All Forum Posts by: Joshua Ferrari

What to Invest in During a Recession

1. A fraction of your portfolio should be allocated to buy & hold real estate. Receiving a consistent flow of cash can provide investors stability during an economic downturn. That way, when asset prices fall, the investor isn't selling at market bottom.

2. Inflation is usually followed by a recession, and in this case, it is looking like it will. In order to combat inflation, the best investment strategy is Real Estate. Whether it be single family, multifamily, commercial, etc. Real Estate is proven to have a built in inflation hedge that protects your asset.

3. With real estate crowdfunding, hypermarket segmentation is available. Investors can choose their property type and geographic region when investing in real estate. EquityMultiple is one example of a real estate crowdfunding. Fundrise and Groundfloor open targeted real estate investing to nonaccredited investors as well. For easier real estate investing access, real estate investment trusts, known as REITs, come in many varieties and span several sectors. And let’s not forget about syndication!

4. The health care and senior-living sector is usually a solid investment, but we need to look at what Coronavirus is doing, specifically to the older generation. Will we see the same returns we’ve been seeing in senior-living investments? That is still yet to be seen, and precaution is highly recommend when considering this investment.

5. Self-storage also seems to be a pretty recession proof investment. People don’t suddenly have less stuff when a recession hits and they are less likely to stop paying and take their stuff out of storage due to the hassle of moving it somewhere else.

6. It's wise for investors to remember that in the short and intermediate term, investing is volatile. That reality underscores the difficulty in removing the risk of investment losses. However, moving forward, real estate investments specifically, are poised to be the most lucrative that we’ve seen in the previous decade and makes for considerable thought when luring the idea of capital investments.

7. The market is difficult to predict, so diversifying your portfolio is an effective way to manage volatility. When assets are allocated in non-correlated markets, there is a balance of risk in your investments. As the markets become more volatile, another approach can be rebalancing your portfolio or resetting asset allocations, which aims to keep the portfolio in line with the initial risk and reward profile with which it was initially created. People who are employed in a reasonably recession-proof job, such as health care, government or education, should consider increasing their portfolio size, particularly through their retirement plans, like a Self-Directed IRA.

@Paul Jump

My niche is multifamily syndications, and the data we look for in a deal is:

- Market Performance: Rent Growth, Market Vacancy, Long-Term Vacancy Average, Adverse Cycle Occupancy Bottom, Median Income, Employment Pool, Rent to Cost of Ownership, Income to Housing Cost Ratio, Market Rankings, Construction/Absorption Ratio, Pricing, Cap Rates, Trends in Capital Market, Etc. 

- Forecasted Market Performance of the Same

- Property Specific Performance: Asking Rents, Actual Rents, Vacancy, New Lease Trade-Outs, Average Vacant Days, Lease Terms, Retention Rates, Renewal Trade-Outs, Sales Record, Renovations Completed, Market Comparable Amenities based on Class of Asset, Revenue, Rent Roll, Trailing 12 Months of Operating Expenses, Property Taxes, Property Insurance, Market Trends of Specific Floor Plans, Etc. 

This is but a few of the major things we look at to be sure we are providing our investors with a solid investment that brings healthy returns. 

If you want to make a platform that can provide such information, I would recommend reviewing what RealPage has to offer. That's who we use for our data analytics software. 

Best of luck to you!  

@Dave Rosa

With $120K there's a ton of opportunities out there for you to invest in real estate. 

Do you want to be active or passive? 

If you want to be active, I strongly don't see there being a huge dip in rental demand due to the pandemic. There is talk of people wanting to move out of apartments because of the close proximity to others, but we haven't seen much of that to back that theory up. 

People still need an affordable place to call home. If you could buy a single family home in a fairly nice area (B or C Class), with a steady market, and job pool of employees able to work remote through the pandemic, then I see no reason why that wouldn't rent. 

Now, we are also seeing rents drop roughly .7% on average. (First time we've seen that in decades.) So you'll want to be sure you have the decreased price, specific to your market, analyzed with your other numbers. If everything makes sense for you, then go for it!

If you could find a property that you could buy and rehab for under $120K, that would definitely be the faster route considering all the lending sources are tightening up. Lenders have added some serious liquidity requirements at closing now and it drastically is affecting new investments. If you could buy a house all cash, complete the BRRRR strategy, and when refinancing with a lender, pull your cash out, then that will allow you to move forward and do it again.

I do, however, recommend not investing all $120K into one property. Too big of a risk if the deal goes sideways. You'll want to save that money for reserves or other investments for a little portfolio diversification.  

Now, if you want to be passive, then you could consider investing into a multifamily syndication. I'm actually a multifamily syndicator & if you'd like to know more on how that niche works, then you're welcome to visit our website and check out all of our different resources. 

