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Updated almost 5 years ago, 02/18/2020
Is anyone selling off properties before the next recession?
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??
@Jared Wild
Hold and renting for now
Flipping may drop off in a recession (because won't lend), but people will always be renting out multi family homes.
@Jared Wild
Technically, we are still in buy mode. In reality, no deals to be found since our last purchase in August 2019. I’m confident rents will remain steady, and our mortgage isn’t changing until the balloon is up in 5-8 years on most recent properties. And some on a 30 year fixed. Heck, I’m not even slowing my Vanguard and 401k investments down. Crushing it until the pullback.
#5 General Landlording & Rental Properties Contributor
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#5 General Landlording & Rental Properties Contributor
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Fear isn’t part of my business strategy . Seems They keep making people buy God quit making land so I’m just going to keep buying regardless because I create my own economy so I don’t care .
@Jared Wild I have investors selling that are afraid of the next election so they're selling off. We hold rent rates and property values remarkably well through the lows here though, so I know other investors that are happily snagging those cash flowing deals!
Originally posted by @Dennis M.:
Fear isn’t part of my business strategy . Seems They keep making people buy God quit making land so I’m just going to keep buying regardless because I create my own economy so I don’t care .
"Fear isn't part of my business strategy."
I love that!
Originally posted by @Dennis M.:
Fear isn’t part of my business strategy . Seems They keep making people buy God quit making land so I’m just going to keep buying regardless because I create my own economy so I don’t care .
LOL
@Jay Hinrichs
Very insightful. My properties bought in Silicon Valley in 2004, saw a 20% increase until 2007 and then a 30% decrease from those highs until 2009. Same are now 2x in value from 2007 levels. The swings are quite wide indeed and things can go south until they bounce back strong. My theory is booms are followed by busts! No second ways to that. And busts are followed by big booms. Given where we are, the next cycle will be rough. But no one knows when it’s coming.
What I find interesting is that if you go back 6 months in the forums you can find very similar threads regarding the impending downturn. And then go back a year, same thing, two years, same thing, three years, four years, five years.... Eventually someone will be right and then won't they look scholarly!
@Jared Wild who cares. As long as you have tenants in them an they are paying your mortgage for you the home value is less relevant. Keep them occupied, the market will rebound. Maybe just hold plans for new purchases, and then snap up some extra property after the market crashes.
@Account Closed Not sure I'd agree with the baby boomers dyeing and the market flooding. Gen-Z is the largest generation in history coming up behind Millennials.
@Jared Wild
We only sell
When we have to. He with the most real estate wins. Just like the board game.
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#4 All Forums Contributor
- Lender
- Lake Oswego OR Summerlin, NV
Originally posted by @Dennis M.:
Fear isn’t part of my business strategy . Seems They keep making people buy God quit making land so I’m just going to keep buying regardless because I create my own economy so I don’t care .
Lets look at the mentality of many investors that post on BP and are buy hold. what do they say
1. I am buy hold never going to sell.
2. appreciation I don't care about that or expect it does not matter.
So as long as you have that mind set what the market is doing ( short of not being able to rent houses because there is price compression on rental rates or vacancy is too high) no need to time the market either the deals work for the cash flow your willing to accept at the price points you can buy for in a given deal.. And for those in markets that could or do move up waiting for some calamity in the market that all of a sudden creates HUGE devaluations like what happened 08 to 2011 you could be waiting a long time.. I can see easy swings of 10% but those days of 50 to 80% devaluations not sure we will ever get there again unless there is some real calamity that no one can imagine right now.
And its totally regional.. like you have talked about many times your still able to buy your assets at a FRACTION of replacement value.. Why is that.. well supply demand and risk .. and each market has those dynamics that are specific to a given market..
