stock market in free fall

[Walker Seid]

Just curious what everyone thinks about the global stock markets falling and it's potential effects on the real estate market. 

[Ryland Taniguchi]

Real estate tends to go in an 18-year cycle with notable exceptions being World Wars and Currency Crisis. I've been in real estate investing for a full cycle now and the market now reminds of 1997/1998. The 2000 tech crash is coming, cause a dip in real estate and then real estate keeps crushing on.

I don't think the next stock market crash will be like 2008 (unless the dollar goes into a free fall). Real estate goes in supply and demand cycles and there seems to be too many housing shortages right now (at least in my market in Seattle). Also, interest rates will stay low due to global deflationary pressures. All the ingredients for 7 to 10 more years of a real estate bubble.

But no one knows whats going to happen. I try to do triangular real estate investing. One part wholesaling/flipping/developing, second part cash flow rentals, and third part out-of-state tax lien certificate investing. The idea is that tax lien redemptions tend to drop after major real estate market crashes and allow me to pick up properties 10-cents to 25-cents on the dollar. It seems to me a good hedge against the downside of a market crash.  For flips during a crash, less risky to Joint Venture with equity partners than to borrow. Always have 2 or 3 exit strategies like Vacation Rentals (if you buy strategically in the right areas). Always expect the worse to happen. 

Also, I think bank financing is more risky during market crashes and it was hard to imagine before the 2008 crash that huge banks like Washington Mutual would go out of business. Don't rely on bank financing during a crash and make sure to have fixed rates and don't rely on HELOCs. Private money is the way to go. However, lots of money gets scared during the crash. I've personally been working with institutional money and hope to be in position to take advantage of the next crash.  I love crashes because that's the only time you can get appreciation and cash flow at the same time.