Planning For The Next Recession

[Kenneth Garrett]

There have been lots of conversations regarding the next recession.  It would make sense for the buy and hold investors to keep your leverage down to 60% or less. 

When 2007 hit how did the buy n hold investors survive.  Were you able to refinance back then?  Did you lower rents or did you get hammered?

Please share your experiences. 

[Michael Ealy]

Originally posted by @Kenneth Garrett:

There have been lots of conversations regarding the next recession.  It would make sense for the buy and hold investors to keep your leverage down to 60% or less. 

When 2007 hit how did the buy n hold investors survive.  Were you able to refinance back then?  Did you lower rents or did you get hammered?

Please share your experiences. 

Kenneth,

The landlords who got hammered and lost their properties in 2008 were the ones who were overleveraged with rentals that were not cashflowing. When property values decrease, they have negative equity and when people lost their jobs and rents decreased/ vacancies increased, they have no choice but lose their "alligators".

As someone who survived the last recession and has bought over 1,000 units since then, the lessons are clear:

1.  In the good times (when rents are high/vacancies are low/ financing is easy with low interest rates), focus on decreasing debt, increasing equity and increasing cashflow.

2.  In the good times, you can also do a lot of capital gains activities like flipping and new builds. What you want to do is accumulate cash, lots of it!

3.  By doing #1 and #2, when the recession hits, when landlords who didn't do #1 and #2 are cash-poor and losing their properties, that's when you BUY heavily discounted properties and further build your portfolio.

I look forward to the next recession. It's a BUYING opportunity.