What happens to rentals during an economic crash?

[Ryan Dossey]

For those of you that have experienced it what happens to rentals in a crash? I would imagine investors who mainly have rentals would fare better then those flipping. I'm always looking to plan for the worst. If you could go back, what would you do differently?

[Dawn Anastasi]

In this last crash, in my area, house prices went down.  More foreclosures.  People couldn't pay their mortgages anymore because they lost their jobs. Even when they got new jobs they were then behind on their mortgage and couldn't catch up so they were foreclosed on.

The benefit to me is that I was able to buy properties for pennies on the dollar and the people that used to own, now are renters until they can buy again.  Cheap houses and more renters = the perfect storm for me.

Now let's say this happened again.  If it happens soon afterwards, there is a portion of the renter population that have doubled up their households.  So now, instead of one family living in a house, people have learned to share and combine households.  So you'd have less impact as people are not 100% recovered from the last time.

People who were trying to sell a house, however, when the crash happened all of a sudden the house that they wanted to sell for $1.2 million and could have all day long in 2005/2006, now had to wait years and wind up selling for $755,000 (true story).