All in all, you shouldn't be scared to invest because of the pandemic. A careful & analytical approach to any investment in real estate should reward you with some great returns. I would like to also mention that I expect us to see more lucrative investment opportunities in the future, spurring from the pandemic, then we have seen in the past decade. They won't be nearly as drastic as 08, but nonetheless, still something you'll want to get in on, on the ground floor.   

@Josh Hitt

Hey Josh! Welcome to BP & to the beginning of your investing journey into financial freedom.

House Hacking for your first deal is a great idea, and is the exact route I decided to take.

I’m just 45 minutes West of you, in Mobile, AL. I’m not super familiar with the Pensacola market, but I would definitely recommend P.I.G. (Professional Investors Guild) 

Begin networking with like-minded individuals and try to avoid a lot of those costly mistakes on the front end. Trust me, it’ll be worth it to wait and learn those.

If there’s anyway you could find a mentor or someone you could work for, that’s doing what you want to do, and is where you want to be in life, then it would seriously catapult your success exponentially. 

I’m a multifamily syndicator & if you ever have any desire to learn about syndications or, one day, passively invest in one, you’re welcome to check out our website where you can find TONS of different resources, including a podcast, all about how to invest in one, what they are, typical returns, market analytics, COVID-19 and its affect to real estate, how to vet a syndicator, etc. 

Whatever you do, be vigilant, be persistent, & be consistent. Best of luck to you in your investing journey! 

@Tiffany Hayes

I would not recommend new construction for a first deal. Way to many variables and too long of a time table.

Fastest path to cash, would probably be a fix and flip. But it all depends on the deal, how fast you can finish renovations, find a buyer, & close.

If you're just looking for long term wealth, then you could do a BRRRR, buy another property and continue on that path.

With $40K you could even invest passively in multifamily syndications, and over a 3-5 year period get over 100% of your money back on average.

Now every deal is very specific to market conditions & the operator of the deal, but nonetheless, syndication is an easy way to build wealth.

With everything going on right now in the economy, I would be weary of jumping right into real estate without first having a SOLID foundation of knowledge in how to accomplish these investments.

Things are changing rapidly in the real estate world, and if you aren’t prepared, then you’ll be washed out and broke in no time.

You’re welcome to check out our website which explains everything you need to know about multifamily syndications and the market.

All in all, if I were you, I would do some more research on whatever method you choose and then become the expert in that niche and your local market before jumping into anything and spending $40K.

My properties are B Class, so we get it cleaned pretty spotless. We usually touch up the paint in the unit, fill the holes in the walls, clean the range, refrigerator, etc. 

If you have a C class property than maybe you don’t have to touch up the paint upon turnover. Probably would make more financial sense.

It’s very dependent on your class of property and your tenant base. 

@Erin Dorsey Robinson

Lol, no problem!

Who out there is still crushing it & buying multifamily properties left & right? What are your systems and processes for completing deals in the midst of the chaos? How are you financing your deals? How are you completing due diligence? What is your one golden nugget of advice for all real estate investors trying to crush it in this economy?  

Best Ever Apartment Syndication - Joe Fairless

Traction - Gino Wickman

Extreme Ownership- Jocko Willink

Advanced Tax Strategies - Amanda Han and Matthew MacFarland

So Good They Can’t Ignore You - Cal Newport

10X Rule - Grant Cardone

Raising Private Capital - Matt Faircloth

Vivid Vision - Cameron Herold

The 4 Hour Work Week- Tim Ferris

The Miracle Morning/The Miracle Equation - Hal Elrod

The Hands-Off Investor - Brian Burke

Rich Dad Poor Dad/Cashflow Quadrant - Robert Kiyosaki

Never Split The Difference - Chris Voss

Crushing it in Apartments and Commercial Real Estate - Brian Murray

Multi-Family Millions - David Lindahl

Wealth Can’t Wait - David Osborne

Miracle Morning Millionaires - David Osborne

Retire Early with Real Estate - Chad Carson

I’m sure I’m missing a million others, but this ought to be a good start!

Well for Section 8, HUD decides when it's rent ready, if you're trying to get them to pay for rent.

In general, not Section 8, it's all dependent on you and your area. If you're in a B class area and you've only fixed your property up to D or C class, it might be harder to rent. Or it might go like hot cakes because lower income individuals want to get in the nicer area, but then you have to deal with lower income tenants, without the financial support of Section 8. It's very specific to your market.

Maybe you have a property in a C class area, and you've renovated it up to a B class rental. That could potentially cause some issue because people don't want to pay more to live in a worse area. 

Never "over-renovate." It'll just be less of a yield for you in the end. You'll have to determine what other rentals in your market are going for, and what amenities they have. Look at a lot of rentals to get a better representation of actuals.

Ask other investors what they are doing in your area, and try to do the same if they've been successful in their endeavors.