While I could have gone lower I am lowering my risk tolerance because I expect a recession in late 2019 to 2020.

Put $10-15K in to get a brand new kitchen, refinished hardwood, recessed lighting, and brand new bathroom.

Just to beat a dead horse, we could see a recession in the future where you and/or your spouse lose your jobs.

When this person goes bankrupt in the next recession, this loan will be part of bankruptcy proceedings.

Just one example of a market getting overheated and then right-sizing.Same is going on with syndications, STRs and soon LTRs.BP took off after the Great Recession when investors could buy almost anything and rent it out for positve cashflow.

We would need to go into a very deep, very bad recession that is housing related for that to happen however so I would not hope for that. 

If you’re using leverage, be extra cautious with your underwriting to ensure the deal still works at today’s rates.Economic Uncertainty: Inflation, potential recessions, or shifts in demand could affect rents, vacancy rates, and property values in some markets.Increased Operating Costs: Rising insurance premiums, property taxes, and maintenance costs can cut into profit margins, particularly for buy-and-hold investments.Regulatory Risks: Some areas are increasing restrictions on landlords, particularly short-term rentals.

For someone that's not as conservative, or a different view on the cycle, they might have a different opinion than me on all of this.2) Sponsor quality check: (takes about 45 minutes per deal)I believe that a great sponsor can take an average looking deal and make it great, and that in mediocre sponsor can take a fantastic looking deal and make it bad (especially if there is a severe recession).

In my market you can do a cosmetic rehab: new kitchen, floors, new bath, recessed lighting, taking down some ways, screwing down floors, new paint, baseboards, trims, casing. 

From the Great Recession to Q1 2022 it was easy to find RE that seemed very likely to produce outstanding return.