Are buy & hold properties recession proof?

[Tommy Martinez]

Hello all, I'm still a newbie when it comes to RE. I currently live in California, which as most people know is very very expensive and I'm looking into buying my first multi family home. I'm hoping to live in one and rent out the others. I'm just curious if these type of properties provide less risk through times of a recession. Again I'm still very new and I'm just speculating that 2007 will happen again. Any insight is welcomed! Thank you, Tommy

[Ali Boone]

What do you mean by "properties like these"? Like what, specifically? House-hacked MFRs?

If you are thinking solely of recession protection, properties in LA aren't it. The only way to profit on a property anywhere near LA is with appreciation....which is the opposite of what happens in a recession.

The good news is that the value of a property doesn't matter unless you are trying to buy or sell it. So if you buy a property and we hit a recession, the value on your house tanking doesn't matter as long as you don't try to sell it. Where the hurt could come in is if rents have to drop. But in LA you won't be covering all of your mortgage anyway with rental income, so it would just be more you have to cover out of pocket if the rents go down. 

The best way to recession-proof a house is to buy one that positively cash flows every month (unfortunately that's not in LA) and in a growing market with lots of demand. So recession or not, you still bank your cash flow and people still want to live there so they keep paying the rents.