How to survive the next downturn?

[Chris Youssi]

The purpose of this forum will be to give practical solutions vs pulling the "crash n crush" alarm like a previous thread. I have a few suggestions that I have implemented and am interested in hearing from other investors. Here are my top 3:

1.) Lock in as much long term funding as possible. Eg... if you qualify for the secondary market grab 10 props  ( up to 40 units as you are able to buy up to a 4 unit and still qualify for secondary market funding ) where you can lock in up to 30 year money. Commercial world lock in for a minimum of 5 years -some lenders are allowing 7 and I am exploring 1 that is a 10 / 1 arm very appealing to me personally

2.) Always develop an exit strategy when you make a purchase. Key is having the discipline to follow thru with the understanding that sometimes life can get in the way and our circumstances change. 

3.) Lastly is you make money on the buy not the sell. Personally I feel this is far more important than location for the simple reason that if you purchase the property correctly location is simply an added bonus.

Some of my thoughts. Looking forward to hearing from others .

[Krishna Chava]

I have bought several properties over last 2 years and I have paused now mainly because of steep climb in interest rates. Speed at which interest rates have climbed is more of concern that interest rates themselves. Here are my strategies to make my properties hardier for a recession hit:

1) Using cash flow, pay of all short term debt, from friends and family and some credit cards. 

2) Make sure all the deposits collected from tenants is in a separate accounts and is not touched by daily operations. This might be requirement in same states, not Texas.

3) Use the cash flow to fix problems that have a longer term ROI like replacing AC on last legs or a fence that needs to be replaced in next 2 years anyway. Make your current properties better such that you will have less repairs later or you can defer repairs when times are not good.

4) Self manage your properties if you can. Management expense is a huge cushion when things go south. Not only can you save 10% of gross rent but you have better control over repair decisions and you can defer non emergency ones based on your financial situation. There are many technologies that make self managing very different than 10 years ago.

Krishna.