Preparing for the next housing crash

[John McCardell]

We all hear all of the investors who made out in the 2008 housing crisis.

If this were to happen again I want to be ready to strike.

I currently have a HELOC and some cash saved for some turnkey rental properties. I could probably get 1 and at most 2 houses due to needing the 20% down for a rental investment purchase.

If this were to happen again I want more than 1 or 2 properties. What can I do now to be prepared to purchase 10 or maybe 15 properties?

[Jay Hinrichs]

if the housing actually crash's like 08 your Heloc will be frozen just like 08 when almost all helocs were called or frozen.
you would need to evergreen it before the crash.

[Jorge R.]

What do you mean by “evergreen” ?

[Erik W.]

@Jorge R., I haven't heard that term either, but a quick Google search reveals it basically means making it permanent so the bank can't close or reduce it on a whim.  More info: https://www.investopedia.com/terms/e/evergreen-loans.asp

The only way I'd know to do that is go ahead and take the entire amount out BEFORE the crash.  Would require market timing, which is "bleh" in my view.  

[Bill F.]

@John McCardell 

The most foolproof way to be ready to strike in a correction is to have liquid cash. Downside is that no one knows when crash will happen, so the cash drag can crush your overall returns. 

A lot of folks misunderstand what happened in '08. It wasn't a RE crash. It was a credit crash that was centered around RE. While that may be a pedantic point, it is an important one. Like @Jay Hinrichs said, unless you take steps now, the HELOC you have will get frozen, read the fine print on your loan.

Another way to prepare is take out a traditional mortgage on the property so that you 1. know what the monthly payment will be with certainty and 2. 100% will have access to the cash. That way when deals come around, no matter if we are in a recessionary environment or not, you can take advantage of them. 

[Jay Hinrichs]

Originally posted by @Erik W.:

@Jorge R., I haven't heard that term either, but a quick Google search reveals it basically means making it permanent so the bank can't close or reduce it on a whim.  More info: https://www.investopedia.com/terms/e/evergreen-loans.asp

The only way I'd know to do that is go ahead and take the entire amount out BEFORE the crash.  Would require market timing, which is "bleh" in my view.  

Evergreen is what bankers call unsecured Usually lines of credit given to business's or investors that the borrower takes out the maximum amount and keeps it out.