How to survive the next crash... Plans, tips, advice, etc.

Question

It is well known that the economy, stock market, and real estate markets go through waves with ups and downs.  For anyone that was investing during the last crash, what helped you to get through it?  What is everyone doing now to protect themselves if/when there is another crash?

Steve Vaughan · Answer

Invest in a market and asset class you know inside and out. Have multiple exit and operating strategies.

Stress test and run worst case scenarios. Have ample reserves.

Carry less debt.  Carry long-term, fixed rate and term debt.

Don't enter hasty partnerships just because you're both half broke.  Have complementary skillsets and spell everything out in writing.

Mike Dymski · Answer

• Good location
• Cash flow
• Prudent debt
• Add value
• Reserves

Good recipe with any market conditions.

Account Closed · Answer

There *will be* another crash; at some point. I buffer against that by buying "off market" properties that have existing equity. My cousin moved from Portland to Bend and tells me both cities are over priced. I'd probably stick to somewhere like Phoenix / Mesa AZ or San Antonio TX - where houses are still reasonably priced and in any down turn won't drop like the coastal cities. You can see how this works by looking at the spreadsheet at the thread

https://www.biggerpockets.com/forums/600/topics/58...

Mathew Wray · Answer

Hi Eric,

I started investing during the last downturn, not before it, but from what I gather from my mentors who not only weathered the turn, but came out ahead was a focus on the fundamentals. The ones I model myself after were not aggressively over-leveraged and believed in the product location.

Are Portland and Bend over-priced? Compared to what? Compared to the midwest and desert SW, then yes. Compared to any other major city on the west coast, then no. I continue to believe in the long-term draw of Portland and the viability of the economy. That doesn't mean I don't think there will be issues here, and we're getting cash-flow to help support the problems when they come, it just means that I believe Portland (and likely Bend) will continue to draw people-coming recession or no.

I think you'll find a different answer, all passionately argued, from every person you ask. Which brings it back to you...what is your risk tolerance? What is your long-term goal for investing in real estate? Do you believe in the underlying wealth creation potential of real-estate? Are you a tortoise or a hare?

Gold, Bitcoin, stocks, bonds, and investing in businesses, are all things people believe will help them generate wealth and protect against a down-turn. You just need to focus on the one or two that you can take action on today. Keep asking questions and narrowing down your goal and you'll find your avenue for weathering the coming storm.

Good luck!

Account Closed · Answer

I like Mike's idea of moving equity from overpriced cities or cities with a history of prices going higher then average when the markets good to cities that have less of a price swing. I think gold would have been a good thing to have when the economy last crashed, I like to think it's going to be a good place to have wealth for the coming crash. I'd like some opinion on that if anyone knows much about it.

Jay Hinrichs · Answer

I think folks just need to understand that buying rental properties is a business small medium or large... same principals apply like what your talking about.. just because in the US our lenders allow for this aggressive leverage situations for inexperienced investors does not mean one should just go hog wild  when they start.. I mean they might not like being a landlord.. many try it many don't like it after a while.. even though to a man or women when they start the common statement is I will never sell I am long term.. It takes the right personality to do this successfully..  and as one ages like a fine wine you figure out that equity is your friend and limit your debt when you can … granted mathematically everyone should do 100% financing and never have an ounce of equity tied up.. but that's just mathematically.. in a down turn like what seems to be running through everyones minds these days because there are a few headline grabbing articles that scare people.. we then start to talk about what to do and how to be positioned... I think you do it like any other small business we build up a war chest and you limit your debt.. so if sales go down your not going down as well and you can weather.

Matt Millard · Answer

George, check out the case for Gold by Jim Rickards. Also look at silver lot more upside than gold. See McKlivaney report for more. Great hedge for your portfolio & big upside during downturns!

Rhonda Wilson · Answer

I think that owning properties with strong cash flow fundamentals is the best way to prepare for a market crash. If you purchase properties that don't cash flow with the hope of making money based on capital appreciation, you put yourself in a position of needing to sell regardless of market conditions. When things take a downturn, you could take a big loss.

Jay Hinrichs · Answer

@Mathew Wray  all though I do think Bend you have to be cautious there are no real jobs there and its heavily dependant on CA and Portland retirees who for some reason think its a great place to live :)  too cold for me.. and to remote.

How to survive the next crash... Plans, tips, advice, etc.

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