During the last crash, how did you fair? Did you hold through it?

Question

We had one rental at that time. We had a little bit higher turn over and rents did not increase maybe went down a hair. Is this consensus for most of you that had rentals then. I ask as I am analyzing the risks of having 100% of my net worth and passive income in real estate. Thanks in advance.

Steve Vaughan · Answer

I had 35 B and C+ class rentals.  Turnover was higher as renters consolidated or moved back home, but rents increased as many previous homeowners became renters.

The only year worse than 2010 was 2011.  LOL   I remember writing credit card checks to pay property taxes hurriedly before yet another credit line froze or closed.

But we buckled down, held on, honored all obligations and things got much better.  RE is a time and risk management game.  Commercial loans and lines of credit have call provisions so be careful with those👍

Troy Forney · Answer

I can’t justify putting money back into a 401k, but keep hoping someone will try to convince me. No one is taking the bait.

Bill B. · Answer

Today is 100x more above board and strict than the late 2000’s. I know people that had 20 - 30 mortgages on new builds that they just flipped to ent to own buyers. These people wouldn’t qualify for 2 mortgages. They lost EVERYTHING.

On the hand. I owned about a dozen SFR rentals in vegas and rents were skyrocketing. I didn’t have a vacancy or even a late pay for 5 years+. We had the best pool of renters of all time. These we people who grew up in homes, were living in homes with their families, and had ZERO interest in living in an apartment. Rents were about the same as their mortgage and now they didn’t have to worry about repairs, taxes or insurance. They had left their current homes because the value dropped or the payments increased.

I assume soon the people who predicted the 2015 and 2020 crashes will be back with their 2025 crashes. I don’t know how they’ll make their “it’s obvious every 8-9-10 years” (what ever number fit between 2 made up points in time and the near future.)

Anyone who wants to predict a near term (less than 5-10 years) crash will have to tell us how they cured inflation and built millions of homes for less than the current existing home prices, all while getting local governments to stop cash grabbing every development they can’t cancel.

Alexander Szikla · Answer

Crash? You mean the flash sale?

Don't get too preoccupied on the "market value" of real estate if you are doing accretive deals. Think about yourself as a purchaser of yield / future cash flow. So long as your rents and expenses remain stable, that yield remains intact even if market value fluctuates on paper.

Bjorn Ahlblad · Answer

We had a recession in the 90's. Then the dot com bubble and the 2007 recession. Dot com bubble was the most personal for us. I was laid off, trying to start a business and we put one of our rental properties up for sale; but nobody would buy it-thank God!! Soon I got a pretty good job, we put lipstick on the rental and got a great tenant.

For me the key is never be forced to cell! If you can hold for the long term most times the market will recover. We were living in Ca through those times and the market returned big time-really big time! We have since sold our Ca properties and retired to western Wa. We have 16 rentals for retirement income. Life is good.

Troy Forney · Answer

Not necessarily expecting a crash. Although, I have seen more unethical and illegal situations in this market than any other over the past 20 years.  Just trying to justify putting money into 401k or other investment when Real Estate has been so good to us. Leveraging is about 50% Ltd and I have reserves so I feel pretty secure. Our management company does a great job of finding the best tenants.

Evan Polaski · Answer

@Troy Forney, I am assuming you are talking about the 2009 financial crisis crash?

I bought my first house in 2007 (primary residence), and then didn't buy rentals until 2011.  I worked in commercial real estate raising institutional capital. I was laid off, found work fairly quickly thereafter, and stayed employed since then.

From my research I was performing from 2007-2009, but also looking back at the early 2000's recession, the early 90's recession, the early 80's recession, apartments faired best of any institutional, real estate asset class (industrial, retail, hospitality, office and multifamily).  But overall, I think it is all relative.

If you are expecting another crash like 2009, being low leverage will help, and having tenants with secure financial situations is a must.  Even though I got laid off for a few months, my wife and I bought a house that one income could afford intentionally, so without my income, we saved less for a period, but still made payments.  If you find renters who make 5 and 6x your asking rent, and have a savings, you are likely to be fine, even if your tenants lose their jobs.

John Leake · Answer

I'm in a rural area and I had minimal impact on receiving rent. We are also seeing now a slight increase in rental rates due to the need for housing if you spend some extra time making sure you get a great tenant it should make all the difference!

During the last crash, how did you fair? Did you hold through it?

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