Thoughts on a coming recession...

Yes, it is definitely coming! It might be in 6 months or it  might not be for 10 more years. No one knows when at this time and anyone that says they do- check their motives! How are they trying to influence you? Do they want to influence your vote? Are they trying to scare you out of taking action because they are afraid to take it themselves? Are they trying to sell you something? From my own experience, this is what I know-

I started buying rentals in Baltimore, MD in 2002. The economy was humming along nicely.  When I started buying I was focused on cash flow and my cash on cash return on my investment. As the real estate market began to take off I continued to buy more rentals. The deals that fit my formula were harder to find, but I stuck with it. With the advent of the no-doc loans, the liar loans, the stated income loans, and the interest only loans a lot of people jumped into the market thinking that they would make money on appreciation alone! Many of them ignored cash flow all together. When the real estate market fell apart around 2007-2008 many of those investors went upside down really fast. They owed more on their investments than they were worth and to top if off, they had little if any cash flow! You can imagine what happened- the tenant moves out, the owner didn't have reserves to cover the vacancy and turnover because they didn't have any cash flow, the house had negative equity, etc... and the landlord went out of business. The point? Invest for cash flow first! Counting on appreciation to bale you out is like trying to time the stock market. Good luck. Another point is that I continued to buy as the market went up- focusing on cash flow. When the market crashed I continued to thrive. Why? Even though I had negative equity on some of my properties I still continued to make money every month. 

After the crash I was nervous. I didn't have the luxury of the hindsight that I do now. Instead of buying as much as I could I sat on the sidelines waiting to hit the bottom...

Of course, no one really knows when we are at the bottom. We don't know until AFTER we start coming out of it. The one thing that I know now is that my method works. When we do have another downmarket I won't wait so long to start buying properties. I'll just continue to buy cash flowing properties that fit my model despite any market.