All Forum Posts by: Scott Passman

There seems to be a lot of misconceptions about what a recession means and especially for real estate investors.  Yes, a recession is coming. But by nature of a cyclical economy it is either always coming or here already.  It may happen next year, in 5 years, 10 years etc.  But 2008 was a once in a lifetime anomaly and it seems like the results of that crash are being presumed for any future recession.  Keep investing, but do so wisely and always look to mitigate risk.  See below for a nice summary of the housing market over the last 5 recessions:

Housing in previous recessions

It’s somewhat counter-intuitive, but recessions don’t necessarily mean bad things for the housing market. In fact, they usually don’t.

ATTOM Data Solutions, a leading real estate data provider, looked at home prices during the five recessions since 1980 and found that only twice—in 1990 and 2008—did home prices come down during the recession, and in 1990 it was by less than a percent. During the other three, prices actually went up.

“Housing is such a basic need that it won’t necessarily do well, but [it will] at least truck along,” said ATTOM’s Daren Blomquist. “It may flatten out a bit, but people still need somewhere to live, so that basic need is going to cause how the housing market—and particularly home prices—to continue to go up.”

ATTOM data also show that rents are even less impacted by a recession. During the housing bust in 2008, the average fair market rent for a three-bedroom property, as calculated by the U.S. Department of Housing and Urban Development, rose at a steady clip even as home prices cratered. Rents likely rose as homeowners who had to go into foreclosure during the crisis added new demand for rental housing.

@Jess Archives Make sure you vet your operator real well and go visit the market as well as the property before committing to anything.  Know your numbers and run them all yourself as any pro forma you look at will be worthless 99% of the time.  Make sure you check accurate rental rates for the area and property types you are looking at, budget out appropriately, and don't make the assumption that because it's "turnkey" that you can budget minimally for capex and repairs.  The "turnkey" property I just bought 9 months ago has already had about $1500 of work done and I'm getting bids for about 10k more work right now.  Be picky and don't dismiss things that come to your attention because you will either plan for it upfront or you will pay for it down the road.  You can make out of state work, but it is trickier so you need to make sure you perform very thorough due diligence on the company, the market, and especially the company. 

@White Kandlez  How much do you have in student debt and at what interest rate?  There are many sides to this coin, but generally speaking if you have low interest debt meaning somewhere around 4% or less then it is probably a much better idea to invest that money since you can make a much better return.  Debt with interest rates around 5-6% get more ambiguous; and anything over that would most likely be best to pay off first before investing.  

Now, these are all general statements and at the end of the day it comes down to whether or not you can peacefully sleep at night with your decision.  If you are going to be stressed out and very anxious the whole time while trying to invest with that debt then perhaps it is in your best interest to tackle the debt fast and hard and get it out of the way.  Based on your comment expressing concern about building FI while still in debt, perhaps that is your answer?  Good luck. 

This is solid gold. I don't know why, but it makes me think of the 12 days of Christmas song, but for investing:

"Here's the first thing for investing that Mike M taught to me....Don't promise what you can't deliver!"

"Here's the second thing for investing that Mike M taught to me...……" 

Thanks for sharing Mike. 

Neighborhood ratings are a bit subjective and what one person may call a B another would call a C/C+. In general:

A neighborhood- I would love to live there

B neighborhood- I would be happy to live there

C neighborhood- I would live there if I needed to, but it wouldn't be my first choice

D neighborhood- I would live there if I had no other choice

F neighborhood- I would call everyone I know to find a place to stay in order to not live here

"A" neighborhoods are the cream of the crop with the best locations, high end amenities/view right there, in the heart of the city. "B" neighborhoods are often what you would think of as a nice suburb near amenities such as popular retails stores and restaurants with lots of parks and is well cared for. "C" areas tend to be more run down with some increased crime. May often see more stores like Dollar General, fast food, family owned small businesses etc. as opposed to larger retail stores. "D" areas are run down neighborhoods with boarded up windows, abandoned buildings, high crime, and are overall poorly maintained and depressed. "F" areas are flat out war zones and you want to stay the heck away from. These are generalities of course, but I hope it helps get the point across. Speaking to local investors, realtors, and property managers is a great way to get the rundown on the best and most desirable neighborhoods in areas you aren't familiar with.

I would have an experienced real estate attorney draft up the agreement for you.  They should be able to help you structure the terms and provide advice on options that would make sense for you and your in-laws. The biggest thing is you want to make sure you have everything clearly spelled out in order to avoid potential conflicts or misunderstandings in the future.  When doing business with family, the more clear you can lay things out up front and plan for possible scenarios the better off you will be to avoid potential issues that could make things very awkward and uncomfortable at family get togethers. 

@Alexiz Pedraza  You should reach out to @Mark Ainley with GC Realty.  They are very knowledgeable about the Chicago market, do a great job, and are deeply connected with local investors. 

@Javontai Shamburger  If I could vote for @Jim K. post more than once I would, because it is spot on.  BiggerPockets, RE podcasts and books have all the information (and far more) that any seminar would have and the best part is it's all free.  Make no mistake, there are many people on BP who are here to advertise their services and try to get business along with some shady characters who are just trying to make a buck. So you need to use critical thinking when taking advice and networking on here too. But there are a lot of great people on here and in your market to reach out to and learn from. If you are genuinely eager to learn and willing to work for it, you will find people willing to help you along the way. 

Why not post it on the BiggerPockets MarketPlace?  Pretty much the only people on this site are investors so there is your target market.  Otherwise, you could reach out to local property managers and even some investor friendly agents to let them know this is an off-market opportunity for interested investors.  Leverage their network of investors to spread the word and land a buyer for you. 

Happy Thanksgiving everyone! Thought it might be fun to take a pause and reflect on something you are thankful for on this day, RE related or otherwise. We are fortunate to live in a country where we have access to information, other people's knowledge, and communities like this to change our lives and make something out of nothing. I am thankful for the unlimited opportunities we are blessed with and for those who seek first to give rather than to receive.