3 Tips for Recession-Proofing Your Real Estate Investments

by | BiggerPockets.com

There’s a lot of talk about being due for another recession. While no one knows what’s truly going to happen or when, I’m going to go over the ways I am recession-proofing my holdings and portfolio.

How to Protect Your Investments From a Market Crash

1. Buy on cash flow.

This is why I love the Midwest—like markets in Ohio, Indiana, and Kentucky. Here I’m able to ensure the property is kicking off the necessary cash and underwriting on a worst case basis. If occupants see dips below a certain standard and rents start dropping, we’ll still be fine. We’ll be able to cover our mortgage and be able to make money.

2. Don’t bank on appreciation.

Most people are doing this these days in order to make the numbers work. Those who are banking on appreciation think that they’ll sell the property in two or three years, and that’s when they’ll make the money. But until then, they will be in the red. From my perspective, that’s a no-no. I wouldn’t recommend it.

Related: Banking on Property Appreciation is Risky & Unwise

3. Go direct to owner.

This has been a crucial thing for us. By doing this, we’re avoiding overbidding and overpaying for property, because that’s when people are most inclined to do the other things—like banking on appreciation and assuming the rents are going to steadily grow. By going direct to owner, we’re controlling our own destiny and are still able to get properties at a discount, where the numbers actually make sense.

These are the ways I’m personally recession-proofing my portfolio. Hopefully you can take something away from my strategy!

What are you doing to protect your assets? 

Share in a comment below!

About Author

Sterling White

With just under a decade of experience in the real estate industry, Sterling currently manages over $10MM in capital, which is deployed across a $26MM real estate portfolio made up of multifamily apartments and single-family homes. Through the company he co-founded, Holdfolio, he owns just under 400 units. Sterling was featured on the BiggerPockets Podcast and has been contributing content to BiggerPockets since 2014, with over 200 posts on topics ranging from single-family investing and apartment investing to wholesaling and scaling a business.

6 Comments

  1. Madelaine Au

    Thank you for the awesome article! I’ve heard a lot of talk about another impending recession and I think these are great tips for minimizing risk. I appreciate you taking the time to share your knowledge on BP. Especially for newbie investors like me!

  2. West wetzel

    Mr. White,
    I’m curious if a recession is imminent would you suggest using cash to pay down debt as in a mortgage recast or hold onto the that cash in order to cover rent decreases and capital expenses?
    Thank you

  3. Stephen Tanquary

    Hey Mr. White,

    Newbie here! Thanks for the article! I’m a little confused by the 3rd point, going direct to owner. Do you mean when purchasing your properties you don’t go through any 3rd party, like an agent? If so, can you help me understand how that helps prevent you from overpaying for your properties?

    Thanks again!

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