- Jay Hinrichs
- Podcast Guest on Show #222
#5 General Landlording & Rental Properties Contributor
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#5 General Landlording & Rental Properties Contributor
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@Jay Hinrichs
For me in my market when I buy at 10k a house it can not really be devalued any lower , it’s an atm with a roof over it . It is a way to make 40% on my money ..even if I slash rents in half it still does better than most investors can get for a return . My tenants or buyers don’t usually get downsized in a recession they are already lower tier employees . It’s a Walmart houses for Walmart people strategy
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#4 All Forums Contributor
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Originally posted by @Dennis M.:
@Jay Hinrichs
For me in my market when I buy at 10k a house it can not really be devalued any lower , it’s an atm with a roof over it . It is a way to make 40% on my money ..even if I slash rents in half it still does better than most investors can get for a return . My tenants or buyers don’t usually get downsized in a recession they are already lower tier employees . It’s a Walmart houses for Walmart people strategy
no argument here its just a business. Many business can make 40% ROI or far better.. I think the main difference is you can start small and scale most business you would start take more capital and could be a tad more complicated than buy house rent house. Not sure how many markets in America are like your market. Has to be a few.. I know I have personally funded a few maybe 20 in W. PA were my client is buying these houses at 8 to 20k.. I know its there and can be done.
- Jay Hinrichs
- Podcast Guest on Show #222
To me it depends a lot on the kind of property you are holding and how well it cashflows! In my view, entry level housing is grossly under-served by current construction trends. If you have that and it cashflows, it does not matter where it is, you should keep it up and NOT sell. Or, is everyone in their late 50s and 60s, and younger people aren't buying these properties and they don't (barely) cash flow. You should definitely sell and rotate into something profitable and sustainable with cash flow. Also, unload your Harley Davidson. Why buy for the schools when the kids are all out of the nest? Just my two cents, and remember, advice is cheap! Actually free on bigger pockets.
@Jared Wild invest in multi family. Start with a 4 plex .. they can withstand recession and cas flow better than most sigue family homes
Originally posted by @Eric Spond:
@Account Closed Not sure I'd agree with the baby boomers dyeing and the market flooding. Gen-Z is the largest generation in history coming up behind Millennials.
Yea, but who owns all that real estate? When they offload there will be an oversupply.
Originally posted by @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.
Best answer. First of all, if you can market time a recession, kudos to you (OP or whomever), I look forward to watching you nightly on CNBC as an overpaid talking head that guessed correctly. Everyone else has failed the last ~5 years when they thought "the next one" was coming. Meanwhile my VTSAX Vanguard index fund made 31% last year for a six figure investment income. Crazy recession!
Otherwise, I believe Nicky's comments are spot on. The country has small dips / recessions every decade, anyone on this site should be 20-30 years old or older and have gone through at least one or two. It's life. But are we likely to have another "Great Recession" complete with banking meltdowns and sub prime mortgage crisis and all that death? No. I wouldn't be selling anything unless you bought something you shouldn't have, or cannot afford. Typically a small recession does not cause rents or travel to go down too much. Again, the people that -might- suffer as owners, are folks that put themselves in bad business situations. Business as usual for me. Probably even hoard more cash over the next 12+ months to wait for buying opportunities for those desperate to sell "fearing some huge recession" is coming. You can read more into Warren Buffet's mindset about buying when others are selling.
@Jared Wild
Except for this recent economic boom, you do realize historically there's been a recession (6 months of economic decline) ever 4-5 years on average.
Even if we see a recessionary period, I dont expect to see big change in real estate, many markets are super heated, BUT a recession will probably only moderate the market. I Flipped and sold foreclosures all the way through the last downturn, the difference this time is lending is not predatory not everyone has ARMs. and more people have a lot of equity. Currently most markets in the US is short on Inventory, so lets say we see a market slowdown, so days on market increase and maybe a slight downturn in prices, and I mean slight if any, the reason prices dipped last recession is because the sellers (banks) could discount to get properties sold, setting lower comps. and many homes were abandoned and blighted. now there are not many blighted homes compared to then, yea in a down turn a few people will lose there homes, but we will probably never see in our lifetime another 5.5% foreclosure rate like at the worst point of the great recession. I hate to burst your bubble Newbies, that ship has sailed, get comfortable with making deals work today, or wait till your old and its too late for you.
@Scott Schultz
US Credit card Debt highest ever @ almost a trillion
US household debt record @ 14.5 trillion
Highest US debt ever and the best employment numbers ever. A story for recession could easily be written off of that. What happens when companies start laying off again?
That being said I’m buying too. Interest rates are so low, the alternatives (stocks & bonds) are so bad, and in my market finding a value add is possible. You just have to be able to execute on the construction, the management, and rent raise. My belief is that if you can cash flow now, you will cash flow later, if you’re buying cash flowing assets on the low @ half of the cost of construction.
@Jared Wild
I’ve bought smart, so no. Even if I had to lower my rents I’m still making money.