  in the SF bay area was a brutal market that most investors on BP are too young to have experienced.. but you had some serious retreat in prices.. this happened not only because of over heated market.. but the earthquake and the war.. it was not uncommon to see 50% devaluation on HIGH end homes.. from Marin county all the way down to Los Gatos etc.. Of course it all bounced back big time.. 

My brother in law in 91 bought a 4k s ft house on an acre in Los Altos Hills for 900k.. it had sold in 88 for 2.2 mil.. today what 6 million if not more.. so some pretty wild swings..